US-based retail giant Walmart is likely to approach the income tax department before September 7 to ascertain its tax liability after it bought 77% stake in Indian e-commerce player Flipkart for $16 billion in May. Meanwhile, a couple of companies which held Flipkart shares before the deal have already applied for a withholding certificate at the department, a government official told FE. The Walmart-Flipkart deal closed after the approval from Competition Commission of India (CCI) earlier this month. The income tax rules require the buyer (Walmart) to discharge its tax liability within the first 7 days of the subsequent month of closing the deal. Some of the sellers are foreign-based entity, who may be protected against the full withholding tax liability due to the bilateral treaties between India and the resident countries of the sellers. The officials at the department declined to reveal the sellers that have approached the department. \u201cThe sellers of Flipkart shares have likely to approached the department to plead for a lower withholding tax in view of the treaties under section 195 of the Income Tax Act,\u201d Amit Agarwal, partner, Nangia Advisors & Co, said. He added that the certificate so issued by the department would have to be honoured by Walmart when the payment for the transaction happens. At least one or even both of sellers \u2014 Tiger Global and SoftBank \u2014 may cite residency in a treaty-protected country to escape\/reduce a capital gains tax liability here. (In case of a tax liability, the buyer withholds the tax while the burden is on the seller.) As Tiger Global arms are registered in Mauritius\/Singapore and acquired their combined 21% stake in Flipkart before April 1, 2017, they could seek protection under a grandfathering clause in New Delhi\u2019s double taxation avoidance agreements with the two countries (the tax waiver is not available to shares purchased post the cut-off date, thanks to amendments to treaties at New Delhi\u2019s behest in 2016). In the case of SoftBank, which purchased its near-21% stake in the online retailer in August last year, a two-year (April 1, 2017, to March 31, 2019) transitional phase when the tax rates will be half India\u2019s domestic rates could be available. However, if the Japanese venture capital firm chooses to carry out the stake sale to Walmart via a US-based arm (reports suggest so), the tax relief would not be available to it. If SoftBank indeed takes the US route for the transaction, then it might delay the deal till August 2019, to be the recipient of long-term, rather than short-term capital gains, which is taxed at a higher rate. Currently, India taxes short-term (held for less than two years) capital gains from unlisted shares at 15%, while similar long-term (over two years) is taxed at 20% with indexation.