Section 70 — Transactions not regarded as transfer

(1) The provisions of section 67 shall not apply to transfer—
( a) by way of distribution of capital assets on the total or partial partition
of a Hindu undivided family;
( b) of a capital asset by an individual or a Hindu undivided family, under a
will or a gift or an irrevocable trust;
( c) of a capital asset, not being stock-in-trade, by a company to its subsidiary
company, if—
( i) the parent company or its nominees hold the whole of the share
capital of the subsidiary company; and
( ii) the subsidiary company is an Indian company;
( d) of a capital asset, not being stock-in-trade, by a subsidiary company to
the holding company, if—
( i) the whole of the share capital of the subsidiary company is held by
the holding company; and
( ii) the holding company is an Indian company;
( e) in a scheme of amalgamation, of a capital asset by the amalgamating
company to the amalgamated company, if the amalgamated company
is an Indian company;
( f) by a shareholder, in a scheme of amalgamation, of a capital asset being
a share or shares held by him in the amalgamating company, if—
( i) the transfer is made in consideration of allotment to him of any
share or shares in the amalgamated company except when the
shareholder itself is the amalgamated company; and
( ii) the amalgamated company is an Indian company;
( g) in a scheme of amalgamation, to him of a capital asset being a share or
shares held in an Indian company by the amalgamating foreign company
to the amalgamated foreign company, if—
( i) at least 25% of the shareholders of the amalgamating foreign com-
pany continue to remain shareholders of the amalgamated foreign
company; and
( ii) such transfer does not attract tax on capital gains in the country,
in which the amalgamating company is incorporated;
( h) in a scheme of amalgamation, of a capital asset, being a share of a for -
eign company, referred to in section 9(10)(a), which derives directly or
indirectly, its value substantially from the share or shares of an Indian
company, held by the amalgamating foreign company to the amalgamated
foreign company, if—
( i) at least 25% of the shareholders of the amalgamating foreign com-
pany continue to remain shareholders of the amalgamated foreign
company; and
( ii) such transfer does not attract tax on capital gains in the country
in which the amalgamating company is incorporated;
( i) of a capital asset by a banking company to a banking institution under
a scheme of amalgamation of a banking company with a banking insti-
tution sanctioned and brought into force by the Central Government
under section 45(7) of the Banking Regulation Act, 1949 (10 of 1949);
( j) in a demerger, of a capital asset by the demerged company to the resulting
company, if the resulting company is an Indian company;
( k) of shares by the resulting company or issue of shares by such com -
pany, in a scheme of demerger to the shareholders of the demerged
company, if the transfer or issue is made in consideration of demerger of the
undertaking;
( l) of a capital asset in a demerger, being a share or shares held in an Indi-
an company, by the demerged foreign company to the resulting foreign
company, if—
( i) the shareholders holding not less than 75% in value of the shares
of the demerged foreign company continue to remain shareholders
of the resulting foreign company; and
( ii) such transfer does not attract tax on capital gains in the country,
in which the demerged foreign company is incorporated,
and in such a case the provisions of sections 230 to 232 of the Companies
Act, 2013 (18 of 2013) shall not apply;
( m) of a capital asset in a demerger, being a share of a foreign company,
referred to in section 9(10)( a), which derives directly or indirectly, its
value substantially from the share or shares of an Indian company, held
by the demerged foreign company to the resulting foreign company, if—
( i) the shareholders, holding not less than 75% in value of the shares
of the demerged foreign company, continue to remain shareholders
of the resulting foreign company; and
( ii) such transfer does not attract tax on capital gains in the country
in which the demerged foreign company is incorporated,
and in such a case the provisions of sections 230 to 232 of the Companies
Act, 2013 (18 of 2013) shall not apply;
( n) in a business reorganisation, of a capital asset by the predecessor co-oper-
ative bank to the successor co-operative bank or to the converted banking
company;
( o) by a shareholder, in a business reorganisation, of capital asset being
share or shares held by him in the predecessor co-operative bank, if the
transfer is made in consideration of the allotment to him of any share
or shares in the successor co-operative bank or the converted banking
company;
( p) of a capital asset, being bonds or Global Depository Receipts as referred
to in section 209(1), made outside India by a non-resident to another
non-resident;
( q) made outside India, of a capital asset, being rupee denominated bond of
an Indian company issued outside India, by a non-resident to another
non-resident;
( r) of a capital asset made by a non-resident on a recognised stock exchange
located in any International Financial Services Centre, where the con -
sideration for such transaction is paid or payable in foreign currency,
and such capital asset is—
( i) bond or Global Depository Receipt referred to in section 209(1); or
( ii) rupee denominated bond of an Indian company; or
( iii) derivative; or
( iv) such other securities as may be notified by the Central Government;
( s) of a capital asset, being a Government security carrying a periodic pay-
ment of interest, made outside India through an intermediary dealing
in settlement of securities, by a non-resident to another non-resident;
( t) in a relocation, of a capital asset by the original fund to the resulting
fund;
( u) by a shareholder or unit holder or interest holder, in a relocation, of a
capital asset being share or unit or interest held by him in the original
fund in consideration for the share or unit or interest in the resultant
fund;
( v) of a capital asset by India Infrastructure Finance Company Limited to an
institution established for financing the infrastructure and development,
set up under an Act of Parliament and notified by the Central Government
for the purposes of this clause;
( w) of a capital asset, under a plan approved by the Central Government, by
a public sector company, to—
( i) another public sector company notified by the Central Government
for the purposes of this clause; or
( ii) the Central Government; or
( iii) a State Government;
10a[(x) by way of redemption, of Sovereign Gold Bond issued by the Reserve Bank
of India under the Sovereign Gold Bond Scheme, 2015 or any subsequent
Sovereign Gold Bond Scheme, if held by an individual from the date of
original issue till maturity;]
10a. Substituted by the Finance Act, 2026, w.e.f. 1-4-2026. Prior to its substitution, clause ( x)
read as under :
“( x) of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign
Gold Bond Scheme, 2015, by way of redemption, by an individual;”
( y) of a capital asset, being conversion of gold into Electronic Gold Receipt
issued by a Vault Manager, or conversion of Electronic Gold Receipt into
gold;
( z) by way of conversion of bonds or debentures, debenture-stock or deposit
certificates in any form, of a company into shares or debentures of that
company;
( za) by way of conversion of bonds referred to in section 209(1) (Table: Sl.
No. 1) into shares or debentures of any company;
( zb) by way of conversion of preference shares of a company into equity
shares of that company;
( zc) of a capital asset, being any work of art, archaeological, scientific or art
collection, book, manuscript, drawing, painting, photograph or print,
to—
( i) the Government; or
( ii) a University; or
( iii) the National Museum, National Art Gallery or National Archives;
or
( iv) such other public museum or institution as may be notified by the
Central Government to be of national importance or of renown
throughout any State;
( zd) of a capital asset or intangible asset by a firm to a company as a result
of succession of the firm by a company in the business carried on by the
firm, if—
( i) all the assets and liabilities of the firm relating to the business
immediately before the succession become the assets and liabilities
of the company;
( ii) all the partners of the firm, immediately before the succession,
become the shareholders of the company in the same proportion
in which their capital accounts stood in the books of the firm on
the date of the succession;
( iii) the partners of the firm do not receive any consideration or benefit,
directly or indirectly, in any form or manner, other than by way of
allotment of shares in the company; and
( iv) the aggregate of the shareholding of the partners in the company
is not less than 50% of the total voting power and such sharehold-
ing continues to not less than 50% for five years from the date of
succession;
( ze) of a capital asset or intangible asset by a private company or unlisted
public company (herein referred to as the company) to a limited liability
partnership or transfer of a share or shares held in the company by a
shareholder as a result of conversion of the company into a limited lia-
bility partnership under the provisions of section 56 or 57 of the Limited
Liability Partnership Act, 2008 (6 of 2009), if—
( i) all the assets and liabilities of the company, immediately before the
conversion, become the assets and liabilities of the limited liability
partnership;
( ii) all the shareholders of the company, immediately before the con-
version, become the partners of the limited liability partnership
and their capital contribution and profit sharing ratio in the limited
liability partnership are in the same proportion as their shareholding
in the company on the date of conversion;
( iii) the shareholders of the company do not receive any consideration
or benefit, directly or indirectly, other than by way of share in profit
and capital contribution in the limited liability partnership;
( iv) the aggregate of the profit sharing ratio of the shareholders of the
company in the limited liability partnership shall not be less than
50% at any time during five years from the date of conversion;
( v) the total sales, turnover or gross receipts in the business of the
company in any of the three tax years preceding the tax year in
which the conversion takes place does not exceed sixty lakh rupees;
( vi) the total value of the assets, as appearing in the books of account of
the company in any of the three tax years preceding the tax year in
which the conversion takes place does not exceed five crore rupees;
and
( vii) no amount is paid, either directly or indirectly, to any partner out
of balance of accumulated profit standing in the accounts of the
company on the date of conversion for three years from the date
of conversion;
( zf) of a capital asset or intangible asset (by way of sale or otherwise) by a
sole proprietorship concern to a company in case of succession of the
sole proprietorship concern by the company in the business carried on
by it, if—
( i) all the assets and liabilities related to the business of the sole pro-
prietary concern, immediately before the succession, become the
assets and liabilities of the company;
( ii) the shareholding of the sole proprietor in the company is not less
than 50% of the total voting power and such shareholding continues
to be not less than 50% for five years from the date of the succession;
and
( iii) the sole proprietor does not receive any consideration or benefit,
directly or indirectly, except through allotment of shares in the
company;
( zg) in a scheme for lending of any securities under an agreement or arrange-
ment, entered into by the assessee with the borrower of such securities
and which is subject to the guidelines issued by the Securities and
Exchange Board of India or the Reserve Bank of India;
( zh) of a capital asset in a transaction of reverse mortgage under a scheme
notified by the Central Government;
( zi) of a capital asset, being share or shares of a special purpose vehicle to a
business trust in exchange of units allotted by that trust to the transferor;
( zj) of a capital asset by a unit holder, being a unit or units, held by him
in the consolidating scheme of a mutual fund, in consideration of the
allotment to the unit holder of a capital asset, being a unit or units, in
the consolidated scheme of the mutual fund subject to the condition that
the consolidation is of two or more schemes—
( i) of an equity-oriented fund; or
( ii) of a fund other than equity-oriented fund;
( zk) of a capital asset by a unit holder, being a unit or units, held by him in
the consolidating plan of a mutual fund scheme, in consideration of the
allotment to the unit holder of a capital asset, being a unit or units, in
the consolidated plan of that scheme of the mutual fund;
( zl) of a capital asset, being an interest in a joint venture, held by a public
sector company, in exchange for shares of a company incorporated out-
side India by the government of a foreign State, as per the laws of that
foreign State.
(2) In sub-section (1), the definitions mentioned in column C of the Table below
shall apply to the corresponding clauses of the said sub-section mentioned in col -
umn B of the said Table:
TABLE
Sl.
No.
Clause Definitions
A B C
1. (i) The expressions,—
( a) “banking company” shall have the same meaning as assigned
to it in section 5(c) of the Banking Regulation Act, 1949 (10
of 1949);
( b) “banking institution” shall have the same meaning as
assigned to it in section 45(15) of the Banking Regulation
Act, 1949 (10 of 1949).
2. (n)
and
(o)
“business reorganisation”, “converted banking company”,
“predecessor co-operative bank” and “successor co-operative
bank” shall have the meanings respectively assigned to them in
section 65.
3. (r) ( a) “derivative” shall have the same meaning as assigned to it
in section 2( ac) of the Securities Contracts (Regulation)
Act, 1956 (42 of 1956);
( b) “securities” shall have the same meaning as assigned to it
in section 2(h) of the Securities Contracts (Regulation) Act,
1956 (42 of 1956).
Sl.
No.
Clause Definitions
A B C
4. (s) “Government Security” shall have the same meaning as assigned
to it in section 2(b) of the Securities Contracts (Regulation) Act,
1956 (42 of 1956).
5. (t) and
(u)
( a) “original fund” means—
( A) a fund established or incorporated or registered out-
side India, which collects funds from its members for
investing it for their benefit and fulfils the following
conditions:—
( i) the fund is not a person resident in India;
( ii) the fund is a resident of a country or a specified
territory with which an agreement referred to
in section 159(1) or (2) has been en -
tered into; or is established or incorporated or
registered in a country or a specified territory
as may be notified by the Central Government;
(iii) the fund and its activities are subject to appli-
cable investor protection regulations in the
country or specified territory where it is estab-
lished or incorporated or is a resident; and
(iv) fulfils other conditions as may be prescribed;
( B) an investment vehicle, in which Abu Dhabi Investment
Authority is the direct or indirect sole shareholder or
unit holder or beneficiary or interest holder and such
investment vehicle is wholly owned and controlled,
directly or indirectly, by the Abu Dhabi Investment
Authority or the Government of Abu Dhabi; or
( C) a fund notified by the Central Government subject to
conditions as specified;
( b) “relocation” means transfer of assets of the original fund, or
of its wholly owned special purpose vehicle, to a resultant
fund on or before the 31st March, 2030, where consideration
for such transfer is discharged in the form of share or unit
or interest in the resulting fund to—
( i) a shareholder or unit holder or interest holder of the
original fund, in the same proportion in which the
share or unit or interest was held by such sharehold-
er or unit holder or interest holder in such original
fund, in lieu of their shares or units or interests in the
original fund; or
Sl.
No.
Clause Definitions
A B C
(ii) the original fund, in the same proportion as referred
to in sub-clause (i), in respect of which the share or
unit or interest is not issued by resultant fund to its
shareholder or unit holder or interest holder;
( c) “resultant fund” means a fund established or incorporated
in India in the form of a trust or a company or a limited
liability partnership, which is located in an International
Financial Services Centre as referred to in section 147 and
has been granted—
( i) a certificate of registration as a Category I or Category
II or Category III Alternative Investment Fund; or
( ii) a certificate as a retail scheme or an Exchange Traded
Fund as per Schedule VI (Note 1) and which fulfils
the conditions specified in Schedule VI (Table: Sl. No.
1),
and is regulated under the Securities and Exchange Board of
India (Alternative Investment Funds) Regulations, 2012 made
under the Securities and Exchange Board of India Act, 1992
(15 of 1992) or regulated under the International Financial
Services Centres Authority (Fund Management) Regulations,
2022 made under the International Financial Services Centres
Authority Act, 2019 (50 of 2019).
6. (y) “Electronic Gold Receipt”and “Vault Manager” shall have the
same meanings as respectively assigned to them in regulation
2(1)(h) and ( l) of the Securities and Exchange Board of India
(Vault Managers) Regulations, 2021 made under the Securities
and Exchange Board of India Act, 1992 (15 of 1992).
7. (zc) “University” means a University established or incorporated by
or under a Central Act or State Act or Provincial Act and includes
an institution declared under section 3 of the University Grants
Commission Act, 1956 (3 of 1956), to be a University for the
purposes of that Act.
8. (ze) “private company” and “unlisted public company” shall have the
same meanings as respectively assigned to them in the Limited
Liability Partnership Act, 2008 (6 of 2009).
9. (zi) “special purpose vehicle” shall have the meaning assigned to it
in Schedule V (Note 2).
10. (zj) ( a) “consolidated scheme” means the scheme with which the
consolidating scheme merges or which is formed as a result
of such merger;
Sl.
No.
Clause Definitions
A B C
(b) “consolidating scheme” means the scheme of a mutual
fund which merges under the process of consolidation of
the schemes of mutual fund as per the Securities and Ex-
change Board of India (Mutual Funds) Regulations, 1996
made under the Securities and Exchange Board of India
Act, 1992 (15 of 1992);
(c) “equity oriented fund” means a fund—
( i) where the investible funds are invested by way of
equity shares in domestic companies to the extent of
more than 65% of the total proceeds of such fund, for
which the percentage of equity shareholding shall be
computed with reference to the annual average of the
monthly averages of the opening and closing figures;
and
(ii) which has been set up under a scheme of Mutual Fund
specified in Schedule VII (Table: Sl. No. 20 or 21);
( d) “mutual fund” means a mutual fund specified in Schedule
VII (Table: Sl. No. 20 or 21).
11. (zk) ( a) “consolidating plan” means the plan within a scheme of
a mutual fund which merges under the process of con -
solidation of the plans within a scheme of mutual fund as
per the Securities and Exchange Board of India (Mutual
Funds) Regulations, 1996 made under the Securities and
Exchange Board of India Act, 1992 (15 of 1992);
( b) “consolidated plan” means the plan with which the consoli-
dating plan merges or which is formed as a result of such
merger;
( c) “mutual fund” means a mutual fund specified in Schedule
VII (Table: Sl. No. 20 or 21).
12. (zl) “joint venture” means a business entity, as may be notified by
the Central Government.