Lok Sabha Question No. 5556 (UNSTARRED), answered on 2017-04-07
Subject: Capital Gains Tax
Ministry: FINANCE
Asked by: P. C. MOHAN

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE LOK SABHA UNSTARRED QUESTION No. 5556 TO BE ANSWERED ON FRIDAY, THE 7 TH  APRIL, 2017

17, CHAITRA, 1939 (SAKA)

## CAPITAL GAINS TAX

## 5556. SHRI P.C. MOHAN:

Will the Minister of FINANCE be pleased to state:

- (a) whether the Government is aware that Parathasarathy Shome Committee has recommended for doing away with the capital gains tax exemption or having a uniform rate for all and if so, the details thereof;
- (b) whether the Government has received any proposal or suggestion from Bombay Stock Exchange  (BSE)  for  removal  of  capital  gains  arbitrage  between  listed  and  unlisted companies;
- (c) if so, the details thereof;
- (d) whether the BSE has conducted any study regarding this and informed the Government about the misuse of provisions and if so, the details thereof; and
- (e) the steps taken by the Government to prevent converting black money into white?

## ANSWER MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI SANTOSH KUMAR GANGWAR)

- (a) In the absence of specific details, about the  Dr. Parthasarathy Shome Committee, the recent  reports  of  the    Dr.  Parthasarathy  Shome  Committee  i.e.  (i)  an  Expert  Committee  on General  Anti  Avoidance  Rules.  (ii)    Tax  Administration  Reform  Commission  (TARC)  (iii) Expert  Committee  on  Retrospective  Amendments  Relating  to  Indirect  Transfer,  have  been examined and it has been noticed that these reports did not recommend doing away with the capital gains tax exemption or having a uniform rate for all.
- (b) to (d) Yes. BSE has written to Ministry of Finance regarding suggestions to rationalize the differential capital gains tax structure vide its letters dated 16.7.15, 20.9.16 and 10.11.16.  In letter dated 16.07.2015, it was suggested that in order to prevent / curb the market abuse that there  should  be  a  simple  mechanism  and  the  current  differential  capital  gains  treatment between listed and unlisted securities should be harmonized to prevent any tax arbitrage.

(e)      The  Government  has  taken  various  steps,  both  by  way  of  policy  initiatives  as  well  as through  more  effective  enforcement  actions  on  the  ground  to  check  black  money.  These include  putting  in  place  robust  legislative  and  administrative  frame  works,  systems  and processes with due focus on capacity building and integration of information and its mining through increasing use of information technology. Some of the recent measures are:

(I)  Vide Finance Act, 2017, section 269ST has been inserted in the Income-tax Act, 1961 (the Act) which provides that no person (other than those specified therein) shall receive cash of Rs. 2  lakh  or  more  from  a  person  in  aggregate  in  a  day  or  in  respect  of  a  single  transaction  or transactions relating to one event or occasion. Further, a new section 271DA has been inserted to provide penalty of a sum equal to the amount of receipt, for contravening the provisions of section 269ST.

(II)    Vide  Taxation  Laws  (Second)  Amendment  Act,  the  provisions  of  section  115BBE  has been  amended  to  provide  that  unexplained  income  of  the  nature  referred  to  in  section  68, section 69, section 69A, section 69B, section 69C or section 69D of the Act shall be taxed @ 60%. Further penalty provisions under section 271AAC and 271AAB have been rationalised to provide higher rate of penalty on income unearthed as a result of search and seizure operation.

(III)  Under section 270A of the Act a higher rate of penalty has been provided for misreporting of income, which shall be equal to two hundred per cent of the amount of tax payable on underreported income.

(IV)    With  a  view  to  prevent  the  misuse  of    exemption  provided  under  section  10(38)  by certain persons for declaring their unaccounted income as exempt long-term capital gains by entering  into  sham  transactions,  section  10(38)  has  been  amended  vide  Finance  Act,2017  to provide  that  exemption  under  this  section  for  income  arising  on  transfer  of  equity  share acquired  or  on  after  1st  day  of  October,  2004  shall  be  available  only  if  the  acquisition  of share(other  than  notified  acquisitions)  is  chargeable  to  Securities  Transactions  Tax  under Chapter VII of the Finance (No 2) Act, 2004

(V)  Constitution of the Special Investigation Team (SIT) on Black Money under Chairmanship and Vice-Chairmanship of two former Judges of Hon'ble Supreme Court.

(VI)  Enactment of  a  comprehensive law - 'The Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015' to specifically deal with black money stashed away abroad.

(VII)  Constitution of Multi-Agency Group (MAG) consisting of officers of Central Board of Direct  Taxes  (CBDT),  Reserve  Bank  of  India  (RBI),  Enforcement  Directorate  (ED)  and Financial Intelligence Unit (FIU) for investigation of recent revelations in Panama paper leaks.

(VIII)  Proactively engaging with foreign governments with a view to facilitate and enhance the  exchange  of  information  under  Double  Taxation  Avoidance  Agreements  (DTAAs)/Tax Information Exchange Agreements (TIEAs)/Multilateral Conventions. (IX)    Proactively  furthering  global  efforts  to  combat  tax  evasion/black  money,  inter  alia,  by joining the Multilateral Competent Authority Agreement in respect of Automatic Exchange of Information (AEOI) and having information sharing arrangement with USA under its Foreign Account Tax Compliance Act (FATCA). (X)    Renegotiation  of  DTAAs  with  other  countries  to  bring  the  Article  on  Exchange  of Information to  International Standards and expanding India's treaty network by signing new DTAAs and TIEAs with many jurisdictions to facilitate the exchange of  information and to bring transparency. (XI)    Enabling  attachment  and  confiscation  of  property  equivalent  in  value  held  within  the country where the property/proceeds of crime is taken or held outside the country by amending the Prevention of Money-laundering Act, 2002 through the Finance Act, 2015. (XII)    Enactment of the Benami Transactions (Prohibition) Amendment Act, 2016 to amend the Benami Transactions (Prohibition) Act, 1988 with a view to, inter alia, enable confiscation of Benami property and prosecution of benamidar and the beneficial owner. (XIII)    Initiation  of  the  information  technology  based  'Project  Insight'  for  strengthening  the non-intrusive, information driven approach for improving tax compliance, and (x) Launching of  'Operation  Clean  Money'  on  31st  January  2017  for  collection,  collation  and  analysis  of information on cash transactions during demonetization period, extensive use of information verification  of  suspect  cases  and  enforcement  actions  in  appropriate  cases  which  include searches, surveys, enquiries, assessment of income, levy of taxes, penalties, etc. and filing of technology  and  data  analytics  tools  for  identification  of  high  risk  cases,  expeditious  eprosecution complaints in criminal courts, wherever applicable.

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