Draft Report on Retrospective Amendments Relating to Indirect Transfer

Retrospective tax on indirect transfers: recommend prospective application, 50% threshold, proportional taxation, and interest/penalty waivers. The Committee recommends prospective application of the Finance Act, 2012 indirect transfer provisions because they widen the tax base; if applied retrospectively, tax demands should be limited to the taxpayer earning the capital gain, with interest and penalties waived. It prescribes definitions and tests: 'share or interest' limited to ownership/control rights; 'substantially' set at a 50% value threshold derived from Indian assets; a look through approach for 'directly or indirectly'; FMV valuation at last balance sheet date with adjustments; proportional taxation of gains attributable to Indian assets; and specific exemptions/safe harbors for small holdings, listed companies, intra group restructurings and SEBI regulated FII investments.