No Capital Gain Tax on Share received by Individual/HUF on company demerger/ amalgamation

Union Budget 2016: The existing provisions of clause(vii) of sub-section 2 of section 56 of the Act provide for chargeability of income from other sources in case any money, immovable property or other property with or without consideration in excess of Rs 50,000 is received by an assessee being an individual or an Hindu undivided family (HUF). The provisions also apply where shares of a company are received as a consequence of demerger or amalgamation of a company. Such a transaction is not regarded as transfer where the recipient is a firm or a company.

With a view to bring uniformity in tax treatment, it is proposed to amend the Act so as to provide that any shares received by an individual or HUF as a consequence of demerger or amalgamation of a company shall not attract the provisions of clause (vii) of sub-section (2) of section 56.

These amendments are proposed to be made effective from the 1st day of April, 2017 and shall accordingly apply in relation to assessment year 2017-18 and subsequent years.

Clause 34 of Finance Bill 2016

Clause 34 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources.

The aforesaid section, inter alia, provide for chargeability of income from other sources, in case any money, immovable property or other property with or without consideration is received by an assessee being an individual or an Hindu undivided family.

It is proposed to amend the said section so as to provide exemption from tax in the hands of an individual or a Hindu

undivided family, on receipt of shares as a consequence of demerger or amalgamation of a company.

This amendment will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-2018 and subsequent years.

[Clause 34]

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Tags : Budget 2016 (434) section 56 (71)

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