UPSC Previous Year Question | Prelims GS | 2022

Which one of the following situations best reflects "Indirect Transfers" often talked about in media recently with reference to India?

  1. An Indian company investing in a foreign enterprise and paying taxes to the foreign country on the profits arising out of its investment
  2. A foreign company investing in India and paying taxes to the country of its base on the profits arising out of its investment
  3. An Indian company purchases tangible assets in a foreign country and sells such assets after their value increases and transfers the proceeds to India
  4. A foreign company transfers shares and such shares derive their substantial value from assets located in India

Answer

Correct Answer

A foreign company transfers shares and such shares derive their substantial value from assets located in India

Explanation

Indirect transfer refers to a situation where a foreign entity's shares are transferred, and those shares derive substantial value from assets located in India — such transfers become taxable in India under the amended Income Tax Act provisions.

Topics: economy, indian assets and foreign share transfers, indirect transfers, taxation