Section 57 of the Income Tax Act shall not apply to change of ownership after death

The government has announced that section 57 of the Income Tax Act will not apply to the change of ownership after the death of a natural person. Presenting the budget for the next fiscal year 2083/84, Finance Minister Dr. Swarnim Wagle said that Section 57 of the Income Tax Act is not attracted to the change of ownership of a controlled entity due to the involuntary nature and change of ownership of the entity after the death of a natural person. This arrangement is expected to reduce tax confusion when ownership is transferred to family or heirs due to death. In particular, in cases where a natural person owns a company, business or investment, explaining the change of ownership due to death as a simple change of business ownership can reduce the perceived tax complexity.

Earlier, the tax regime related to change of ownership used to create confusion among businessmen, investors and heirs. The budget has signaled that the tax system will look at transfers of ownership due to death differently after the new regime. The government has adopted a policy of simplifying the tax system through the budget, facilitating the business environment and reducing unnecessary tax disputes. At the same time, the provision that section 57 does not apply to the change of ownership after the death of a natural person has been brought forward.