Clause - 023 - Amendment of section 47.

THE FINANCE BILL, 2017

Clause 23 of the Bill seeks to amend section 47 of the Income-tax Act relating to transactions not regarded as transfer.

The said section provides that certain transfers of capital assets are not chargeable to tax under section 45 of the Act.

Further, under the existing provisions of clause (x) of the said section, any transfer by way of conversion of bonds or debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company is not regarded as transfer.

It is also proposed to insert a new clause (xb) in the said section so as to provide that the conversion of preference shares of a company into equity shares of that company shall also not be regarded as transfer.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.

 

Conversion of preference shares into equity not treated as transfer, changing capital gains treatment from assessment year 2018-19. The Finance Bill, 2017 adds a new clause excluding conversion of preference shares into equity of the same company from the definition of transfer for capital gains purposes. This amendment, aligning preference-share conversion with existing non-transfer treatment for bond or debenture conversions, takes effect from 1 April 2018 and applies to assessment year 2018-19 onward.