Section 70 — Transactions not regarded as transfer. Successor to s.47 of the 1961 Act.
Section 70 is in Chapter IV — Computation of Total Income, which runs from section 13 to section 95.
Sub-section (1) is a list of transactions to which section 67 — the capital gains charge — does not apply, running through clauses (a) to (zl), roughly thirty-eight limbs. They fall into groups: family and gratuitous transfers (partition of a HUF, will, gift, irrevocable trust); intra-group transfers between a wholly owned Indian subsidiary and its parent; amalgamations and demergers, including foreign-to-foreign transfers of Indian shares and of shares deriving value substantially from Indian shares; co-operative bank business reorganisations; specified non-resident to non-resident transfers of bonds, GDRs, rupee denominated bonds and Government securities, and ifsc exchange transactions in foreign currency; fund relocations to an ifsc resultant fund; redemption of Sovereign Gold Bonds and conversion between gold and Electronic Gold Receipts; conversions of bonds, debentures and preference shares into shares; gifts of art and manuscripts to the Government, a University or a national institution; conversion of a firm or a sole proprietorship into a company and of a company into an llp; securities lending, reverse mortgage, transfers to a business trust, and mutual fund scheme and plan consolidations. Sub-section (2) is a Table of twelve rows that supplies the definitions applying to the individual clauses — banking company, business reorganisation, derivative, Government security, original fund, relocation, resultant fund, Electronic Gold Receipt, University, private company, special purpose vehicle, consolidating and consolidated schemes and plans, equity oriented fund and joint venture. Clause (x) on Sovereign Gold Bonds has been substituted by Act No. 4 of 2026 with effect from 1 April 2026.
Section 67 charges gains on any transfer, so this section carves out transactions where ownership changes form but not economic substance — reorganisations, conversions, intra-group moves — and a set of policy exclusions for non-residents, ifsc transactions and gifts to national institutions. Most limbs carry continuity conditions, which is the price of the exclusion: the deferred gain is meant to surface later in the transferee's hands.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Shareholder continuity in a foreign amalgamation | At least 25% of shareholders | Shareholders of the amalgamating foreign company must continue as shareholders of the amalgamated foreign company, and the transfer must not attract capital gains tax in the country of incorporation | Sub-section (1)(g)(i) and (h)(i) |
| Shareholder continuity in a foreign demerger | Not less than 75% in value of shares | Shareholders of the demerged foreign company must continue as shareholders of the resulting foreign company, and the transfer must not attract capital gains tax in the country of incorporation | Sub-section (1)(l)(i) and (m)(i) |
| Partners' shareholding after a firm is succeeded by a company | Not less than 50% of total voting power, held for five years | Aggregate shareholding of the erstwhile partners, continuing for five years from the date of succession; all assets and liabilities must pass and no consideration other than shares may be received | Sub-section (1)(zd)(iv) |
| Turnover ceiling on conversion of a company into an llp | Sixty lakh rupees | Total sales, turnover or gross receipts of the company must not exceed this in any of the three tax years preceding the year of conversion | Sub-section (1)(ze)(v) |
| Asset ceiling on conversion of a company into an llp | Five crore rupees | Total value of assets as appearing in the books in any of the three tax years preceding the year of conversion | Sub-section (1)(ze)(vi) |
| Profit sharing ratio of erstwhile shareholders in the llp | Not less than 50% | At any time during five years from the date of conversion | Sub-section (1)(ze)(iv) |
| Bar on paying out accumulated profits after llp conversion | Three years | No amount out of the accumulated profit standing on the date of conversion may be paid to any partner, directly or indirectly, for three years from conversion | Sub-section (1)(ze)(vii) |
| Sole proprietor's shareholding after succession by a company | Not less than 50% of total voting power, held for five years | Continuing for five years from the date of succession, with all business assets and liabilities passing and no consideration other than shares | Sub-section (1)(zf)(ii) |
| Outer date for a fund relocation | 31st March, 2030 | The transfer of assets of the original fund or its wholly owned spv to the resultant fund must be on or before this date | Sub-section (2), Table Sl. No. 5, definition of 'relocation' |
| Equity threshold for an equity oriented fund | More than 65% of total proceeds | Invested in equity shares of domestic companies, computed as the annual average of the monthly averages of opening and closing figures | Sub-section (2), Table Sl. No. 10 |
Find the exact clause your transaction falls under and read its conditions as cumulative — the continuity, consideration and residence requirements in clauses (f) to (m), (zd), (ze) and (zf) are what the exclusion turns on, and a shortfall in any one of them puts the transaction back inside section 67. Several conditions run for years after the event, notably the five-year 50% shareholding and profit-sharing tests on a firm or proprietorship conversion and on an llp conversion, and the three-year bar on distributing pre-conversion accumulated profits, so the exclusion can be lost long after the transaction closes. Definitions are not in the clause you are reading: sub-section (2)'s Table maps definitions to clauses, and the resultant fund, special purpose vehicle and mutual fund definitions send you on to Schedules V, VI and VII. For a Sovereign Gold Bond, note the amended clause (x): from 1 April 2026 the exclusion applies to redemption only where an individual has held the bond from the date of original issue until maturity.
A private company with turnover of Rs. 55 lakh in each of the three tax years before conversion, and assets in its books of Rs. 4 crore, converts into a limited liability partnership under section 56 of the Limited Liability Partnership Act, 2008. Clause (ze) keeps the transfer outside section 67: it is under the sixty lakh rupees turnover ceiling in item (v) and the five crore rupees asset ceiling in item (vi). But the exclusion is not final on the day of conversion — if within five years the erstwhile shareholders’ aggregate profit sharing ratio in the llp falls below 50%, item (iv) fails, and if any part of the accumulated profit standing on the date of conversion is paid to a partner within three years, item (vii) fails. A company whose turnover had touched Rs. 70 lakh in even one of those three years would never have been inside clause (ze) at all.
In the capital gains computation in the return — the transaction is reported but no gain is charged, because section 67 is disapplied — and then in the assessment that tests the clause’s conditions, often years later when a continuity test in clause (zd), (ze) or (zf) breaks. The section names no form and no authority; it is a list of exclusions read against section 67, with its own definitions supplied by the Table in sub-section (2).
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
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See every circular and notification on this section, or the circulars index.
See every circular and notification on this section, or the notifications index.