Prevention of Tax Avoidance through Temporary Transfer and Reacquisition of Securities (Bond Washing Transactions) - (New) Section 175(1) & (2) / (Old) Section 94(1)

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....he interest on those securities is received by another person in respect of such securities, then: • Clause (a): The interest is deemed to be the income of the original owner for income-tax purposes. • Clause (b): The interest is not treated as the income of the person who actually received it. This applies regardless of any other provision of the Income-tax Act. Tax Neutrality Where Similar Securities Are Acquired [ Section 175(2) ] If the owner buys or acquired similar securities instead of the exact same securities, the law ensures that: • the owner is not taxed more heavily merely because similar securities were purchased instead of the original ones. In other words, purcha....

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.... • Minimum Compliance Period: The notice must provide a period of not less than twenty-eight days for compliance, ensuring that the recipient has a reasonable opportunity to collect and furnish the required details. • Scope of Information: The AO may require details of: • all securities owned by the person; or • securities in which the person had a beneficial interest, • during the period specified in the notice. • Purpose of Information: The information is sought to: • facilitate the application of the provisions of Section 175; and • determine whether income-tax has been borne on the interest arising from those securities. Under Secti....

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....provisions of section 94(1) shall not apply if • the owner, or • the person who has had a beneficial interest in the securities, as the case may be, proves to the satisfaction of the Assessing Officer- • (a) that there has been no avoidance of income-tax, or • (b) that the avoidance of income-tax was exceptional and not systematic and that there was not in his case in any of the three preceding years any avoidance of income-tax by a transaction of the nature referred to in section 94(1). [ Section 94(3) ] Section 94(1) is an anti-avoidance provision designed to prevent taxpayers from reducing their tax liability by temporarily transferring securities before the due date of ....