GAINS TAX CONCESSIONS FOR AGRICULTURAL LAND
Capital gains arising on sale of a rural agricultural land & on compulsory acquisition of an urban land are fully tax exempt!
Section 2(14) of the Income-tax Act, which defines ‘capital asset,’ excludes from within its purview an agricultural land situated in India at a place having a population of less than 10,000 as per the last preceding census or at an area not comprised within any municipal limits or within a notified distance from such municipal limits. The Government notification in this regard has specified distances ranging between 2 to 8 kms for various towns situated in different states keeping in view the extent of urban development in the respective areas.
If the agricultural land sold by a taxpayer does not qualify as a ‘capital asset’ on the basis of the above test, then it does not give rise to any taxable capital gains. Any agricultural land situated in any ‘urban area’ on the basis of the above guidelines being required to be treated as a ‘capital asset,’ any gains arising from the transfer of the same would be liable to tax as capital gains. (more…)
SMART BOND FOR EXEMPTION!
Enjoy exemption from long term capital gains by planning investment in specified bonds!
Section 54EC of the Income-tax Act provides for exemption of taxable long term capital gains (LTCG) arising from the transfer of an asset, to the extent the amount of such gains are invested in notified bonds within a period of six months from the date of transfer. Notified for this purpose are the three year bonds issued by National Highways Authority of India (NHAI) and Rural Electrification Corporation (REC).
Until FY 2006-07, there was no monetary ceiling prescribed in regard to investment in such capital gains bonds and hence a taxpayer could virtually invest his entire taxable gain, even running into crores of rupees, in these bonds and avail the benefit of 100% exemption under Section 54EC.
However, the Finance Act, 2007 amended Section 54EC so as to provide that this exemption would be available subject to the condition that the investment in the notified capital gains bonds made on or after 1st day of April, 2007 does not exceed Rs.50,00,000 during any financial year. (more…)
INDEX YOUR GAIN AND REDUCE YOUR TAX PAIN!
Availing the Benefit of Indexation, you can Inherit Today,
Sell Tomorrow & Still Keep Away your Tax Sorrow!
Difficult to believe, but ‘zero tax’ is the correct answer. (more…)
NO TAX ON SALE OF SILVER UTENSILS?
As Silver Prices have Doubled from Rs.22,500 to Rs.45,000 in past 21 months, it may be worth reaping this Tax Free Bonanza!
SALE OF ‘PERSONAL EFFECTS’ NOT TAXABLE
As per Section 2(14) of the Income-tax Act, ‘personal effects,’ excluding jewellery, are not treated as capital assets and hence any gain arising on their transfer cannot be made liable to capital gains tax.
‘Personal effects’ would include movable property such as wearing apparel, furniture, household articles, utensils, vehicles, etc. held for personal use. Jewellery which has been excluded from ‘personal effects’ would include ornaments made of gold, silver, platinum or any other precious metal, precious or semi-precious stones and any articles set in any such stones.
A motor car or any other conveyance held for the personal use of a taxpayer is also a personal effect and any profit or gain arising from the same cannot be charged to tax as capital gains. In this regard, one can rely on the decision of the Bombay High Court in the case of ‘CIT vs. Sitadevi N. Poddar’ 148 ITR 506(Bom.). (more…)
SHARE INVESTMENT NOT BUSINESS!
Mumbai High Court Stresses On Need For
Uniformity & Consistency In Approach!
“Activity of a taxpayer accepted as investment in shares in earlier years cannot be treated as business in subsequent years, if facts are the same.” This landmark ruling of the Mumbai High Court delivered on 6th January, 2010 will make several investors heave a sigh of relief, in the backdrop of the recent onslaught of the Income-tax Department in treating capital gains from securities liable to tax as business income from trading in shares. While long term capital gains from securities are exempt and short term gains attract a concessional tax, business income gets taxed at normal rates. (more…)
Inherit Today, Sell Tomorrow, Still Keep Away Tax Sorrow!
ITAT Special Bench Grants Unique Tax Shelter
For Capital Gains On Gifted & Inherited Assets!
If your grandfather had acquired a plot of land for Rs.10 lakhs in late 1981, which you receive by way of inheritance on his death now in 2009 and you are planning to sell the same in early 2010 for a consideration of Rs.63 lakhs, what would be the income-tax you would be required to pay on your capital gains? Difficult to believe, but ‘zero tax’ is the correct answer.
NRIs treated as Not Required Indians
Harsh, Illogical & Discriminatory Taxing Provisions For NRIs!
Proposals That Will Hurt The Global Indian Sentiment
Flat Rate of Tax
- 20% flat tax on interest & other investment income.
- 30% flat tax on all capital gains.
- Apart from 20% & 30% TDS on above, TDS at a baffling rate of 35% prescribed on all residual income.
No Personal Exemption
- No personal exemption or deduction allowed in computing the above income treated as ‘income from special sources.’
Weird Interpretation
- Poor drafting leads to such a weird interpretation that transfer of a capital asset may attract 30% tax on gross sale consideration.
What a Discrimination?
- Ironical but true! Non-Indian sports-persons, say Ricky Ponting or Shoaib Akhtar, required to pay a concessional tax of 10% on their game, advertisement and column earnings in India, thus enjoying a more privileged tax status than our own sons of the soil living abroad.
Now no Capital Gain without Tax Pain!
End Of Tax Honeymoon For Market Investors!
Understanding The New Capital Gains Regime
New Rules for Computation
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Present distinction between long term and short term gains to be eliminated.
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Current exemption for capital gains arising from transfer of personal effects and agricultural land beyond specified urban limits to continue.
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Base date for computing cost of acquisition shifted from 1st April, 1981 to 1st April, 2000.
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Indexation benefits can be availed for all assets held for atleast one year.
No More Tax Concessions
- Zero tax on STT paid long term capital market gains and 15% concessional rate for short term market gains to end on 31st March, 2011.
- No more concessional rates of 10%/20% for taxing specified long term gains.
- All capital gains to be taxed at the taxpayer’s applicable marginal rate. Securities Transaction Tax (STT) to be simultaneously eliminated.
Exemptions Abolished & Redesigned
- Present exemption u/s. 54EC via investment in specified bonds abolished.
- Current exemptions u/s. 54, 54B and 54F attempted to be redesigned under a new scheme of relief for roll over on the basis of a given formula. (more…)
