Income Tax Section 2(29) company in which public are substantially interested

Simplified explanation of the term “company in which the public are substantially interested” as defined in the Income Tax Act, 2025:

What is a “Company in Which the Public Are Substantially Interested”?

This refers to certain types of companies that are not privately controlled and are considered to have widespread public ownership.

Such a company can be any of the following:

(a) Government-Owned Companies

• A company that is owned by the Government or the Reserve Bank of India (RBI),
  or
• A company where at least 40% of the shares are held by the Government, RBI, or a government corporation.

(b) Section 8 Companies

• A company registered under Section 8 of the Companies Act, 2013
  (i.e., non-profit companies for charitable, educational, religious, or social purposes).

(c) Certain Companies Without Share Capital

• A company that does not have share capital, and
• Has been officially declared by the tax authorities as a company in which the public are substantially interested, based on its objectives, members, etc.

(d) Mutual Benefit Finance Companies

• Companies that take deposits only from their members, and
• Are declared by the Central Government as a Nidhi or Mutual Benefit Society under Section 406 of the Companies Act, 2013

(e) Co-operative Society-Owned Companies

• Companies where at least 50% of the voting shares (excluding preference shares) are held, allotted, and beneficially owned by co-operative societies during the relevant financial year.

(f) Public Companies (Not Private Companies)

If the company is not a private company (as per Companies Act, 2013 ), and either of the following is true:

 (i) Its shares are listed:

• The company’s ordinary shares (not preference shares) are listed on a recognised stock exchange in India on the last day of the financial year.

OR

 (ii) Its voting shares are held by public institutions:

At least 50% of voting shares (not preference shares) are:

• Owned by and held throughout the year by:
  • (A) The Government, or
  • (B) A government-established corporation, or
  • (C) Another public company (to which this definition applies), or its wholly owned subsidiary.

Special Rule for Industrial Companies:

For industrial companies (involved in building ships, manufacturing, mining, or power generation), the 50% requirement is relaxed to 40%.

In Short:

A company is said to be “publicly held” (i.e., a company in which the public are substantially interested) if:

• It is government-owned, or
• It is a non-profit or charitable company, or
• It is publicly listed, or
• Its shares are held by co-operatives or government institutions, or
• It is a Nidhi company, or
• It has been declared as such by the government (if it has no share capital).