Retro tax: Government’s solution to litigation

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Retro tax: Government’s solution to litigation

Retro tax: Government’s solution to litigation

Recently retro tax rules have been issued by the government to resolve the litigation.

The draft of these rules has been brought under the Taxation Laws (Amendment) Act, 2021. This amendment proposes to amend the retrospective taxation measures introduced by the Finance Act 2012.

The amendment to the Income Tax Act in the year 2012 aims to examine the conduct of Indian businesses under entities incorporated abroad without being subject to capital gains tax liability in India. Also, this Amendment Act was to be applied to retrospective transactions.

The Taxation Act 2021 aims to bring in tax certainty. Also, it is to be ensured that the pending income tax proceedings will be withdrawn after fulfilling the specified conditions. If any demand is raised it will be rejected. Further, the amount collected, if any, will be refunded to the taxpayer without any interest.

The new rules amend the Income-tax Rules, 1962 to give effect to the amendments made by the Act, 2021.

The draft rules propose a time-frame for withdrawal of cases, compensation from any future litigation and siege of Indian properties abroad and a phased disposal of the case.

Retrospective taxation allows a country to pass tax rules to levy duties on certain products, goods or services and agreements and companies for a period prior to the enactment of the relevant law.

Efforts made in drafting the rules

  • The companies and the interested parties shall have to withdraw all prosecutions in a convertible manner.
  • The parties will have to forfeit the claims, costs, damages, etc. permanently.
  • The parties have to withdraw all the charges within 60 days of giving the undertaking
  • Will provide an undertaking that they will never accuse in future.
  • Refunds will be issued within 30 days of the order granting relief.


  • Monitoring of Cairn, Vodafone and 15 others affected by retro tax.
  • Monitoring of companies awaiting regulations to determine resolution possibilities.
  • Monitoring of contacts made with the government for negotiations.

Source – The Hindu

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