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Budget 2017 : Capital Gain provisions changed

The process of computation and taxation of capital gains has seen a significant overhaul in this Budget. The changes made to the system are:

Definition

Capital assets had been defined as assets which were held for more than 36 months. This definition has been revised to ensure that assets held for more than 2 years will hereon be considered capital assets and will be eligible for lower rates of taxes as well as indexation benefits.

Indexation

On the subject of indexation, the base year has been changed from 1981 to 2001.

Amendment to Section 45

Section 45 has been amended to change the point at which capital gains shall be incurred in the case of joint development agreements from the date of handover of possession to the date of completion of the project as certified by the issuance of the completion certificate by the competent authority.

Amendment to Section 49

Section 49 has been amended to deem the cost of acquisition of shares in the project as being the full value of consideration.

Amendment to Section 54EC

Definition of bonds covered under section 54EC has been expanded to include any bond redeemable after a duration of 3 years as may be specified by the government as being eligible for this purpose.

Amendment to Section 47

Amendment of section 47 of the act has been proposed to ensure that conversion of preference shares into equity shares shall not be considered as a transfer for the purposes of calculation of capital gains. Further transfer by one NR to another NR outside India of Rupee Denominated Bond is not considered as transfer.

Exemption on transfer of shares

Exemption under section 10(38) on transfer of shares to be available only to cases where STT has been also paid at the time of acquisition. The government has clarified though that it will notify bonfire transactions where STT on acquisition shall not be applicable.

Fair market Value of Shares

Fair Market Value (FMV) of Shares of an unlisted company shall be deemed to be consideration received in case such shares are transferred at a value lower than such FMV. A new section 50CA has been introduced for this purpose.

With Contributions From Anshu Mehta, Ankit Sharma, Ayesha Jain, and Mansi Singhal

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