Key Proposals of The Taxation Laws (Amendment) Bill, 2021

The Finance Minister presented the Taxation Laws (Amendment) Bill, 2021 (herein referred as ‘the Bill’) in the Lower House of Parliament on 5 August 2021. The Bill proposes to amend the Income-tax Act, 1961 (‘IT Act’) and the Finance Act, 2012 to withdraw the retrospective amendment made in 2012 for taxing capital gains arising from indirect transfer of assets located in India under section 9(1)(i) of the IT Act. The Bill also provides that, all tax demands raised in relation to indirect transfer of Indian assets happened before 28 May 2012 will be nullified provided conditions stipulated are obliged by taxpayers.

 

The Bill is a major and welcome development that ensures commitment of the government towards providing tax certainty. The contentious retrospective tax provisions has been of matter of criticism from various stakeholders involved. In few cases, major Multinational Enterprises (“MNEs”) has challenged and won against these amendments in International Courts. Indian government is in tax tussle with many MNEs and tax demands were raised in 17 cases in past few years. This Bill aims to settle all litigations and arbitrations arising out of amendment in 2012. The Bill not only provides tax certainty to investors but would also enhance India’s reputation as an attractive investment destination.

 

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