The April 2026 issue of The Chamber’s Journal, published by The Chamber of Tax Consultants, carries a special feature on Company Payouts to Shareholders. I have written on the income-tax implications of capital reduction, covering four questions that are critical to understand in the context of capital reduction:
1. Whether capital reduction is a “transfer” under Section 2(47);
2. Why the individual share (not proportionate shareholding) is the right unit of analysis;
3. How gains and losses are computed in zero-payout reductions; and
4. Whether floor valuation principles under section 50CA applies to a capital reduction.
The article traces the jurisprudential arc from Kartikeya Sarabhai through the Bennett Coleman Special Bench divergence to the Supreme Court’s observations in Jupiter Capital and the Mumbai ITAT’s reasoning in Carestream Health and Tata Sons.