Tax neutral transfers
Section 47 provides for certain tax neutral transfers. Section 56 also excludes income arising out of certain tax neutral transfers from its ambit. However, the transfers referred to in clause (iv) and clause (v) of section 47 have not been excluded from the scope of section 56.
In order to further facilitate the transaction of money or property between a wholly owned subsidiary company and its holding company, it is proposed to amend the section 56 so as to exclude such transfer from its scope.
This amendment will take effect, from 1st April, 2018 and shall accordingly, apply in relation to the transaction made on or after 1st April, 2018.
Extract of Clause 21 of Finance Bill 2018
Clause 21 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources.
Clause (x) of sub-section (2) of the said section, inter alia, provides that where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017, any immovable property, for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration shall be charged to tax under the head “Income from other sources”.
It is proposed to amend the said clause of sub-section (2) of the said section so as to provide that where any person receives any immovable property for a consideration, the stamp duty value of the property as exceeds such consideration, if the amount of such excess is more than fifty thousand rupees or the amount equal to five per cent. of the consideration, whichever is higher, shall be charged to tax under the head “Income from other sources”.
This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-2020 and subsequent years.
It is further proposed to amend the fourth proviso to clause (x) of the said sub-section so as to exclude the transfer of capital asset between holding company and its wholly owned Indian subsidiary company and between subsidiary company and its Indian holding company, which are not regarded as transfer under clause (iv) or clause (v) of section 47, from the scope of clause (x) of the said sub-section.
This amendment will take effect from 1st April, 2018.
It is also proposed to insert a new clause (xi) in sub-section (2) of the said section so as to provide that any compensation or other payment due to or received by any person, by whatever name called, in connection with the termination of his employment or the modification of the terms and conditions relating thereto shall be chargeable to income-tax under the head “Income from other sources”.
This amendment will take effect from 1st April, 2019 and will, accordingly, apply in relation to the assessment year 2019-2020 and subsequent years.
