CBDT notifies Taxability of Gift is not applicable w.r.t Equity Shares of PSU, received from Govt. under Strategic Disinvestment

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The Central Board of Direct Taxes (“the CBDT”) through an Extraordinary Gazette No.  CG-DL-E-10092021-229539 dated September 10, 2021 notified that the regulations pertaining to the taxability of Gift will no longer be effective on the Equity Shares of the Public Sector Companies. The Equity Shares received from the Government under Strategic Disinvestment are considered under the purview of this amendment. The said amendment will take effect from April 1, 2022 for the assessment year of 2022-2023, and shall remain applicable for the subsequent assessment years.

The CBDT amended the Rule 11UAC of the Income Tax Rules, 1962; and added another clause immediately after Clause (3) which reads as follows:

“(4) any movable property, being equity shares, of the public sector company, received by a person from the Central Government or any State Government under strategic disinvestment.”

The phrase “strategic disinvestment” is given the identical connotation as was given in Clause (iii) of the Interpretation Clause (d) of Sub-Section (1) of Section 72 A of the Income Tax Act, 1962 (“the IT Act”).

Rule 11UAC pertains to an exemption from deeming provisions of section 56(2)(x) which is applicable only when gifts are received by Individual and HUF, and Donor or Donee may be Resident or non-resident.

The Notification can be accessed at: http://www.a2ztaxcorp.com/wp-content/uploads/2021/09/Gazette-No.-CG-DL-E-10092021-229539-dated-September-10-2021-.pdf