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Capital Gains Transactions not regarded as Transfer

Capital Gains Transactions not regarded as Transfer

The following, though may fall under the above definition of transfer are to be treated as not transfer for the purpose of computing Capital Gains:

  1. distribution of capital assets on the total or partial partition of a Hindu Undivided Family;
  2. transfer of a capital asset under a gift or will or an irrevocable trust except transfer under a gift or an irrevocable trust, of shares, debentures or warrants allotted by a company to its employees under ‘Employees’ Stock Option Plan or Scheme;
  3. transfer of a capital asset by a company to its subsidiary company, if:
    1. the parent company or its nominees hold the whole of the share capital of the subsidiary company,
    2. the subsidiary company is an Indian Company
    3. the capital asset is not transferred as stock-in-trade, and such an exemption exists if:
      1. the subsidiary company does not convert such capital asset into stock-in-trade for a period of 8 years from the date of transfer and
      2. the parent company or its nominees continue to hold the whole of the share capital of the subsidiary company for 8 years from the date of transfer.
  4. transfer of a capital asset by a subsidiary company to the holding company, if:
    1. the whole of the share capital of the subsidiary company is held by the holding company,
    2. the holding company is an Indian Company,
    3. the capital asset is not transferred as stock-in-trade, and such an exemption exists if:
      1. the holding company does not convert such capital asset into stock-in-trade for a period of 8 years from the date of transfer and
      2. the holding company or its nominees continue or hold the whole of the share capital of the subsidiary company for 8 years from the date of transfer.
  5. in a scheme of amalgamation, transfer of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company;
  6. transfer of shares of an Amalgamating Company, if:
    1. the transfer is made in consideration of the allotment of share or shares in the Amalgamated Company, and
    2. the Amalgamated Company is an Indian Company
  7. transfer of shares of an Indian Company, by an amalgamating foreign company to the amalgamated foreign company, if:
    1. at least twenty-five per cent of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company and
    2. such transfer does not attract tax on capital gains in the country in which the amalgamating company is incorporated.
  8. in a demerger:
    1. transfer of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian Company;
    2. transfer of share or shares held in an Indian Company by the demerged foreign company to the resulting foreign company, if:
      1. the share holders holding not less than three fourths in value of the shares of the demerged foreign company continue to remain share holders of the resulting foreign company; and
      2. such transfer does not attract tax on Capital Gains in the country, in which the demerged foreign company is incorporated.
    3. transfer or issue of shares, in consideration of demerger of the undertaking, by the resulting company to the share holders of the demerged company.

Capital Gains Transactions not regarded as Transfer

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