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Clarification on Indirect Transfer provisions in case of redemption of share or interest outside India under the Income-tax Act, 1961

Income Tax - 28/2017 - Dated:- 7-11-2017 - Circular No. 28/2017 F.No. 500/10/2017-FT&TR-IV Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Dated, the 7th of November, 2017. Sub: Under the provisions con .....

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asset or source of income in India or through the transfer of a capital asset situate in India, shall be deemed to accrue or arise in India. Explanations 5, 6 and 7 of section 9(1)(i) further define the scope of said provision. 2. Concerns have been .....

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t structures, suffer multiple taxation of the same income at the time of subsequent redemption or buyback. Such taxability arises firstly at the level of the fund in India on its short term capital gain/ business income and then at every upper level .....

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ect transfer provisions of the Act. 3. Addressing such concerns in his Budget speech on 1st February, 2017, the Finance Minister had stated that Category I and Category II Foreign Portfolio Investors (FPI) will be exempted from indirect transfer prov .....

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ch is chargeable to tax in India. 4. Vide Finance Act, 2017, Category I and Category II FPls have already been exempted from indirect transfer provisions of the Act through insertion of proviso to Explanation 5 to section 9(1)(i) of the Act, with eff .....

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s 'specified funds'), is redeemed in an upstream entity outside India in consequence of transfer of shares or securities held in India by the specified funds, the income of which have been subject to tax in India. In such cases, application o .....

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the insertion of proviso to Explanation 5 to section 9(1)(i) of the Act, vide Finance Act, 2017. 6. The matter has been examined by the Board and it has been decided that the provisions of section 9(1)(i) of the Act read with Explanation 5 thereof sh .....

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such income accrues or arises from or in consequence of transfer of shares or securities held in India by the specified funds and such income is chargeable to tax in India. However, the above benefit shall be applicable only in those cases where the .....

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