TAXATION OF NON-COMPETE FEES AND EXCLUSIVITY RIGHTS IN CASE OF PROFESSION
EXTENSION OF SCOPE OF SECTION 43B
April 30, 2016AMORTISATION OF SPECTRUM FEE FOR PURCHASE OF SPECTRUM
April 30, 2016Under the existing provisions of the Income Tax Act, there are provisions in relation to taxation of non-compete fees and exclusivity rights in relation to Business but there are no such provisions in relation to Profession.
Thus, it is proposed to make the following considerations:-
-Non-compete fees received/receivable, recurring in nature, in relation to not carrying out profession shall be taxed as “Profits and Gains of Profession”
-Capital receipts on transfer of rights to carry profession, shall be taxable under the head “Capital Gains” and not as “Profits and Gains of Profession”
-Further, the cost of acquisition and cost of improvement for calculating capital gains on account of transfer of rights to carry profession, shall be taken as ‘nil’
Non-compete fees in case of business shall be taxed as business income and not as capital gains.
These amendments will take effect from 1st April, 2017 and will, accordingly, apply in relation to the assessment year 2017-18 and subsequent years.