Page 22 - Union Budget_2019

Union Budget 2019

INCOME FROM OTHER SOURCES

4.1 Prescription of exemption from deeming of fair market value of shares for certain transactions

The existing provisions of Section 56(2)(x) provides that for determining the amount of income for receipt

of shares, the fair market value of shares shall be taken into account.

Similarly, Section 50CA provides for deeming of fair market value of unquoted shares for computing the

capital gains from the transfer of such shares.

For both these provisions, the fair market value is determined based on the methods prescribed under Rule

11UA of the Income Tax Rules, 1962.

However, we have different set of rules prescribed under various statutes for the purpose of valuation of
shares like, FEMA, Companies Act, 2013, etc. which can result in different fair market value for the same

shares under consideration. This may lead to genuine hardship in the hand of transferor as well as
transferee.

In order to provide relief to such types of transactions from the applicability of Sections 56(2)(x) and 50CA,
it is proposed to amend these sections to empower the Board to prescribe transactions undertaken by

certain class of persons to which these provisions shall not be applicable subject to certain prescribed
conditions.

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the

assessment year2020-21 and subsequent assessment years.

4.2 Deemed accrual of gift made to a person outside India

Gifts provisions provides that taxability shall accrue in the hands of donee i.e. person receiving the gift. As

per Section 9, non-residents are taxable in India if income accrued or arised or received in India or deemed
to accrue or arise or received in India. Thus, it was contented that when a person resident in India gifts to a

person resident outside India, it shall be non-taxable in India as such income does not accrues or arises in
India.

Thus, it is proposed to clarify that any person resident in India gifts to a person resident outside India in the
form of any sum of money or any property situated in India on or after 5th July, 2019, such income shall be

deemed to accrue or arise in India and hence taxable in India.

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