Clarification regarding the applicability of section 112

Finance Act, 2012 with effect from 1st April, 2013 amended the provisions of section 112(1)(c) to provide concessional rate of taxation of ten per cent for long-term capital gains arising from the transfer of unlisted securities in case of non-resident. There was an uncertainty as to whether the provision of section 112(1)(c)(iii) is applicable to the transfer of share of a private company. Finance Act, 2016 amended section 112(1)(c) to clarify that the share of company in which public are not substantially interested shall also be chargeable to tax at the rate of ten per cent with effect from 1st April, 2017. As the concessional rate was provided with effect from 1st April, 2013, there was uncertainty about the applicability of the amendment to the intervening period.

With a view to clarify that the amendment made by Finance Act, 2016 shall also apply to the period from 1st April, 2013 to 31st March, 2017, it is proposed to amend section 50 of the Finance Act, 2016 so as to provide that the effective date of amendment made to section 112(1)(c)(iii) vide Finance Act,2016 shall be 01-04-2013 instead of 01-04-2017.

This amendment will take effect, retrospectively from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.

[Clause 150]

Extract of relevant clause from Finance Bill, 2017

Amendment of Act 28 of 2016.

150. In the Finance Act, 2016,––

(i) in section 50, for the words, figures and letters “with effect from the 1st day of April, 2017”, the words, figures and letters “and shall be deemed to have been substituted with effect from the 1st day of April, 2013” shall be substituted;

(ii) in section 197, clause (c) shall be omitted and shall be deemed to have been omitted with effect from the 1st day of June, 2016.

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June 2021