Govt to amend Income Tax Act, no provision for retrospective tax

The UPA government in 2012 imposed capital gains tax retrospectively on some companies like Cairn and Vodafone.

The Centre on Thursday introduced the Taxation Laws (Amendment) Bill to bring closure to the retrospective income tax law which was introduced in 2012. Once the amendments are passed, there will be no incident like that of Cairn energy or Vodafone may take place.

The amendment will do away with the provision of retrospective tax.

"The Bill proposes to amend the Income-tax Act, 1961 so as to provide that no tax demand shall be raised in future on the basis of the said retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before 28th May 2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President)," the finance ministry said in a statement.

"It is further proposed to provide that the demand raised for indirect transfer of Indian assets made before 28th May 2012 shall be nullified on fulfillment of specified conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking to the effect that no claim for cost, damages, interest, etc., shall be filed. It is also proposed to refund the amount paid in these cases without any interest thereon," the ministry stated.

What is retrospective tax?

This is a tax charged for transactions that took place in the past. The UPA government in 2012 imposed capital gains tax retrospectively on some companies like Cairn and Vodafone.

The move comes India lost both the cases in the international tribunal in the Netherlands filed by both Cairn and Vodafone. In both cases, the court ruled that India must not make any more attempts to recover the "alleged tax liability or any interest and or penalties".

Vodafone and Cairn cases

Cairn Energy, the British oil and gas company, is seeking to recover $1.2 billion from India while in the Vodafone case, the government has no liability.

The country today stands at a juncture when quick recovery of the economy after the Covid-19 pandemic is the need of the hour and foreign investment has an important role to play in promoting faster economic growth and employment, the ministry said.