Complete list of certain transactions not regarded as Transfer - Section 47 - Income Tax - Ready Reckoner - Income Tax

Section 47 Certain transactions not regarded as Transfer :- Section 46(1) - Where the assets of a company are distributed to its shareholders on liquidation of a company, such distribution shall not be regarded as transfer in the hands of the company. Section 47(i) - Distribution of capital asset on total or partial partition of HUF Section 47(iii) - Transfer of capital asset under gift or will or irrevocable trust [ (any transfer of a capital asset by an individual or a Hindu undivided family, under a gift or will or an irrevocable trust) Substituted vide Finance (No. 2) Act, 2024 w.e.f. 01.04.2025 ] Except ESOP Note : a) This clause shall not apply to transfer under gift or an irrevocable trust of share, debenture or warrants alloted by company to employee under ESOPs. b) As per sixth proviso to section 48 FMV on the date of transfer (date of GIFT or irrevocable trust) shall be treated as FVOC of such shares, debentures or warrants. Section 47(iv) - Transfer of capital assets by holding to 100% subsidiary if subsidiary is Indian Company Section 47(v) - Transfer of capital assets by 100% subsidiary to holding, if holding is Indian Company Transfer Under Amalgamation : Section 47(vi) - Transfer in scheme of amalgamation if amalgamated company is Indian Section 47(via) (viab) - Transfer of Shares in Indian Co. or Shares of Foreign Company (FC) which derive its value from share of Indian Co. by Amalgamating Foreign Company to Amalgamated Foreign Company (FC). Note: a) If atleast 25% of shareholders of Amalgamating Foreign Company (FC) continue in Amalgamated Foreign Company (FC). b) Such transfer does not attract tax in the country in which Amalgamating Co. is incorporated. Section 47(viaa) - Transfer of any capital asset under scheme of amalgamation of Banking Co. with Banking Institution as per section 45(7) of Banking Regulations, 1949. Section 47(vii) - Surrender of Share in Amalgamating Co. by shareholder of Amalgamating Co. to Amalgamated Co., Where amalgamated Co. is Indian Co. Transfer under Demerger: Section 47(vib) - Transfer of any capital asset by Demerged Co. to Resulting Co., if resulting company is Indian Co. Section 47(vic) (vicc) - Transfer of Shares in Indian Co. or Shares of Foreign Company (FC) which derive its value from share of Indian Co. by Demerged Co. to Resulting Co Note: a) If shareholder holding atleast 75% value of shares in Demerged Co. continue in Resulting Co. b) Such transfer does not attract tax in the country in which Demergered Co. is incorporated. Section 47(vid) - Issue of Shares by resulting co. to shareholders of demerged Co. Transfer in case of Non-Resident: Section 47(viia) - Bond/GDR referred u/s 115AC outside India - By one NR to another NR, outside India. Section 47(viiaa) - Rupee denominated bond of an Indian Co. - By one NR to another NR, outside India. Section 47(viib) - Govt. Securities periodic payment of interest - By one NR to another NR, outside India through an intermediary dealing in settlement of securities. Section 47(viiab) - a) Bonds or GDR referred to in Section 115AC b) Derivative c) RDB of Indian Co. d) Such other securities as may be notified by Central Government [ Notification No : 16/2020 ] - Foreign currency denominated bond - Foreign currency denominated equity share of a company - Units of a Mutual Fund - Units of a Business Trust - Units of Alternative Investment Fund - Bullion Depositary Receipt by NR on a Recognised Stock Exchange located in any IFSC where the consideration is paid or payable in foreign currency. Conversion of Entities : Section 47(xiv) - Conversion of Sole proprietor into company, following conditions to be fulfilled :- a) All assets liabilities transfer to Company. b) Sole proprietor become shareholder c) Consideration to Sole proprietor shall the shares in the Company. d) His shareholding in the company should be atleast 50% during 5 years from the date of conversion. Section 47(xiii) - Conversion of Firm into Company or Conversion of Stock exchange as AOP/BOI into recognised stock exchange as Company, following conditions to be fulfilled :- a) All assets liabilities transfer to Company. b) All partners/members become shareholders in proportion of their capital standing as on the date of succession. c) Consideration to partners/members will only be the allotment of shares in Company. d) Total Voting Power of partners/members in the company should be atleast 50% during 5 years from the date of succession. e) The Corporatization or demutualisation of Recognised stock exchange in India is carried out as per corporatization or demutualisation scheme approved by SEBI. Sec 47(xiiia) - Transfer of membership rights for acquisition of shares trading/clearing right in that RSE - Transfer made as per the Corporatization or demutualisation scheme approved by SEBI (i) Cost of Acquisition of equity share allotted shall be the Cost to acquire membership (ii) Cost of Acquisition of Trading/clearing right shall be NIL. Period of holding shall be reckoned from date of his membership in RSE. Sec 47(xiiib) - Conversion of Unlisted Public Co./Private Co. into LLP, following conditions to be fulfilled :- a) All assets liabilities transfer to LLP. b) All shareholder become partners and their capital contribution PSR are in proportion of their shareholding. c) Consideration to shareholders will be share in profit capital. d) Total Profit Sharing Ratio in LLP of shareholder should be atleast 50% during 5 years from the date of conversion. e) No Amount is paid directly/indirectly to an partner from accumulated profit balance standing on conversion date for 3 years from date of conversion. f) Total turnover or gross receipts of company should be upto ₹60 Lakhs in last 3 FY preceding the year of conversion. g) Total Assets of company should be upto ₹5 Crore in 3 FY preceding the PY of conversion. Section 47A(3) (4) : Violation of above conditions: If any condition of Section 47(xiii)/(47(xiv)/47(xiiib) is violated, the exemption claimed by the proprietor/firm/company will be taxable in the hands of successor company/LLP in the year of violation Conversion of Securities: Section 47(x) - Conversion of Bond, debenture, debenture stock, deposit certificates of a company into Share or debenture of same company, following points has to consider :- Cost of Acquisition of share/debenture received on conversion will be the cost of that part of Bond, debenture, Deposit certificate which is so converted Section 49(2A). Period of holding of share/debenture shall also include the period for which Bond, debenture, Deposit certificate held by the assessee. Section 47(xb) - Conversion of Preference Share of a company into Equity Share of same Company, following points has to consider :- Cost of Acquisition of equity share received on conversion shall be the cost of that part of preferance share which is so converted. Period of holding of equity share shall also include the period for which preference shares held by the assessee. Other Points: Section 47(viic) - Transfer of Sovereign Gold Bond issued by RBI under Sovereign Gold Bond Scheme 2015, by way of redemption by the assessee being an Individual. Section 47(viid) - any transfer of a capital asset, being conversion of gold into Electronic Gold Receipt issued by a Vault Manager, or conversion of Electronic Gold Receipt into gold. Sovereign Gold Bond scheme, 2015 This scheme of the government of India is intended to reduce the demand for physical gold and consequently, reduce the foreign exchange outflow due to import gold . The two-fold benefit or this scheme are: The gold Bond would serve as a subsitute for physical gold and The gold bond would provide security to the individual investor investing in gold for meeting their social obligation. Vault Manager - Any person who carries on or intends to carry on the business of providing vaulting services. Vaulting services - In relation to gold means the storage and safekeeping of gold deposited with the vault manager, by the depositor for the purpose of trading in electronic gold receipt and providing services incidental thereto, and includes (i) utilizing the services of assayers empanelled with the stock Exchange for testing as per the gold standard , wherever required; (ii) coordination with depositories for creation, transfer and extinguishment of Electronic Gold Receipt and (ii) providing deposit storage and withdrawal services to the beneficial owners. [ w.e.f. 01.04.2024, Inserted by FA 2023 ] Section 47(xv) - Stock lending scheme : Any transfer in a scheme for lending any securities under an agreement between the assessee and borrower of such securities to SEBI or RBI guidelines. Section 47(ix) - Transfer of Work of Art, scientific, archaeological, manuscript, books, photograph or print to Govt. University, National Museum, National Art Gallery, National Archives, Any public museum as notified institutions. Section 47(xii) - Transfer of land by Sick Industrial Company which is being managed by its worker's co-operative under a scheme sanctioned u/s SICA 1985, during the period starting from PY in which it become sick and ending with PY in which Net Worth become more than Accumulated Loss. Section 47(xvi) - Transfer of capital asset under reversed mortgage under a scheme made and notified by Central Government. Section 47(xvii) - Transfer of share of SPV to a Business Trust in exchange of units of the Trust. Section 47(vica) - Transfer of capital asset in a business reorganisation, by the predecessor co-operative bank to the successor co-operative, or to the converted banking company. Section 47(vicb) - Transfer of share by a shareholder, in a business reorganisation, if the transfer is made in consideration of the allotment to him of any share or shares in the successor co-operative bank or to the converted banking company. Section 47(viiac) - Any transfer, in a relocation of a capital asset by the original fund to the resulting fund. Section 47(viiad) - Any transfer by a shareholder or unit holder or interest holder, in a relocation, of a capital asset being a share or unit or interest held by him in the original fund in consideration for the share or unit or interest in the resultant fund. Section 47(viiae) - any transfer of capital asset by India Infrastructure Finance Company Limited to an institution established for financing the infrastructure and development, set up under an Act of Parliament and notified by the Central Government for the purposes of this clause. Section 47(viiaf) - any transfer of capital asset, under a plan approved by the Central Government, by a public sector company to another public sector company notified by the Central Government for the purposes of this clause or to the Central Government or to a State Government. Section 47(xviii) - any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating scheme of a mutual fund, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund: the consolidation is of two or more schemes of equity oriented fund or of two or more schemes of a fund other than equity oriented fund. Section 47(xix) - any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund. Section 47(xx) - any transfer of a capital asset, being an interest in a joint venture, held by a public sector company, in exchange of shares of a company incorporated outside India by the Government of a foreign State, in accordance with the laws of that foreign State. [ Inserted by FA 2023 ]