Capital Gains on Transfer of Assets by a Partnership Firm to its Partners in India – Fishing in Troubled Waters
Capital Gains on Transfer of Assets by a Partnership Firm to its Partners in India – Fishing in Troubled Waters

Author(s): Sridhar Vemulapati, Bindu Ronald
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Capital gains; Income tax; India
Summary/Abstract: The Finance Act, 2021 introduced section 9B to the Income Tax Act, 1961 and substituted (4) 45(4) of the Act. These sections deal with the transfer of money, capital assets and other assets from a partnership firm to a partner. The amendments are stated to be made to clear the uncertainty that exists in the law. This article explores the history of taxation of partnership firms and their partners under the Indian Tax law and examines whether the said amendments meet the stated objective. The authors argue that the amendments have widened the uncertainty rather than minimise it let alone erase it. In the opinion of the authors, the entire amendment process is flawed, and the situation causes vexatious litigation of alarming proportions. Similar tax provisions in the USA, the UK and Australia, are compared.

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