The provisions governing the tax treatment of hybrid equity instruments and third-party backed shares are again subject to further refinement.

Subsequent to the introduction of section 8EA governing "third-party-backed shares" and the overhaul of section 8E relating to "hybrid equity instruments" in 2012, numerous amendments have been made to these sections to address their initially highly restrictive application. One of the shortcomings has been the narrow definition of "qualifying purpose" applicable to both these sections. The Budget proposes to clarify this definition, which we hope will be expanded to include not only the acquisition of equity shares in operating companies, but also the acquisition of qualifying businesses and the distribution of qualifying dividends/returns of capital.