Capital gains tax due on Flipkart deal

Capital gains tax due on Flipkart deal

India’s tax authorities are right to seek details of Walmart’s acquisition(कमाई/प्रप्ति) of Flipkart to check if the resultant(परिणामी/फलस्वरूप) capital gains on the deal will attract tax.The deal entails Walmart paying around $16 billion for buying 77% stake in Flipkart — India’s largest online retailer — which is registered in Singapore.The law on the tax treatment on indirect transfer of assets(संपत्ति) is clear: the value of shares of a foreign company is deemed to be substantially derived from India if the value of the Indian assets is more than 50% of its worldwide assets. The criterion(कसौटी/मापदण्ड) applies to Flipkart.The Flipkart deal involves changing ownership through transfer of assets that derive their substantial value from economic activity in India. Logically, therefore, non-resident investors in Flipkart — who will reap capital gains as the value of shares they transfer is derived substantially(काफी हद तक/असल में) from Indian assets — would be liable(उत्तरदायी/जवाबदेह) to pay tax. The income-tax law also places the onus on the buyer to withhold the tax.

The intent is to ensure that the tax is collected upfront when the buyer (read: Walmart) makes the payment. Reportedly, co-founder Sachin Bansal, SoftBank and Naspers will sell their entire stake in Flipkart. Other investors — co-founder Binny Bansal, Tencent Holdings, Tiger Global Management and Microsoft Corp — will stay invested. Transparent disclosure(भेद खोलना/उद्घाटन) would help assess the tax, to be computed based on India’s tax treaty(समझौता) with Singapore. Walmart can also get to know its liability on the transaction from the Authority for Advance Ruling (AAR), if it wishes to do so. The AAR, a quasi-judicial body, enables taxpayers to ascertain(जांचना/सुनिश्चित करना) the tax liability on their transactions well ahead, and is an effective way to curb litigation. It will also be binding on the government and the taxpayer.

Important Vocabulary

1. Resultant(परिणामी/फलस्वरूप
Synonyms: aftereffect, aftermath, backlash, backwash, conclusio
Antonyms: beginning, cause, commencement, origin, question

2.Criterion(कसौटी/मापदण्ड)
Synonyms: benchmark, norm, precedent, principle, proof
Antonyms:change, conjecture, fancy, guess, possibility

3.Treaty(समझौता)
Synonyms: accord, alliance, arrangement, bargain, bond
Antonyms: antagonism, disagreement, discord, misunderstanding, refusal

4.Ascertain(जांचना/सुनिश्चित करना)
Synonyms: confirm, determine, divine, double-check, find out
Antonyms: disprove, invalidate, aid, assist, confuse

5.Disclosure(भेद खोलना/उद्घाटन)
Synonyms: acknowledgment, admission, confession, discovery, exposure
Antonyms: concealment, denial, secret


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