Preface
In this Budget there have been lot of amendments with regard to Capital Gains. The excellent homework done by the Government deserves lot of praise. The rationalisation and simplification of taxation of capital gains is a positive step taken by the Government in simplifying taxation of capital gains. Of course, the removal of indexation and restoring Partially indexation benefits is likely to raise lot of questions with regard to its restoration in the sense as to whether the restoration is full or partial. In other words, does the resident assessee stand to lose the capital loss that is likely to arise while exercising option of indexation in the case of transfer of his capital asset by foregoing the same in view of second proviso to section 112 of the Income-tax Act (the Act)? This amendment to section 112 of the Act along with other amendments made by the Finance (No. 2) Act, 2024 have been duly explained in a separate chapter.
It is always a pleasure to work for Taxmann Group of Publications as you are not working alone but with a team of dedicated experts who are always willing to support the author. This team is mainly responsible for moulding me into author of articles and then elevating me to that of an Author of a book on an important topic of “capital gains”. I am really privileged to be associated with Taxmann in revising and updating this 2024 edition.
All the Chapters have been revised and updated with practical examples and latest case laws the testimony being order dated 9th August, 2024 passed by the ITAT Chennai Bench has been digested while covering case laws under section 54F of the Act. This book also provides an in-depth and thorough analysis of each aspect of capital gains with the help of ‘relevant’ judicial pronouncements, Circulars and Notifications, and illustrations.
A separate chapter captioned “NRIs and Taxation of their incomeA Brief Note” has been devoted wherein, among other things, it has
been clearly explained the procedure to be adopted when an NRI disposes of his property in India. The special feature of this Chapter also includes tips for people returning to India or those who become Resident Indians from Non-Resident Indians.
The present-day topic of Tax planning through Family Arrangement/ Settlement has been discussed in detail with examples and case laws. This book has also discussed and of exemption claims made under sections 54, 54B and 54F arising out of investment made in the name(s) of relatives from funds emanating out of transfer of capital asset.
I will be failing in my duty if I do not wholeheartedly thank my entire team members especially Saravanan, Vaibhav Ramanathan and Sailakshmi who worked with me by supporting me in this interesting assignment of updating this book. Of course, full support rendered by my four generation of family members at home can never be equated with any degree of thanks.
Before concluding, let the conversation the author had with a Senior Government Official from the Income-tax Department recently be shared which highlights the importance of co-ordination between assessees, the professionals and the income-tax department. The Senior Government Official explained about non-compliance by NRIs unintentionally and the consequences that follow as detailed below.
Let us presume that the NRI deposits few lakhs of rupees in NRE fixed deposit account. He had taken PAN either when he was an Indian or at the time of leaving the country through a friend or some agency with some local address which he may not even remember. The NRI has not informed the tax department in India that he is an NRI. He also has not created income-tax password and id.
The income-tax department on noticing this deposit in NRE account, picking up the case from non-tax filers’ folder, serves a notice on the address mentioned in the PAN card advising the NRI to file the return for that year. The tax department would not be able to issue a notice electronically because no id. was created by the NRI. As the NRI is not aware of such notice being served on him, he does not respond. The second notice proposing to treat the amount lying in fixed deposit as income of the previous year is served on him on the same address which notice is also not responded to by the NRI. The third communication is the assessment order treating the entire deposit as income raising a huge demand. The NRI is not aware of the assessment order framed on him raising a huge demand. Now
the fourth stage is, when recovery proceedings are initiated by the tax department by recourse to his bank account, the NRI becomes aware of such proceedings in different stages but it is too late for him without much remedy.
The senior official conceded that it is not the intention of the tax department to collect more tax than what is required but it is left with no other choice in a case like this. He advised tax practitioners to act as catalyst between the NRI assessees and the tax department so that there is due tax compliance on the part of the NRIs and the tax department takes only its share of taxes. The author suggested to that senior officer that the tax department should (also) come out with advertisements through social media about the tax obligations of NRIs and how such obligations can be fulfilled by NRIs with the help of role to be played by the tax authorities and professionals.
S. KRISHNAN
IS “CAPITAL ASSET”?
WHAT IS COST OF IMPROVEMENT?
WHAT IS INDEXED COST OF ACQUISITION AND INDEXED COST OF IMPROVEMENT
ROLLOVER DEDUCTION IN RESPECT OF PROFIT ON SALE OF PROPERTY USED FOR RESIDENCE [SECTION 54]
DEDUCTION OF ROLLOVER OF GAIN ON TRANSFER OF LAND USED FOR AGRICULTURAL PURPOSES [SECTION 54B]
19 TAX INCENTIVES FOR TRANSFER OF ASSETS ON SHIFTING OF INDUSTRIAL UNDERTAKINGS FROM URBAN AREA/SHIFTING OF INDUSTRIAL UNDERTAKING FROM
SALE [SECTION 50B]
CHAPTER 0
AMENDMENTS MADE BY THE FINANCE (NO. 2) ACT, 2024
0.1 AMENDMENT TO SECTION 115QA(1) AND OTHER CONSEQUENTIAL AMENDMENTS-
What is the impact on account of amendments?
How will it be taxed after the amendment?
“(f) any payment by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 68 of the Companies Act, 2013;”
Continuing the same example, let us analyse the situation post amendment
0.2 RATIONALISATION OF TAXATION OF CAPITAL GAINS
TABLE A: SITUATIONS WHEN PROPERTY WAS ACQUIRED AFTER 01-04-2001
SITUATION - 1OLDNEW
SITUATION - 2OLDNEW
SITUATION - 3OLDNEW
SITUATION - 4OLDNEW
SITUATION - 3OLDNEW
TABLE B : SITUATIONS WHEN PROPERTY WAS ACQUIRED PRIOR TO 1-4-2001
SITUATION - 1OLDNEW
SITUATION - 2OLDNEW
SITUATION - 3OLDNEW
0.3 AMENDMENTS TO SECTION 112 OF THE ACT EXPLAINED
0.4 PERIOD OF HOLDING OF CAPITAL ASSETS AFTER THE AMENDMENTS MADE BY THE FINANCE (NO. 2) ACT, 2024
PERIOD OF HOLDING OF CAPITAL ASSET
0.5 TAX RATES
ParticularsTax rate for transfer prior to 23rd July, 2024
Tax rate for transfer on or after 23rd July, 2024
vis-à-vis
Amendments to section 112 of the Act explained.”
0.6 THE FOLLOWING LIST CONTAINING FAQs WAS ISSUED BY THE GOVERNMENT ON NEW CAPITAL GAINS TAXATION REGIME AFTER INTRODUCTION OF FINANCE (NO. 2) BILL, 2024 IN THE LOK SABHA ON 23RD JULY, 2024 Q1.
Ans.
Q2. Ans. Q3. Ans.
Q4. Ans.
Q5. Ans. i.e. Q6. Ans. Q7. ` Ans. ` . Q8. Ans.Q9.
Ans. vis-a-vis
Q10.
Ans. -
Q11.
Ans.
Q12. Ans. `
Q13. Ans.
0.7 NRIs TO PAY MORE TAX ON CAPITAL GAINS VIS-À-VIS SALE OF UNLISTED SHARES -
0.8 AMENDMENT OF SECTION 56 OF THE ACT
2. Vide viib
3. viib viib
4.
Taxation of Capital Gains
AUTHOR : S. KRISHNAN
PUBLISHER : TAXMANN
DATE OF PUBLICATION : SEPTEMBER 2024
EDITION : 13TH EDITION
ISBN NO : 9789364553452
NO. OF PAGES : 1360
BINDING TYPE : PAPERBACK
Rs. 2995
DESCRIPTION
This book is the most comprehensive guide on capital gains taxation, providing chapter-wise analysis with over 35 structured chapters. It covers tax planning within family settlements, the impact of recent judicial decisions, and detailed guidance on exemptions under Sections 54, 54B, and 54F, etc.
The book addresses complex scenarios like joint property developments, transactions between firms and partners post-2021 amendments, and tax implications for NRIs, OCIs, and PIOs. It emphasises ethical tax planning and practical solutions through numerous examples and illustrations.
It is designed for tax professionals, legal practitioners, and financial advisors, equipping them with the knowledge to understand the intricate landscape of capital gains taxation.
The Present Publication is the 13th Edition and has been amended by the Finance (No. 2) Act, 2024. This book is authored by CA S. Krishnan with the following noteworthy features:
• [In-depth Tax Planning] Explores tax planning strategies within family settlements, including company-related arrangements, supported by judicial rulings
• [Critical Analysis on Exemptions] Thorough examination of exemptions under Sections 54, 54B, and 54F, etc., with practical insights and judicial interpretations
• [Joint Property Developments] Addresses complex issues in joint property developments with a detailed judicial analysis and potential legislative remedies
• [Impact of 2021 Amendments] Provides a comprehensive discussion on the impact of 2021 amendments to Section 45, including analysis of significant case laws
• [Guidance for NRIs, OCIs, and PIOs] Provides practical guidance on tax planning, compliance, and property transactions specific to Non-Resident Indians, Overseas Citizens of India, and Persons of Indian Origin
• [RFCTLARR Act, 2013] Examines the implications of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 on capital gains
• [Taxability of Compensation Interest] Extensively covers the taxability of interest received on compensation for acquiring agricultural land, supported by judicial reviews and clear guidance