Fifth continues budget by Finance Minister Smt. Nirmala Sitaraman is record for current Government. Till now maximum budget, i.e. 10 times were given by Late Shri Morarji Desai, 9 times by P. Chidambaram and 8 times by Pranav Mukharaji. If the current Government will continue in 2024 election and Smt. Nirmala Sitaramn, become the Finance Minister, she may cross Pranav Mukharji or P. Chidambaram or equal to Morarji Desai.
We find that there are 122 amendments in this budget under Direct Tax Laws. One of them is Provisions relating to Capital Gains, the details of which are as under:
Taxation of Capital Gain on electronic Gold Receipt
As announced in the Union Budget 2021-21, the SEBI has notified regulations and Framework for the Gold Exchange as well as spot trading in Gold through Electronic Gold Receipts (EGR).
To provide boost to the concept of EGR, it was proposed to keep the transections of conversion of physical gold to EGR and vice versa out of the purview of ‘transfer’ for the purpose of calculating capital gain.
It is also proposed that the cost of acquisition of the EGR shall be deemed to be the cost of gold to the person in whose name the EGR is issued. The holding period for the EGR shall also include the period for which the physical gold was held before its conversion in to EGR.
Taxation of Capital Gain on Market Linked Debentures
Market Linked Debentures refer to listed debt securities. They are subject to long term capital gain tax at the rate of 10%. Indexation benefit are not available to such debentures.
Such debentures many a times, carry differential terms such as variable interest as well as other derivatives. Normally derivatives are taxed at different rates other than the 10% rate applicable to the long term capital gains.
By way of inserting new section 50AA, it is proposed that the capital gain on transfer/ redemption/ maturity of such market linked debentures shall be chargeable as short term capital gain at the applicable rates. The amount of capital gain shall be computed by reducing the cost of acquisition and expenditure of transfer or redemption of such debentures from the full value of consideration received or accrued on the transfer/ maturity/ redemption on such debentures.
It is also proposed to provide the definition “ Market Linked Debentures” as a security by whatever named called, which has an underlying principal component in the form of a debt security and where the returns are linked to market returns on other underlying securities or indices and include any security classified or regulated as a Market Linked Debenture by SEBI.
Limiting the roll over benefit of capital gain claimed u/s 54 and 54F:
The existing provisions of section 54 / 54F allows deduction on the Capital Gains arising from the transfer of long term capital asset ( residential property / other asset) if an assessee,
- Within a period of one year before or two years after the date on which the transfer took place purchased any residential property, or
- Within a period of three years after that date constructed any residential property in India.
It is proposed to impose a limit on the maximum deduction that can be claimed by the assesse u/s 54/ 54F to Rs. 10 Crore. It has been provided that if the cost of the new assest purchased is more than 10 crore, the cost of such asset shall be deemed to be Rs. 10 crores. Accordingly, this will limit the deduction under the two sections to Rs. 10 crores.
Consequent amendments are also proposed in sub-section (2) of Section 54 and sub section (4) of section 54F for the purpose of deposit in the Capital Gain Account Scheme to restrict the investment up to Rs. 10 crore of capital gains or net consideration, as case may be.
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