Page 12 - Union Budget, 2022

Union Budget, 2022

DIRECT TAX PROPOSALS

Rationalisation and Clarification
Definition of the term “slump sale”
The definition of slump sale as per Sec 2(42C) is proposed to be amended so as to substitute the term “sales”
with the term “transfer”.

AY 2021-22 and subsequent AYs

The proposed amendment is only clarificatory in nature and seeks to avoid disputes and litigations on the
scope of the definition, after including slump exchanges within the ambit of slump sale vide Finance Act, 2021.

Reduction of Goodwill from block of assets to be considered as ‘transfer’
It is proposed to amend Sec 50 to provide that reduction of the amount of goodwill of a business or profession
from the block of asset, shall be deemed to be transfer.

Retrospectively from AY 2021-22 and subsequent AYs.

The proposed amendment is consequential to the earlier amendment brought vide Finance Act 2021 which
derecognised goodwill as a depreciable asset. By virtue of the erstwhile amendment in Sec 43, the value of the
goodwill has to be reduced from the block of the asset. Now, pursuant to the proposed amendment, the

reduction will be treated as deemed transfer.

Taxation on dividend income u/s 115BBD
• It is proposed that dividend income received by Indian companies from foreign companies (in which the
Indian company holds more than 26% of the equity share capital) shall be taxable at the prevailing
corporate profit tax rate, applicable to dividends, ranging from 22% to 30%.
• The concessional rate of taxation at the rate of 15% as prescribed under Sec 115BBD shall be withdrawn.

AY 2023-24 and subsequent AYs

After the abolition of DDT which was charged at 15% (surcharge and cess), the dividends received by Indian
companies is now chargeable to tax in the hands of the recipient at the respective slab rates. Now, in order to
bring parity with the dividends received from Indian companies, Sec 115BBD is proposed to be withdrawn,

whereby the dividend received from foreign companies in which the Indian companies have a substantial
shareholding (more than 26%) will be taxed at the respective tax rates.

Provisions pertaining to bonus stripping and dividend stripping
• It is proposed to extend the provisions of bonus stripping and dividend stripping to units of
Infrastructure Investment Trust (InvIT), Real Estate Investment Trust (REIT) and Alternative
Investment Funds (AIFs) regulated by SEBI.
• Further the provisions of bonus stripping are additionally proposed to be made applicable to securities.

AY 2023-24 and subsequent AYs

• The provisions of bonus or dividend stripping involves curtailing of loss arising from original shares ex-
bonus or ex-dividend, in order to set-off short-term losses against other capital gains.

• Existing provisions restrained setting off of losses and such disallowed losses was to be treated as cost of
acquisition of bonus shares.
• With increasing interest towards alternative investments such as InvITs, REITs, AIFs, the scope of this
anti-abuse provision has been extended to the sphere of business trusts and AIFs.
• However, the same is not applicable to units of AIFs in IFSC.

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