Union Budget 2026-27 - Finance Bill, 2026

Exiting Clause (40) of the section 2 inter alia provides the definition of dividend. Sub- clause (v) to long line of clause (40) provides that dividend does not include any advance or loan between two group entities, where, __

(A) one of the group entities is a “Finance company” or a “Finance unit”; and

(B) the parent entity or principal entity of such group is listed on stock exchange in a country or territory outside India other than the country or territory outside India as may be specified by the Board in this behalf;

2. In order to rationalise the said provision, it is proposed to amend the sub-clause (v) to long line of clause (40) to inter alia provide that, the other group entity to the transaction shall also be located in a country or territory outside India which shall be a notified jurisdiction, Also, the parent entity or the principal entity of such group is listed on stock exchange in a country or territory outside India; and for such purposes the country or territory outside India shall be specified by the Central Government, by notification in the Official Gazette.

3. For the purposes of aforementioned provisions, it is also proposed to define the following terms, namely: __

(a) “group entity” shall have the same meaning as assigned to the expression “group entities” in clause (m) of sub-regulation (1) of regulation 2 of the International Financial Services Authority (Payment Services) Regulations, 2024 made under the International Financial Services Centres Authority Act, 2019 (50 of 2019);

(b) “parent entity” or “principal entity” in relation to one or more other group entities, shall be an entity of which other group entities are subsidiary and such entity, __

(i) exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiaries; or46

(ii) controls the composition of the Board of Directors.

4. These amendments will take effect from the 1st day of April, 2026 and shall accordingly, apply in relation to the tax year 2026-27 and subsequent tax years.

[Clause 27]

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Union Budget 2026-27 - Finance Bill, 2026