Issues FAQs and Tax Planning Relating to Capital Gains

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Description
Throughout our careers as tax administrators, we have frequently been approached by professional colleagues, friends, and relatives seeking advice on how they can legitimately save tax on the sale of immovable property held for over three years. Common questions include: What happens if they sell the property below the circle rate or stamp duty value? What rollover benefits or exemptions are available under the provisions of the Income-tax Act, 1961 (hereinafter referred to as 'the Act')? What are the eligibility conditions for claiming these exemptions? What is the procedure outlined in the Act for claiming such exemptions? Can they invest the sale proceeds in more than one residential house, and can the new residential house be purchased in joint names with other family members? These and a host of other related questions naturally arise in the mind of every taxpayer intending to dispose of immovable property and claim the benefit of exemption by using the sale consideration to acquire or construct a new residential house. Similarly, those interested in investing in equity markets or mutual funds are keen to understand the relevant tax rules and their implications to minimize the tax arising from the sale of such investments. It is in this context that the idea of addressing the subject of capital gains taxation in a question-and-answer or query-response format, however unconventional it may seem, was conceived.
Before delving into the content, structure, and purpose of this book, it is pertinent to briefly trace the history of capital gains taxation in India. The taxation of capital gains dates back to the 1947 Budget when capital gains tax was introduced by inserting Section 12B into the then Indian Income- tax Act, 1922, with effect from the assessment year 1947-48. This move was intended to curb speculative activities involving the buying and selling of assets in an inflationary environment following World War II. However, this levy was short-lived and was abolished after two years, as it was considered to be inhibiting the growth of the stock market.
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Table of Contents
Chapter 1. upil n Introduction
Chapter 2. Exempted Capital Gains Section 10 or
Chapter 3. Capital Asset - Section 2(14)
Chapter 4. Capital Gains and Agricultural Land - Section 2(14)(iii)
Chapter 5. Short-term and Long-term capital gains - Section 2(42A), 2(42B), 2(29AA), 2(29B) & Rule 8AA
Chapter 6. Transfer Section 2(47)
Chapter 7. Whether Business Income or Capital Gains
Chapter 8. Capital Gains - Section 45
Chapter 9. Capital gains and entry of new partner/member in the firm/AOP/BOI- Section 45(3)
Chapter 10. Capital gains on distribution of assets on dissolution of the firm - Section 45(4)
Chapter 11. Capital gains on reconstitution of firm/specific entity - Sections 45(4) and 9B
Chapter 12. Capital gains on compulsory acquisition of capital asset - Section 45(5)
Chapter 13. Capital gains and Joint Development Agreement - Section 45(5A)
Chapter 14. Capital gains on distribution of assets by companies in liquidation - Section 46
Chapter 15. Buy-back of Shares - Section 46A
Chapter 16. Transfers to which section 45 is not applicable - Section 47
Chapter 17. Withdrawal of exemption of capital gains in certain cases - Section 47A
Chapter 18. Mode of Computation of capital gains - Section 48
Chapter 19. Indexation - Second proviso to section 48
Chapter 20. Cost with reference to certain modes of acquisition - Section 49
Chapter 21. Capital gains and family settlement - Section 49(1)(i)
Chapter 22. Capital gains on depreciable assets - Sections 50 and 50A
Chapter 23. Capital gains in case of Market Linked Debenture - Section 50AA
Chapter 24. Slump Sale-Section 508
Chapter 25. Special provision for full value of consideration in certain cases Section 50C
Chapter 26. Full value of consideration for transfer of unquoted shares - Section 50CA
Chapter 27. FMV deemed as FVC-Section 50D
Chapter 28. Treatment of advance money received - Section 51
Chapter 29. Exemption from investment in residential house - Section 54 (Basic Conditions)
Chapter 30. Exemption on investment in agricultural land - Section 54B
Chapter 31. Compulsory acquisition and exemption for investing in new Industrial Undertaking - Section 54D
Chapter 32. Exemption on investment in specified asset - Section 54E
Chapter 33. Exemption on investment in specified asset - Section 54EA
Chapter 34. Exemption on investment in specified asset - Section 54EB
Chapter 35. Exemption on investment in certain bonds - Section 54EC
Chapter 36. Capital gain on transfer of certain listed securities/units - Section 54ED
Chapter 37. Exemption on investment in units of a specified fund - Section 54EE
Chapter 38. Exemption for investment in new residential house - Section 54F
Chapter 39. Exemption on investment in new residential house - Sections 54 and 54F
Chapter 40. Exemption from capital gains tax and capital gains accounts scheme
Chapter 41. Exemption on shifting of industrial undertaking from Urban Area- Section 54G
Chapter 42. Exemption on shifting of Industrial undertaking to SEZ - Section 54GA
Chapter 43. Exemption for investment in start-up - Section 54GB
Chapter 44. Extension of time for investment in cases of compulsory acquisition - Section 54H
Chapter 45. Cost of acquisition in certain cases - Section 55
Chapter 46. Reference to valuation officer - Section 55A
Chapter 47. Set off of capital gains/loss - Sections 70,71,74 and 80
Chapter 48. Taxation of short-term/long-term capital gains - Sections 111A, 112 and 112A
Chapter 49. Capital gains tax on offshore funds/non-resident person/ FIIs in respect of units/GDRs/Securities - Sections 115AB, 115AC, 115ACA, 115AD
Chapter 50. Alternative tax regime in the case of Non-Resident Indians - Sections 115C, 115D, 115E, 115F, 115G, 115H and 115-1
Chapter 51. Capital gains and Business Trust
Chapter 52. Capital gains and International Financial Services Centre (IFSC)
Chapter 53. Capital gains under International Taxation
Chapter 54. Other applicable provisions relating to capital gains
Chapter 55. Miscellaneous common queries
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Author Details
D.C. Agrawal, Advocate, has a vast experience in the field of taxation. He served in Income Tax Department as an IRS officer for about 30 years. Thereafter in 2005, he was elevated to Income Tax Appellate Tribunal where he served as Accountant Member till his superannuation in July, 2011. In Income Tax Department, he served in various capacities, from Assessing Officer, Investigating Officer and Departmental Representative before Income Tax Appellate Tribunal and Income Tax Settlement Commission. During his tenure as Investigating Officer in Delhi, he has been associated with some high profile cases. Apart from being IRS, he holds Master’s Degree in Science. He is Law Graduate and is also a qualified Cost and Works Accountant. As an Accountant Member of Income Tax Appellate Tribunal, he has authored several landmark Judgments which have been published in leading Tax journals. He has also authored about 200+ Articles, particularly carrying analysis of judgments rendered by Hon’ble High Court and Income Tax Appellate Tribunal. These Articles are published in leading journals such as Corporate Professional Today.Currently, he is practising as an Advocate and Consultant and also appearing before Income Tax Appellate Tribunal and Income Tax Settlement Commission. He has represented in several important matters involving issues relating to domestic taxes, Transfer Pricing and International Taxation.