Which one of the following situations best reflects “Indirect Transfers” often talked about in media recently with reference to India ?
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Answer: D. Indirect transfer means a foreign company sells shares of an overseas entity whose value comes substantially from assets in India. India taxes such deals under Section 9(1)(i) of the Income-tax Act; this was the Vodafone and Cairn dispute. The Taxation Laws (Amendment) Act, 2021 withdrew retrospective tax demands for such deals made before May 2012.
Watch for: Several options involve cross-border taxes; the key idea is offshore shares whose value lies in Indian assets.
Why the other options are wrong
- A. Wrong because this describes ordinary foreign investment taxed abroad, not an indirect transfer.
- B. Wrong because this is ordinary FDI and home-country taxation, not an indirect transfer.
- C. Wrong because this is a direct sale of foreign assets, not an offshore share transfer deriving value from India.
Source to check: Income-tax Act, 1961, Section 9(1)(i), Explanation 5; Taxation Laws (Amendment) Act, 2021
Answer from the official UPSC key. Written and fact-checked by AI against the official key. Spotted a mistake? Report it.