Budget 2014: Important amendments to remember (Part I)
The Union Budget 2014 announced a slew of reforms related to income tax. In this article, I have tried to highlight some major amendments that will impact the tax-payers directly.
Amendments in Capital Gain Bonds
The existing provision contained in section 54EC of the Income-tax Act provides that where the Capital Gains arises from the transfer of a Long-term Capital Asset and the assessee has invested within a period of six months, the whole or part of the Capital Gain in Capital Gain Bonds, then the tax payer will be able to save tax in respect of the Capital Gains arising to him. However, the law provides for investment in one financial year not to exceed Rs 50 lakhs. However, for those tax payers where such Capital Gains arose after September of a particular financial year, they were able to make Rs 50 lakhs investment in the Capital Gain Bonds in the same financial year and again in the earlier start of the next financial year they were able to further invest Rs 50 lakhs thereby the total of Rs 1 crore could be invested by them in Capital Gain Bonds for tax saving.
However, the budget has provided that the investment made by an assessee in the long term specified asset that is the Capital Gain Bonds etc. The maximum deduction which can be availed is Rs 50 lakhs in one financial year in which the original asset or the assets are transferred and separate deduction cannot be claimed in the subsequent financial year.
Investing in Real Estate in London? Be Careful!
As per section 54 or section 54F of the Income-tax Act exemption is available to a tax payer when he sells his property and invests the money in buying another residential property. The law is silent about the place or the area where this property can be purchased. Hence, taking advantage of this provision a large number of Indians were selling their property in India and through proper banking channels making the investment in Real Estate in London, USA and other countries of the world. Now, an amendment has been brought which says that the exemption either under section 54 or section 54F will be available only if the investment is made in one residential house situated in India. Hence, it is now very crystal clear that if you sell some property in India, you cannot buy another residential property outside India to save your taxes.
Know all about Business Trust Concept
A new clause known as Clause 2(13)(8) has been inserted in the Income-tax Act, 1961 which provides for the first time definition of Business Trust. Business Trust has been defined to mean a Trust registered as an Infrastructure Investment Trust or a Real Estate Investment Trust the units of which are required to be listed on a recognized Stock Exchange as per the regulations of SEBI. Another big advantage of the Business Trust popularly known as REIT is that as per the budget as per section 10(23FC) the income of a Business Trust by way of interest received or receivable from a special vehicle will be exempt from income-tax.
Advance for selling their Real Estate
Amendment has taken place in section 56 of the Income-tax Act 1961 whereby it is now provided that any sum of money received as advance during the course of negotiation for transfer of capital asset if such sum is forfeited and negotiations finally do not result in the transfer of capital asset, then the same will be treated as income from other sources.
Subhash Lakhotia
Subash Lakhotia is a Tax and Investment Consultant and Tax Guru in CNBC Awaaz.
The views expressed in this article are the author´s own.
