Executive Summary:
This notification from the Central Board of Direct Taxes amends the Income-tax Rules, 1962. It concerns the inclusion of asset holding periods for Indian subsidiary companies, specifically regarding the conversion of a foreign company branch as per Section 115JG of the Income-tax Act, 1961. The amendment is termed the "Income-tax 13th amendment, Rules, 2018" and took effect on December 6, 2018, the date of its publication in the Official Gazette.
Key Points / Main Content:
* **Amendment Details:**
* The notification amends the Income-tax Rules, 1962.
* It is referred to as the "Income-tax 13th amendment, Rules, 2018."
* **Effective Date:**
* The rules came into force on December 6, 2018.
* **Rule 8AA Amendment:**
* In Rule 8AA, after sub-rule 3, sub-rule 4 is inserted.
* This insertion pertains to capital assets that became the property of an Indian subsidiary company due to the conversion of a foreign company branch, as described in Section 115JG(1).
* **Holding Period Inclusion:**
* The period for which the asset was held by the foreign company branch will be included when determining the holding period.
* The holding period also includes the period held by the previous owner, if the asset was acquired through modes specified in Section 49(1) clauses (i, ii, iii, iv) or Section 115JG(1).
Impact Analysis:
* **Indian Subsidiary Companies:**
* Impact: Indian subsidiary companies that have acquired assets through the conversion of a foreign company branch will have the asset's holding period calculated differently, potentially affecting capital gains tax liabilities.
* Action Required: Review asset acquisition history and holding periods, and adjust tax calculations accordingly.
* **Central Board of Direct Taxes (CBDT):**
* Impact: Responsible for implementing and enforcing the amended Income-tax Rules.
* Action Required: Ensure the amended rules are effectively communicated and applied by tax authorities.
* **Tax Authorities:**
* Impact: Must understand and apply the new rules when assessing capital gains tax for relevant companies.
* Action Required: Update assessment procedures and guidelines to reflect the changes in holding period calculations.
* **Taxpayers:**
* Impact: Need to be aware of the changes in holding period calculation for capital assets to comply with Income-tax rules.
* Action Required: Follow the updated rules to correctly calculate and report their taxes.
Key Entities Referenced
Incometax Act, 1961: The primary legislation being amended by this notification. Specifically, section 2 and section 295 are referenced.
Central Board of Direct Taxes: The organization issuing the notification and making amendments to the Incometax Rules.
Incometax Rules, 1962: The set of rules being amended by this notification. Rule 8AA is specifically mentioned.
New Delhi: Location where the notification was issued.
Ministry of Finance: The government ministry under which the Central Board of Direct Taxes operates.
Department of Revenue: A department within the Ministry of Finance.
Pravin Rawal: Director, Tax Policy Legislation. The signing authority for the notification.
Indian subsidiary company: Entity mentioned in amendment to the Incometax Rules, 1962 related to conversion of a branch of a foreign company.
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[अिधसूचना फा. सं. 86/2018, फा. सं. 370133/34/2016-टीपीएल(भाग)]
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MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 6th December, 2018
INCOME-TAX
S.O. 6054(E).—In exercise of the powers conferred by clause (ii) of the Explanation 1 to
clause (42A) of section 2 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central
Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules,
1962, namely:
1. (1) These rules may be called the Income-tax (13th amendment), Rules, 2018.
(2) They shall come into force from the date of their publication in the Official Gazette.
2. In rule 8AA of the Income-tax Rules, 1962, after sub-rule (3), the following shall be inserted,
namely,─
“ (4) In the case of a capital asset which became the property of the Indian subsidiary
company in consequence to conversion of a branch of a foreign company referred to in sub-
section (1) of the section 115JG, there shall be included the period for which the asset was
held by the said branch of the foreign company and by the previous owner, if any, who has
acquired the capital asset by a mode of acquisition referred to in clause (i) or clause (ii) or
clause (iii) or clause (iv) of sub-section (1) of section 49 or sub-section (1) of section
115JG.”.
[Notification No. 86/2018/F.No.370133/34/2016-TPL (Part)]
PRAVIN RAWAL, Director (Tax Policy & Legislation)
Note : The Principal Rules were published in the Gazette of India, Extraordinary, Part II, Section 3,
Sub-section (ii) vide notification number S.O. 969(E), dated the 26th of March, 1962 and were
last amended vide notification number G.S.R. 1128(E) dated the 19th November, 2018.
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and Published by the Controller of Publications, Delhi-110054.