Tax department move to tax goodwill could expand in the next Budget

While the new tax is not retrospective in nature, it will impact foreign companies buying into Indian companies going ahead

A somewhat overlooked amendment in the direct tax laws, flying in the face of established accounting standards, has bulged out the tax receipts in this fiscal and is keeping tax experts on tenterhooks for the next union government budget, due on February 1. 

The amendment is about the treatment of goodwill by a business. Over the past decade several multinational companies and Indian companies have used this route to reduce their tax liability spectacularly. The largest of them was Vedanta’s Rs 20,000 crore write down in 2015. Others included Vodafone, BP and Tata Steel. 

While the new tax is not