Rule 58 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Rule 58 of the Income-tax Rules, 2026 lists five classes of person to whom section 92(2)(m) does not apply, each tied to a specific nature of asset and a specific set of conditions.
The structure
Sub-rule (1) is a four-column Table: the class of persons in column B, the nature of asset in column C, and the conditions in column D. Where all three line up, section 92(2)(m) does not apply. The 1962 parallels are rules 11UAC and 11UAD.
The five classes in rule 58
| Sl. | Class | Asset | Condition |
|---|---|---|---|
| 1 | Resident of an unauthorised colony in the National Capital Territory of Delhi | Any immovable property being land or building, or both | The Central Government has, by notification, regularised the transactions based on the latest power of attorney, agreement to sale, will, possession letter and other documents including documents evidencing payment of consideration, conferring or recognising ownership, transfer or mortgage in favour of that resident |
| 2 | Shareholder | Any movable property being unquoted shares of a company, its subsidiary, or that subsidiary's subsidiary | (a) The Tribunal, on a Central Government application under section 241 of the Companies Act, 2013, has suspended the Board and appointed new directors nominated by the Central Government under section 242; and (b) the share was received under a resolution plan approved by the Tribunal under section 242 after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner |
| 3 | Investor or investor bank | Any movable property being equity shares of the reconstructed bank | The share was allotted by the reconstructed bank under the Scheme at a price specified in paragraph 3(3) of the Scheme |
| 4 | Any person, from a public sector company or the Central Government or any State Government | Any movable property being equity shares of a public sector company or a company | The shares were received under strategic disinvestment |
| 5 | The fund management entity of the resultant fund | Any movable property being shares, units or interest in the resultant fund | Received in lieu of shares, units or interest held by the investment manager entity in the original fund, pursuant to the relocation, subject to the two 90% tests below |
Each row of rule 58 is a package. Being in the class is not enough — the asset must be of the stated nature and every condition in column D must be satisfied. A shareholder receiving quoted shares under a Tribunal-approved plan is outside row 2, because column C is limited to unquoted shares; and shares received in a public sector company sale that is not a strategic disinvestment are outside row 4.
The two 90% tests at Sl. No. 5 of rule 58
- not less than 90% of the shares or units or interest in the fund management entity of the resultant fund are held by the same entities or persons, in the same proportion as held by them in the investment manager entity of the original fund; and
- not less than 90% of the aggregate of shares or units or interest in the investment manager entity of the original fund was held by such entities or persons.
The first tests continuity into the new entity, including the proportions; the second tests concentration in the old one. Both have to hold, which is why a relocation that brings in even a modest new investor at the management-entity level can fail rule 58.
The definitions rule 58 relies on
| Term | Meaning |
|---|---|
| Resident (Sl. No. 1) | A person having physical possession of property on the basis of a registered sale deed or the latest set of power of attorney, agreement to sale, will, possession letter and payment evidence in an unauthorised colony — includes legal heirs, but does not include a tenant, licensee or permissive user |
| Unauthorised colony | As in clause (b) of section 2 of the National Capital Territory of Delhi (Recognition of Property Rights of Residents in Unauthorised Colonies) Act, 2019 |
| Subsidiary (Sl. No. 2) | A company is a subsidiary of another if that other holds more than half in nominal value of its equity share capital |
| Tribunal | As in section 2(90) of the Companies Act, 2013 |
| Scheme (Sl. No. 3) | The Yes Bank Limited Reconstruction Scheme, 2020; "investor", "investor bank" and "reconstructed bank" from paragraphs 2(1)(b), (c) and (d) of that Scheme |
| Strategic disinvestment (Sl. No. 4) | As in section 116(3)(c) |
| Relocation, original fund, resultant fund (Sl. No. 5) | As in section 70(2) |
| Fund management entity | As in regulation 2(p) of the International Financial Services Centres Authority (Fund Management) Regulations, 2022 |
| Investment manager entity | The fund manager of the original fund regulated by the respective regulation of the jurisdiction in which the original fund is located |
It is not a registered-title test. A person in physical possession holding the latest power of attorney, agreement to sale, will or possession letter with proof of payment qualifies, and so do legal heirs. What is excluded is anyone holding under a tenancy, licence or permission — occupation that never purported to transfer ownership.
The section 79 extension
Sub-rule (2): the provisions of section 79 shall also not apply to the transfer of any movable property of the nature mentioned in Sl. No. 2 of the table, where the conditions mentioned there are satisfied.
So the Tribunal-resolution-plan case at row 2 is the only one in rule 58 that carries relief on both sides of the transaction — outside section 92(2)(m) for the recipient shareholder, and outside section 79 on the transfer itself.
Worked example
| Facts | Position under rule 58 |
|---|---|
| Occupant of a regularised Delhi unauthorised colony holding a possession letter and payment receipts | Row 1 — section 92(2)(m) does not apply |
| Tenant in the same colony | Excluded by the definition of "resident" |
| Shareholder receiving unquoted shares under a section 242 resolution plan, the Commissioner having been heard | Row 2 — and section 79 also disapplied |
| Same plan, but the jurisdictional Commissioner was not heard | Condition (b) fails |
| Investor allotted Yes Bank equity at the paragraph 3(3) price | Row 3 |
| Buyer of PSU shares in an ordinary market sale | Not strategic disinvestment — outside row 4 |
| Relocated fund whose new management entity has 85% common ownership | Fails the first 90% test |
Compliance checklist
- Match the class, the asset and every condition before relying on rule 58.
- For row 1, confirm the Central Government notification regularising the transactions.
- Test the occupant against the "resident" definition, excluding tenants and licensees.
- For row 2, confirm both the section 241 suspension and the section 242 plan approval with the Commissioner heard.
- Check that the shares are unquoted, and trace the subsidiary chain on the more-than-half nominal value test.
- For row 3, confirm allotment at the paragraph 3(3) price of the Yes Bank Scheme.
- For row 4, confirm the transaction is a strategic disinvestment under section 116(3)(c).
- For row 5, run both 90% tests, including the same-proportion requirement.
- Remember the section 79 relief attaches only to row 2.
Common mistakes
- Applying row 2 to quoted shares.
- Treating a tenant as a resident of an unauthorised colony.
- Assuming any PSU share sale is a strategic disinvestment.
- Testing only the 90% level and not the same-proportion requirement.
- Extending the section 79 relief to rows other than row 2.