President Ram Nath Kovind has given assent to the ‘The Taxation Laws (Amendment) Bill, 2021‘ which amends the Income Tax Act, 1961 (IT Act) and the Finance Act, 2012.
i.Objective of Bill – To nullify retrospective tax provision & end retrospective taxes imposed on Indirect Transfer of Indian Assets made before May 28, 2012.
ii.The Bill was introduced by Finance Minister Nirmala Sitharaman in the Lok Sabha as a Money Bill.
Key Points
i.The Finance Act, 2012 amended the IT Act, 1961 to impose tax liability on income earned from sale of shares of a foreign company on a retrospective basis. The new bill aims to nullify the retrospective basis for taxation.
- Retrospective tax means to pay tax for goods and services purchased in the past or income earned in the past.
ii.However, the tax law remains intact prospectively, which means that the sale of shares of a foreign entity is taxable in India if those shares garner value from assets in India.
iii.The bill will nullify tax liability imposed on persons if they fulfil certain set conditions.
iv.The new Bill provides a framework to resolve international arbitration cases that the government has lost.
Private Companies affected by Retro Tax Cases
i.The New Bill impacts Retrospective tax cases of 2 Big Companies – Cairn Energy Plc and Vodafone Group of UK. Both companies won International arbitrations against India for levying retrospective taxes on them.
- In the Cairn Energy arbitration case, the company is seeking to recover USD 1.2 billion from New Delhi.
- A total of INR 8,100 Crore was collected by the Income Tax Department using the retrospective tax legislation. This will be repaid by the Government of India.
- Out of INR 8,100 crore, INR 7,900 crore was from Cairn Energy.
Recent Related News:
On September 29, 2020, the President of India, Ram Nath Kovind gave his assent to the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020 which will amend 5 Acts viz. the Income-tax Act, 1961, Central Goods and Services Tax Act, 2017, Finance Act, 2019, the Direct Tax Vivad se Vishwas Act, 2020 and the Finance Act, 2020.
About Ministry of Finance
Union Minister – Nirmala Sitharaman(Rajya Sabha,Karnataka)
Minister of State (MoS) – Dr S Bhagwat Karad (Rajya Sabha, Maharashtra) and Shri Pankaj Chaudhary (Maharajganj, Uttar Pradesh)
