Budget 2020- Increase in safe harbour limit of 5% u/s 43CA, 50C and 56 of the Income Tax Act to 10%

Section 43CA of the Act, inter alia, provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed or assessable by any authority of a State Government (i.e. ‘stamp valuation authority’) for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall for the purpose of computing profits and gains from transfer of such assets, be deemed to be the full value of consideration. The said section also provide that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration.

Section 50C of the Act provides that where the consideration declared to be received or accruing as a result of the transfer of land or building or both, is less than the value adopted or assessed or assessable by stamp valuation authority for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed or assessable shall be deemed to be the full value of the consideration and capital gains shall be computed on the basis of such consideration under section 48 of the Act. The said section also provides that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.

Clause (x) of sub-section (2) of section 56 of the Act, inter alia, provides that where any person receives, in any previous year, from any person or persons on or after 1st April, 2017, any immovable property, for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration shall be charged to tax under the head “income from other sources”. It also provide that where the assessee receives any immovable property for a consideration and the stamp duty value of such property exceeds five per cent of the consideration or fifty thousand rupees, whichever is higher, the stamp duty value of such property as exceeds such consideration shall be charged to tax under the head “Income from other sources”.

Thus, the present provisions of section 43CA, 50C and 56 of the Act provide for safe harbour of five per cent.

Representations have been received in this regard requesting that the said safe harbour of five per cent may be increased.

It is, therefore, proposed to increase the limit to ten per cent..

This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.

[Clauses 22, 27 & 29]

Extract of Relevant Clauses of Finance Bill, 2020

Clause 22

“Clause 22 of the Bill seeks to amend section 43CA of the Income-tax Act relating to special provision for full value of consideration for transfer of assets other than capital assets in certain cases.

The proviso to sub-section (1) of the said section provides that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and five per cent. of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

It is proposed to amend the said proviso so as to provide that where the value adopted or assessed or assessable by the authority for the purpose of payment of stamp duty does not exceed one hundred and ten per cent. of the consideration received or accruing as a result of the transfer the consideration so received or accruing as a result of transfer shall, for the purposes of computing profits and gains from transfer of such asset, be deemed to be the full value of the consideration received or accruing as a result of such transfer.

This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to assessment year 2021-2022 and subsequent years.”

Clause 27

“Clause 27 of the Bill seeks to amend section 50C of the Income-tax Act relating to special provision for full value of consideration in certain cases.

The third proviso to sub-section (1) of the said section provides that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and five per cent. of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.

It is proposed to amend the said proviso so as to provide that where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and ten per cent. of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall, for the purposes of section 48, be deemed to be the full value of the consideration.

This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-2022 and subsequent assessment years.”

Clause 29

“Clause 29 of the Bill seeks to amend section 56 of the Income-tax Act relating to income from other sources.

Sub-section (2) of the said section provides the details of the incomes which shall be chargeable to income-tax under the head “Income from other sources“.

Clause (v) of said sub-section provides that where any sum of money exceeding twenty-five thousand rupees received without consideration by an individual or a Hindu undivided family from any person on or after the 1st day of September, 2004 but before the 1st day of April, 2006, the whole of such sum shall be chargeable to income-tax. Clause (g) of the first proviso to clause (vii) provides that the clause of said sub-section shall not apply to any sum of money received from any trust or institution registered under section 12AA.

It is proposed to make a reference to section 12AB in the clauses (v), (vi), (vii) and clause (x) of sub-section (2) so as to provide that the said clauses shall not apply to any sum of money received from any trust or institution registered under section 12AB of the Income-tax Act.

These amendments will take effect from 1st June, 2020.

Sub-clause (b) of clause (x) of sub-section (2) of the said section, inter alia, provides that where any person receives, any immovable property, in any previous year, from any person or persons on or after the 1st day of April, 2017 for a consideration, where the stamp duty value of such property exceeds five per cent. of the consideration the excess amount if it is more than fifty thousand rupees shall be charged to tax under the head income from other sources.

It is proposed to amend the said sub-clause (b) so as to provide that where any person receives, any immovable property, in any previous year, from any person or persons on or after the 1st day of April, 2017 for a consideration, where the stamp duty value of such property exceeds ten per cent. of the consideration, the excess amount if it is more than fifty thousand rupees shall be charged to tax under the head income from other sources.

This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to assessment year 2021­2022 and subsequent assessment years.”

Extract of Relevant Amendment Proposed by Finance Bill, 2020

22. Amendment of section 43CA.

In section 43CA of the Income-tax Act, in sub-section (1), in the proviso, for the words “five per cent.”, the words “ten per cent.”shall be substituted with effect from the 1st day of April, 2021.

27. Amendment of section 50C.

In section 50C of the Income-tax Act, in sub-section (1), in the third proviso, for the words “five per cent.”, the words “ten per cent.”shall be substituted with effect from the 1st day of April, 2021.

29. Amendment of section 56.

In section 56 of the Income-tax Act, in sub-section (2),–

(A) with effect from the 1st day of June, 2020,–

(i) in clause (v), in the proviso, in clause (g), for the word, figures and letters “section 12AA”, the words, figures and letters “section 12AA or section 12AB”shall be substituted;

(ii) in clause (vi), in the proviso, in clause (g), for the word, figures and letters “section 12AA”, the words, figures and letters “section 12AA or section 12AB”shall be substituted;

(iii) in clause (vii), in the second proviso, in clause (g), for the word, figures and letters “section 12AA”, the words, figures and letters “section 12AA or section 12AB” shall be substituted;

(B) in clause (x),–

(i) in sub-clause (b), in item (B), in sub-item (ii), for the words “five per cent.”, the words “ten per cent.” shall be substituted with effect from the 1st day of April, 2021;

(ii) in the proviso, in clause (VII), for the words, letters and figures “section 12A or section 12AA”, the words, figures and letters “section 12A or section 12AA or section 12AB” shall be substituted with effect from the 1st day of June, 2020.

Source- Finance Bill 2020 / Union Budget 2020-21

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2 Comments

  1. Prabir das says:

    Sir, shall appreciate if you kindly enlighten whether I can sell my residential house property alongwith a house building plan applied and the consequent LTCG availment there of. Please do the needful.

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