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CA Final · Direct Tax Laws & International Taxation · Provisions to Counteract Unethical Tax Practices

Under Rule 235(3) of the Income-tax Rules, 2026, an Indian concern must maintain financial and accounting statements of the foreign entity that directly or indirectly holds the Indian assets. For which period before the transfer date are these required?

Financial and accounting statements of the foreign company or entity holding the Indian assets must be maintained for two years prior to the date of transfer of the share or interest, as required by Rule 235(3)(e).

  1. ATwo years prior to the date of transferCorrect
  2. BOne year prior to the date of transfer
  3. CThree years prior to the date of transfer
  4. DTwo years after the date of transfer

Explanation

Rule 235(3)(e) requires financial and accounting statements of the foreign company or entity for two years prior to the date of transfer of the share or interest. Statements after the transfer are not required under this clause, and one or three years are not the prescribed period.

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