Taxation Laws (Amendment) Act, 2021

The Ministry of Finance has passed the Taxation Laws (Amendment) Act, 2021 on August 13, 2021. The Act amends the Income Tax Act, 1961 and the Finance Act, 2012.

Key amendments under the Act are:

Levy of Tax on income earned from the sale of shares outside India: 

Under the Income Tax Act, 1961 the non-residents are required to pay tax on the income accruing through or arising from any business connection, property, asset, or source of income situated in India. The Finance Act, 2012 amended the Income Tax Act, 1961 and clarified that if a company is registered or incorporated outside India, its shares will be deemed to be or have always been situated in India if they derive their value substantially from the assets located in India.  As a result, the persons who sold such shares of foreign companies before the enactment of the Finance Act, 2012, also became liable to pay tax on the income earned from such sale. The Taxation Laws (Amendment) Act, 2021, omits this tax liability if following conditions are met:

  1. An appeal or petition filed in this regard must be withdrawn or the person must submit an undertaking to withdraw it
  2. The notices or claims under such proceedings must be withdrawn or the person must submit an undertaking to withdraw them
  3. The person should submit an undertaking to waive the right to seek or pursue any remedy or claim in this regard, which may otherwise be available under any law in force or any bilateral agreement.

The Act prescribes that if all the above conditions are fulfilled by the concerned person, then all the assessment or reassessment orders issued with respect to such tax liability will be deemed to have never been issued. Also, if a person becomes eligible for refund after fulfilling these conditions, the amount will be refunded to him, without any interest.


*Tanvi Singh, Editorial Assistant has reported this brief.

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