Alignment of provisions of section 45(5A) with the TDS provisions of section 194-IC – Budget 2023
The existing provisions of the sub-section (5A) of section 45 of the Act, inter alia, provide that on the capital gain arising to an assessee (individual and HUF), from the transfer of a capital asset, being land or building or both, under a Joint Development agreement (JDA), the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. Further, for computing the capital gains amount on this transaction, the full value of consideration shall be taken as the stamp duty value of his share, as increased by the consideration received in ‘cash’.
2. It has been noticed that the taxpayers are inferring that any amount of consideration which is received in a mode other than cash, i.e., cheque or electronic payment modes would not be included in the consideration for the purpose of computing capital gains chargeable to tax under sub-section (5A) of section 45. This is not in accordance with the intention of law as is evident from the provisions of section 194-IC of the Act which, inter alia, provides that tax shall be deducted on any sum by way of consideration (other than in kind), under the agreement referred to in sub-section (5A) of section 45, paid to the deductee in cash or by way of issue of a cheque or draft or any other mode. Accordingly, it is proposed to amend the provisions of sub-section (5A) of section 45 so as to provide that the full value of consideration shall be taken as the stamp duty value of his share as increased by any consideration received in cash or by a cheque or draft or by any other mode.
3. This amendment will take effect from the 1st day of April, 2024 and shall accordingly, apply in relation to the assessment year 2024-25 and subsequent assessment years.
[Clauses 20]
Extract of relevant clause of Finance Bill 2023
Clause 20 of the Bill seeks to amend section 45 of the Income-tax Act relating to capital gains.
Sub-section (5A) of the said section, inter alia, provides that on the capital gain arising to an assessee, from the transfer of a capital asset, being land or building or both, under a specified agreement, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority. Further, for computing the capital gains amount on this transaction, the full value of consideration shall be taken as the stamp duty value of his share, as increased by the consideration received in cash.
It is proposed to include consideration received by cash or by a cheque or draft or by any other mode shall be deemed to be full value of consideration of the capital asset as a result of the transfer of the capital asset.
This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Extract of Relevant Amendment Proposed by Finance Bill, 2023
20. Amendment of section 45.
In section 45 of the Income-tax Act, in sub-section (5A), for the words “the consideration received in cash, if any,”, the words “any consideration received in cash or by a cheque or draft or by any other mode” shall be substituted with effect from the 1st day of April, 2024.
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