Anti Avoidance Measures

Gift by resident to NOR taxable in India

With effect from 1April 2023, any gift given to a NOR exceeding INR 50,000 by a resident, will be regarded income from Indian source and will be taxable in the hands of the NOR as income from other sources as described in Section 56(2)(x) read with section 2(24)(xviia). For this, Section 9(1)(viii) is amended. Such payments were already made taxable for an NR since 5 July 2019. This change makes the two provisions aligned.

Payment by Business Trusts to unit holders doubly non taxed is now taxable on Unit holders:

• New sub clause (xii) in Section 56(2) is inserted to include as income, a sum paid to a unit holder of a business trust which is neither interest, nor dividend, nor rental income.

• In case of units of business trust, repayment of debt could be redemption of units. This being repayment of capital, it is capital receipt and unless specific provision to tax it is provided it could not be taxed. Now it is provided that such amount is treated as income of the unit holder under this new subclause (xii) of Section 56(2) read with Section 2(24)(xviic).

• The proviso says that the cost of acquiring the units will be deducted from the payment, thus excluding from tax the return of investment

• Consequent change is made in Section 115UB to clarify that the sum referred to in Section 56(2)(xii) does not qualify to be the income which retains its character as is envisaged under Section 115UB (1),(2)(3).