Abolition of Retrospective Tax Regime
Recently, the Government of India has notified new rules to eliminate the chaos related to retrospective taxation.
In August, 2021, the government amended the ‘Income Tax Act, 1961’ to withdraw the retrospective tax demands for transactions made before May 28, 2012.
The new Income Tax (31st Amendment) Rules, 2021 specify the procedure to be followed by the affected taxpayers to settle their retrospective tax cases.
Also, the case or proceedings pending before any tribunal/court shall be withdrawn. In these cases the demands or claims raised by the government will be rejected. Also, the amount collected by the companies from them after fulfilling the conditions specified in the rules will be returned to them.
Retrospective taxation allows a country to pass rules to tax certain products, goods or services and deals. In this, companies are taxed from the time before the date of passing of the law.
It was introduced in the year 2012. It empowers the Income Tax Department to raise tax demand on capital gains arising from indirect transfer of assets located in India.
This taxation method was used in 17 cases related to companies like Vodafone, Cairn Energy, West Globe, Reset Holdings etc.
Source – The Hindu