NEW DELHI: The Central Board of Direct Taxes (CBDT) has amended the income tax rules to facilitate strategic disinvestment of public sector companies by expanding the scope of a tax exemption on shares received below fair market value, showed an official order.
The Income-tax (Eighth Amendment) Rules, 2023 issued on Thursday is effective from 1 April. As per this rule change, any person receiving shares from a public sector company below their fair market value is exempt from the purview of section 52 (2)(x) of the Income Tax Act that makes such discounted share issues taxable in the hands of the recipient.
At present, this exemption applies to shares received by a person from the central or state government under strategic disinvestment. That covers only a share sale by the government and not necessarily a fresh issue of shares by the company. The amended provision makes the exemption applicable to “any movable property, being equity shares, of a public sector company or a company, received by a person from a public sector company or the Central Government or any State Government under strategic disinvestment.” The rule change effectively expands the scope of the tax exemption.
Section 56(2)(x) of the Income Tax Act pertains to the taxation of gifts and other items received without consideration or for inadequate consideration. This can include money, property, shares, securities, and other assets. When such assets are received for no consideration or for consideration significantly less than their fair market value, they may be taxable under this section. The Income Tax Act also specifies the instances when this provision is not applicable.
The Centre is working on strategic disinvestment of several companies but is not in a hurry to sell state-owned companies given that tax revenue receipts have been buoyant.
Source By: livemint
