Corporate restructuring and reorganisations often involve transactions where assets such as shares of another company are transferred without consideration, typically regarded as 'gifts'. These transactions have historically enjoyed tax exemptions for the donating entity under section 47(iii) of the Income Tax Act, ToI reported. However, the recipient of the gift has been taxed under section 56(2)(x) of the Act. A new budget proposal seeks to limit these exemptions starting April 1, 2024, to only individuals and Hindu undivided families.

Currently, companies, firms, and trusts could give away assets without facing capital gains tax, considering these actions as gifts. However, the budget proposal changes this by specifying that the exemption under section 47(iii) will no longer apply to non-individual entities, such as companies and firms.

Deepak Joshi, an advocate at the Supreme Court, commented on the shift in the legal landscape.