Page 23 - Union Budget_2019

Union Budget 2019

It is further proposed that existing provisions of exemptions in relation to gift shall apply for non-residents.

For e.g. gifts made to a non-resident relative outside India shall not be taxable. Further, the taxability of such
non-resident shall be subject to provisions of Double Taxation Avoidance Agreement ("DTAA") entered by

India with the country of non-resident.

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

assessment year 2020-21and subsequent assessment years.

The proposed amendment has provided much needed clarity thereby bringing the non-resident under
the ambit of gift tax provisions subject to DTAA.

4.3 Compliance with the notification of exemption issued under section 56(2) (viib)

Section 56(2) (viib) states that

• If a closely held company issues share to a resident,

• The consideration received exceeds the face value of shares and

• Aggregate consideration received exceeds the fair market value of shares.

Then the excess consideration over fair market value of shares shall be regarded as income in the hands of
such closely held company.

However, the Central Government is empowered to notify companies for whom the above-mentioned
section shall not apply, subject to certain condition. However, if these conditions are not satisfied, it is

proposed to provide that the consideration received for issue of shares which exceeds the face value of such
shares shall be deemed to be the income of the company chargeable to income-tax in the year in which such
failure takes place.

These amendments will take effect from 1st April, 2020 and will, accordingly, apply in relation to the
assessment year 2020-21 and subsequent assessment years.

The proposed amendment provides clarity on the year of chargeability for cases falling under the

ambit of Section 56(2) (viib)

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