## Report on Income Tax Amendment Rules, 2021
**1. Executive Summary:**
This report analyzes the Income Tax 19th Amendment Rules, 2021, as notified by the Central Board of Direct Taxes (CBDT) on July 7, 2021. This amendment modifies the Income-tax Rules, 1962, by inserting rule 8AC. The core purpose of this amendment is to provide rules for the computation of short-term capital gains and written-down value under section 50 of the Income-tax Act, 1961, specifically in cases where depreciation on goodwill has been obtained. The key finding is that the amendment introduces a structured approach to calculating capital gains and written-down value when dealing with goodwill depreciation.
**2. Introduction:**
This report aims to provide a comprehensive overview of the Income Tax 19th Amendment Rules, 2021, based solely on the official notification published by the CBDT. The analysis will focus on understanding the amendment's objectives, key provisions, and potential impact.
**3. Policy Overview:**
* **Amendment:** This report analyzes an amendment to the Income-tax Rules, 1962.
* **Core Objective(s):** As inferred from the text, the core objective of this amendment is to provide specific rules for calculating short-term capital gains and the written-down value of assets under section 50 of the Income-tax Act, 1961, when goodwill depreciation is involved. The text indicates that the amendment aims to address scenarios where depreciation on goodwill has been claimed.
**4. Background and Rationale:**
* **Amendment:** The likely reason for this amendment is to clarify the application of section 50 of the Income-tax Act, 1961, in situations involving goodwill. Specifically, the amendment appears designed to address complexities arising when depreciation has been claimed on goodwill, and how this impacts the calculation of short-term capital gains and written-down value of the relevant block of assets. Prior to this amendment, the rules for such calculations may have been unclear or required further specification.
**5. Key Provisions / Changes:**
This amendment introduces Rule 8AC into the Income-tax Rules, 1962, with specific sub-rules:
* **What is being changed:** The amendment adds a new rule (8AC) to clarify the calculation of short-term capital gains and written down value under section 50 of the Income-tax Act, 1961. This section comes into effect when depreciation on goodwill has been obtained.
* **What the new rule/provision is:**
* **Sub-rule 1:** States that written down value of the block of assets and short term capital gains shall be determined as prescribed for the assessment year commencing on April 1, 2021.
* **Sub-rule 2:** Details how to determine the written down value of a block of assets for the previous year relevant to the assessment year commencing on April 1, 2021, when goodwill was the only asset or one of the assets in the intangible asset block for which depreciation was obtained in the assessment year beginning on April 1, 2020. In this case, subclause c of clause 6 of section 43 is referenced.
* **Sub-rule 3:** Addresses situations where a reduction as described in the policy exceeds the written-down value and the actual cost of acquired assets. Any such excess will be deemed short-term capital gains.
* **Sub-rule 4:** Stipulates that if goodwill was the only asset in the intangible asset block for which depreciation was obtained, and the block ceases to exist because no further assets were acquired, then there will be no capital gains or loss.
* **Sub-rule 5:** States that capital gains or loss on the transfer of goodwill during the previous year relevant to the assessment year 2021-22 or later, will be determined in accordance with the provisions of section 48, section 49 and clause a of subsection 2 of section 55.
* **Difference/Effect of the change:** The introduction of Rule 8AC provides specific guidance for calculating capital gains and written-down values related to goodwill depreciation. This aims to standardize the process and reduce ambiguity.
**6. Target Audience and Stakeholders:**
Based on the text, the target audience and stakeholders primarily include:
* **Assessees:** Individuals and entities claiming depreciation on goodwill.
* **Tax Professionals:** Accountants and tax advisors who assist assessees in computing their tax liabilities.
* **Tax Authorities:** The CBDT and other tax officials responsible for administering and enforcing income tax laws.
**7. Implementation Aspects (Inferred):**
* **Responsible Agency/Bodies:** The Central Board of Direct Taxes (CBDT) is the responsible agency, as indicated by its issuance of the notification.
* **Timelines or Procedures:** The rules are effective for the assessment year commencing on April 1, 2021, and subsequent years. The text provides detailed procedures for calculating written-down value and capital gains, specifically referencing relevant sections of the Income-tax Act, 1961, and Income-tax Rules, 1962.
* **Amendment-Specific Implementation:** The implementation of this amendment requires assessees to carefully apply the new Rule 8AC when calculating capital gains and written-down value in situations where goodwill depreciation has been claimed. Tax professionals must also be aware of these changes to accurately advise their clients.
**8. Expected Outcomes / Impact of Changes:**
* **Likely Intended Outcome of the Changes:** The likely intended outcome of this amendment is to provide greater clarity and certainty in the computation of short-term capital gains and written-down value in cases involving goodwill depreciation. This should reduce disputes and ensure consistent application of tax laws. The amendment should also help businesses and tax authorities to accurately assess tax liabilities related to goodwill.
**9. Conclusion:**
The Income Tax 19th Amendment Rules, 2021, represents a targeted update to the Income-tax Rules, 1962, specifically addressing the calculation of short-term capital gains and written-down value under section 50 of the Income-tax Act, 1961, when depreciation on goodwill has been obtained. The introduction of Rule 8AC aims to provide clearer guidance and standardize the computation process, benefiting assessees, tax professionals, and tax authorities alike. This amendment is significant as it clarifies a potentially complex area of tax law, promoting compliance and reducing ambiguity.
Key Entities Referenced
section 48: A section of the Income-tax Act, 1961, related to capital gains.
section 43: A section of the Income-tax Act, 1961, related to computation of short term capital gains and written down value
NEW DELHI: The city where the notification was issued.
ASHADHA: A month in the Hindu calendar, corresponding to June-July in the Gregorian calendar, mentioned in relation to the date.
Ministry of Finance: The ministry responsible for the notification.
Department of Revenue: The department within the Ministry of Finance.
Central Board of Direct Taxes: The issuing authority for the notification.
Income-tax Act, 1961: The primary legislation being amended (43 of 1961).
Income-tax Rules, 1962: The rules being amended by this notification.
Income tax Amendment 19th Amendment, Rules, 2021: The short title of the amendment rules.
section 50: A section of the Income-tax Act, 1961, related to computation of short term capital gains and written down value
section 295: A section of the Income-tax Act, 1961, related to rule-making powers.
section 55: A section of the Income-tax Act, 1961, related to capital gains.
section 49: A section of the Income-tax Act, 1961, related to capital gains.
ANKIT JAIN: The Under Secretary, Tax Policy and Legislation Division.
Tax Policy and Legislation Division: Division under which the under secretary works.
Government of India Press, Ring Road, Mayapuri, New Delhi: The printing location for the Gazette of India.
Controller of Publications, Delhi: The publisher of the Gazette of India.
रजिस्ट्री स.ं डी.एल.- 33004/99 REGD. No. D. L.-33004/99
सी.जी.-डी.एल.-अ.-07072021-228152
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CG-DL-E-07072021-228152
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असाधारण
EXTRAORDINARY
भाग II—खण्ड 3—उप-खण्ड (i)
PART II—Section 3—Sub-section (i)
प्राजधकार स ेप्रकाजित
PUBLISHED BY AUTHORITY
स.ं 382] नई दिल्ली, बधु िार, िलु ाई 7, 2021/आषाढ़ 16, 1943
No. 382] NEW DELHI, WEDNESDAY, JULY 7, 2021/ASHADHA 16, 1943
जित्त मत्रं ालय
(रािस्ट्ि जिभाग)
(केंद्रीय प्रत्यक्ष-कर बोडड)
अजधसचू ना
नई दिल्ली, 7 िुलाई, 2021
आय-कर
सा.का.जन. 472(अ).—केंद्रीय प्रत्यक्ष-कर बोडड, आय-कर अजधजनयम, 1961 (1961 का 43) की धारा 295 के
साथ पठित धारा 50 के परन्तुक द्वारा प्रित्त िजियों का प्रयोग करते हुए, आय-कर जनयम, 1962 का और संिोधन करने के
जलए जनम्नजलजखत जनयम बनाता है, अथाडत् :--
1. सजं क्षप्त नाम.—इन जनयमों का संजक्षप्त नाम आय-कर (उन्नीसिां संिोधन) जनयम, 2021 ह ै।
2. आय-कर जनयम, 1962 में, जनयम 8कख के पश्चात् जनम्नजलजखत जनयम अंत:स्ट्थाजपत दकए िाएंगे, अथाडत् :--
‘‘8कग. धारा 50 के अधीन अल्पकाजलक पिूं ी अजभलाभ और अिजलजखत मल्ू य की संगणना, िहा ं गुडजिल पर
अिक्षयण अजभप्राप्त दकया गया ह ै।
3748 GI/2021 (1)2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(i)]
(1) धारा 50 के परन्तुक के प्रयोिनों के जलए, 1 अप्रैल, 2021 को प्रारंभ होने िाले जनधाडरण िषड के जलए सुसंगत पूिडिषड
हते ु आजस्ट्त समूह और अल्पकाजलक पूंिी अजभलाभ, यदि कोई हो, का अिजलजखत मूल्य इन जनयमों के अनुसार
अिधाठरत दकया िाएगा ।
(2) िहां कारबार या िृजत्त की गुडजिल ‘’अमूतड’’ आजस्ट्त समूह में से केिल आजस्ट्त थी या आजस्ट्तयों में से एक थी, जिसके
जलए अिक्षयण 1 अप्रैल, 2020 को प्रारंभ होने िाले जनधाडरण िषड में जनधाडठरती द्वारा अजभप्राप्त दकया गया था, 1
अप्रैल, 2021 को प्रारंभ होने िाले जनधाडरण िषड के जलए सुसंगत पूिडिषड हते ु इस आजस्ट्त समूह का अिजलजखत मूल्य
धारा 43 के खंड (6) के उपखंड (ग) के मि (ii) के उपबंधों के अनुसार अिधाठरत दकया िाएगा ।
(3) िहां 1 अप्रैल, 2021 को प्रारंभ होने िाले जनधाडरण िषड के जलए सुसंगत पूिडिषड हते ु धारा 43 के खंड (6) के उपखंड
(ग) के मि (ii) के उपमि (आ) के अधीन कमी, जनम्नजलजखत रकम के योग से अजधक होती है, अथाडत् :–
(i) धारा 43 के खंड (6) के उपखंड (ग) के मि (ii) के उपमि (आ) के अधीन कमी को प्रभािी दकए जबना 1 अप्रैल,
2021 को प्रारंभ होने िाले जनधाडरण िषड के जलए सुसंगत पूिडिषड के प्रारंभ पर आजस्ट्त समूह का अिजलजखत
मूल्य ; और
(ii) 1 अप्रैल, 2021 को प्रारंभ होने िाले जनधाडरण िषड के जलए सुसंगत पूिडिषड के िौरान अर्िडत गुडजिल से जभन्न
‘’अमूतड’’ आजस्ट्त समूह के भीतर आने िाली दकसी आजस्ट्त की िास्ट्तजिक लागत, के ऐसे आजधक्य को अल्पकाजलक
पूंिी अजभलाभ के अंतरण से उद्भूत पूंिी अजभलाभ समझा िाएगा ।
(4) उपजनयम (3) और धारा 55 के उपबंधों पर प्रजतकूल प्रभाि डाले जबना, िहां कारबार या िृजत्त की गुडजिल ‘’अमूतड’’
आजस्ट्त समूह की एकमात्र आजस्ट्त थी, जिसके जलए अिक्षयण 1 अप्रैल, 2020 को प्रारंभ होने िाले जनधाडरण िषड में
जनधाडठरती द्वारा अजभप्राप्त दकया गया था और उस ब्लाक में 1 अप्रैल, 2021 को प्रारंभ होने िाले जनधाडरण िषड के
जलए सुसंगत पूिडिषड के िौरान कोई अजतठरि आजस्ट्त अर्िडत न होने के कारण आजस्ट्त समूह अजस्ट्तत्िहीन हो िाता ह,ै
िहां आजस्ट्त समूह के अजस्ट्तत्िहीन होने के कारण कोई पूंिी अजभलाभ या हाजन नहीं होगी ।
(5) जनधाडरण िषड 2021-22 या पश्चातिती जनधाडरण िषों के जलए सुसंगत पूिडिषों के िौरान गुडजिल के अंतरण पर पूंिी
अजभलाभ या हाजन धारा 48, धारा 49 और धारा 55 की उपधारा (2) के खंड (क) के उपबंधों के अनुसार अिधाठरत
दकया िाएगा ।
[अजधसूचना सं. 77/2021/फा. सं. 370142/23/2021-टीपीएल]
अंदकत िैन, अिर सजचि (कर नीजत और जिधायन प्रभाग)
ठटप्पण—मूल जनयम भारत के रािपत्र, असाधारण, भाग II, खंड 3, उपखंड (ii) में अजधसूचना संखयांक का. आ. 969(अ),
तारीख 26 माचड, 1962 द्वारा प्रकाजित दकए गए थे और अजधसूचना संखयांक सा. का. जन. 470 (आ.), तारीख
02 िुलाई, 2021 द्वारा अंजतम संिोधन दकया गया ।[भाग II—खण् ड 3(i)] भारत का रािपत्र : असाधारण 3
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 7th July, 2021
INCOME-TAX
G.S.R. 472(E).— In exercise of the powers conferred by proviso to section 50 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. Short title: - These rules may be called the Income tax Amendment (19th Amendment), Rules, 2021.
2. In the Income-tax Rules, 1962, after rule 8AB, the following rules shall be inserted, namely:—
“8AC. Computation of short term capital gains and written down value under section 50 where
depreciation on goodwill has been obtained.
(1) For the purposes of proviso to section 50, the written down value of the block of the asset and short term capital
gains, if any, for the previous year relevant to the assessment year commencing on the 1st day of April, 2021
shall be determined in accordance with this rule.
(2) Where the goodwill of the business or profession was the only asset or one of the assets in the block of asset
“intangible” for which depreciation was obtained by the assessee in the assessment year beginning on the 1st day
of April, 2020, the written down value of this block of asset for the previous year relevant to the assessment year
commencing on the 1st day of April, 2021 shall be determined in accordance with the provisions of item (ii) of
sub-clause (c) of clause (6) of section 43.
(3) Where the reduction under sub-item (B) of item (ii) of sub-clause (c) of clause (6) of section 43, for the previous
year relevant to the assessment year commencing on the 1st day of April, 2021, exceeds the aggregate of the
following amounts, namely:-
(i) the written down value of the block of assets at the beginning of the previous year relevant to the
assessment year commencing on the 1st day of April, 2021 without giving effect to reduction under
sub-item (B) of item (ii) of sub-clause (c) of clause (6) of section 43; and
(ii) the actual cost of any asset falling within the block of assets “intangible”, other than goodwill, acquired
during the previous year relevant to the assessment year commencing on the 1st day of April, 2021,
such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets.
(4) Without prejudice to the provisions of sub-rule (3) and section 55, where the goodwill of the business or
profession was the only asset in the block of asset “intangible” for which depreciation was obtained by the
assessee in the assessment year beginning on the 1st day of April, 2020, and the block of asset ceases to exist on
account of there being no further asset acquired during the previous year relevant to the assessment year
commencing on the 1st day of April, 2021 in that block, there will not be any capital gains or loss on account of
the block of asset having ceased to exist.
(5) The capital gains or loss on transfer of goodwill, during the previous years relevant to the assessment year
2021-22 or subsequent assessment years, shall be determined in accordance with the provisions of section 48,
section 49 and clause (a) of sub-section (2) of section 55.”
[Notification No. 77/2021/ F. No. 370142/23/2021-TPL]
ANKIT JAIN, Under Secy. (Tax Policy and Legislation Division)
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 March, 1962 and was last amended vide notification
number G.S.R. 470 (E) dated the 2nd July, 2021.
Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.