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An Update on capital gains under income tax act

An Update on capital gains under income tax act. CA Vimal Chopra, Jaipur. sections. 2(1A) - Agriculture income v/s. Agriculture land 2(14) - Capital Asset 2(22B) - Fair Market Value 2(24)(vi)- any capital gain chargeable u/s 45 2(26) Indian company

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An Update on capital gains under income tax act

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  1. An Update on capital gains under income tax act

    CA Vimal Chopra, Jaipur
  2. sections 2(1A) - Agriculture income v/s. Agriculture land 2(14) - Capital Asset 2(22B) - Fair Market Value 2(24)(vi)- any capital gain chargeable u/s 45 2(26) Indian company 2(29A) LTCA means a CA which is not STCA 2(29B) LTCG means CG arising from LTCA 2(42A) STCA means a CA held ≤ 36 M from DOT 2(42A) Proviso when ≤ 12 M applies 2(42B) STCGmeans CG arising from STCA 2(47) transfer in relation to a CA includes..
  3. Agriculture Land2(14) & agricultural income 2(1A) [(iii)  agricultural land in India, not being land situate—  (a)  in any area which is comprised within the jurisdiction of a municipality (whether known as aM,MC,NAC,TAC,TCorON) or a cantonment board and which has a population of not less than 10,000 according to the last preceding census of which the relevant figures have been published before the 1st of the PY ; or  (w.e.f. 1-4-2014 :  (b)  in any area within the distance, measured aerially,— not more than 2 KM from LLM + P = 10001-100000, or not more than 6 KM from LLM + P = 100001-1000000, or not more than 8KM from LLM + P = 10,00,001 + (b) above added in 2(1A) as well.
  4. Short term versus long term Shares in Indian companies STCA means a CA held for not more than 36M Provided that in the case of a share held in a company or any other security listed in a recognised stock exchange in India or a unit of the Unit Trust of India established under the UTI Act, 1963 or a unit of a MF specified - under 10(23D) or a zero coupon bond the provisions of this clause shall have effect as if for the words "thirty-six months", the words "twelve months" had been substituted. Is STCG mandatory ? 15% v/s 10% - S-111A
  5. Transfer 2(47) transfer in relation to a capital asset, includes, (i)  S,E,R ; or (ii)  the extinguishment of any rights therein ; or (iii)  the compulsory acquisition thereof under any law ; or (iv)  conversion or treatment of asset by the owner as stock-in-trade of a business carried on by him (iva)  the maturity or redemption of a zero coupon bond; or] (v)  any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the TOP Act, 1882 or (vi)  any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
  6. Charging section 45 45(1) any PG save 54,54B,-D,-E,-EA,-EB,-F,-G,-H Deemed income of PY when transfer took place 45(2) treatment of CA into or as Stock in trade 45(3) Amount recorded is consideration 45(4) distribution of capital assets on dissolution
  7. When no transfer - 47 Overrides section 45 47(i) any distribution …. HUF 47(iii) gift, will or irrevocable trust 47(iv) to (v) subsidiary to parent & vice versa 47(vi) to (xa) reorganiation amalgamation etc Conversion of firm or proprietorship firm into companies
  8. Mode of computation 48 Full value of consideration received or accruing.. Reduce expenditure incurred wholly and exclusively in connection with such transfer the cost of acquisition of the asset and the cost of any improvement thereto No deduction for STT paid
  9. Cost in certain cases 49 Where the CA became the property.. (i)on any distribution of assets on the total or partial partition of a Hindu undivided family;  (ii) under a gift or will; (iii)   (a) by succession, inheritance or devolution, or (b) on any distribution of assets on the dissolution of a firm, BOI,AOP prior to 1.4.1987, or (c) on any distribution of assets on the liquidation of a company, or (d) under a transfer to a revocable or an irrevocable trust, or (e) some specified transfers of s.47; (iv) such assessee being a HUF, by the mode referred to in 64(2) at any time after the 31.12.1969 the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be.
  10. Deemed Sales Consideration 50C Special provision for full value of consideration in certain cases. 50C. (1) Consideration received or accruing - capital asset, being land or building or both, is less than the value adopted or assessed or assessable]by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer, for the purposes of section 48 be deemed to be the full value of the consideration (2) Without prejudice to the provisions of sub-section (1), where—  (a) the A claims before any AO that the value adopted exceeds the FMV of the property as on the DOT;  (b) the value so adopted has not been disputed the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer Explanation 2.—For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, …adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty.]
  11. Issues under 50C When 54EC investment is 100% of Sales consideration but less than 50C value. What when successor invests in 54EC What when investment is made in the name of spouse? What when the return is filed after 139(1) but within 139. What when a house is to be sold after demolition 54F or 54 What when old agreement is now got registered
  12. Sections at a glance 54 Profit on sale of property used for residence 54B Capital gain on transfer of land used for agricultural purposes not to be charged in certain cases (even STCA will fall) 54D Capital gain on compulsory acquisition of lands and buildings not to be charged in certain cases (even STCA will fall) 54E Capital gain on transfer of capital assets not to be charged in certain cases 54EA Capital gain on transfer of long-term capital assets not to be charged in the case of investment in specified securities 54EB Capital gain on transfer of long-term capital assets not to be charged in certain cases 54EC Capital gain not to be charged on investment in certain bonds 54ED Capital gain on transfer of certain listed securities or unit not to be charged in certain cases 54F Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house 54G Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area (even STCA will fall) 54G A Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone 54GB Capital gain on transfer of residential property not to be charged in certain cases 54H Extension of time for acquiring new asset or depositing or investing amount of capital gain ( for 54, -B,-D,-EC,-F)
  13. property used for residence - 54 Applies to Ind and HUF only LTCA being buildings or lands appurtenant thereto, and being a residential house chargeable under IFHP. Exemption- if capital gains are invested in a residential house 1 year before or 2 year after purchased or has constructed within 3 years before the date of furnishing the return of income u/s 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section 139(1). (Similar requirement is in 54F)
  14. Issues on section 54 What if one purchases a house and constructs a house thereon What when a piece of land is purcahsed What when more than one flat is purchased What when residential house is purchased in other name What when seller dies What when seller ‘s account is frozen What when seller gifts sums to relatives under family settlement What when advance was used for construction
  15. Land used for agriculture purpose 54B CA (even STCA) being land which, in the 2 years immediately preceding the DOT, was being used by the assessee being an individual or his parent, or a HUF for agricultural purposes, and the assessee has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, then, CG needs to be invested..
  16. Capital gain not to be charged on investment in certain bonds 54 EC Available to all assessees and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset(LTSA), Provided that the investment made on or after the 1.4.2007 in the LTSA by an assessee during any financial year does not exceed 50L.
  17. Issues in section 54F When Capital gain not to be charged in case of investment in residential house.- 54F. Individual or HUF capital asset transferred, not being a residential house within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house Exemption- if the cost of the new asset is not less than the net consideration then whole or else in proportion  "net consideration", reduce - any expenditure incurred wholly and exclusively in connection with such transfer. before the date of furnishing the return of income under section 139.
  18. Cases in 54F What if a flat booking sum is paid What if property is purchased in the name of spouse What if the adjacent house is purchased What is a residential house What is meant by a residential house What if a house is sold after demolition
  19. CG on transfer of residential property s. 54GB – (Benefit to promoters) being a residential property (a house or a plot of land), owned by the eligible assessee (I & HUF) before the due date of furnishing of ITR Utilise net consideration for subscription in the equity shares of an eligible company , AND the company has, within 1 year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of new asset 50% ownership, its holding and fund utilization conditions are imposed Sun set clause- valid till 31.3.2017
  20. Meaning of "adjusted", "cost of improvement" and "cost of acquisition S. 55 Cost of improvement Sec 49(1) Cost of acquisition for the purpose of 48 & 49 …….  where the capital asset became the property of the assessee before the 1.4.1981, means the cost of acquisition of the asset to the assessee or the fair market value of the asset on that date, at the option of the assessee; where the capital asset became the property of the assessee by any of the modes specified in 49(1) and the capital asset became the property of the previous owner before the 1.4.1981, means the cost of the capital asset to the previous owner or the fair market value of the asset on that date at the option of the assessee;
  21. transfer of immovable property - 194-iA Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon. (2) No deduction – if consideration is less than 50 L. (3) TAN need not be applied -section 203A "agricultural land" means agricultural land in India, not being a land situate in any area referred to in items (a) and (b)of sub-clause (iii)of clause (14)of section 2; (b)  "immovable property" means any land (other than agricultural land) or any building or part of a building.]
  22. Issues on 194 IA When initial booking is paid-pending agreement What if the payment falls in two years When TDS & Year of income booking differs -199 When part payment was made prior to 1.6.2013 When property is purchased jointly
  23. Summary Highly potential section Solves capital creation desires Requires constant updation Courts differ on many issues Impact is substantial Long term planning is required Should be read with Loss set off laws Life planning is equally essential
  24. Immortal topic mortal speaker Thanks
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