New section 50AA in the Income-tax Act with effect from April 1, 2023.
New section 50AA provides for a special provision for the computation of capital gains in the case of Market Linked Debenture.
As per the new section 50AA, the full value of the consideration received or accruing from the transfer, redemption, or maturity of a Market Linked Debenture will be deemed to be the capital gains arising from the transfer of a short-term capital asset. This is subject to the reduction of the cost of acquisition of the debenture and the expenditure incurred in connection with such transfer or redemption or maturity.
Please note that no deduction will be allowed for the amount paid as securities transaction tax under the provisions of Chapter VII of the Finance (No. 2) Act, 2004.
For the purposes of this section, a Market Linked Debenture is defined as a security that has an underlying principal component in the form of debt security and where the returns are linked to the market returns on other underlying securities or indices, including any security classified or regulated as a market-linked debenture by the Securities and Exchange Board of India.
Section 54 of the Income-tax Act, effective April 1, 2023
In sub-section (1) of Section 54, a new proviso will be inserted stating that where the cost of the new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of this subsection.
In sub-section (2) of Section 54, the following changes will be made: After the words, “amount so deposited shall”, the words “subject to the third proviso to sub-section (1)” will be inserted.
A new proviso will be inserted stating that the capital gains in excess of ten crore rupees shall not be taken into account for the purposes of this subsection.
These amendments will have an impact on the computation of capital gains and the investment of the capital gains in a new asset.
Section 54F of the Income-tax Act.
With effect from 1st April, 2023, the following changes will take place:
(a) In sub-section (1), a new proviso will be inserted, stating that “where the cost of new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of this sub-section.”
(b) In sub-section (4), two changes will be made: (i) The words “subject to the second proviso to sub-section (1)” will be inserted after the words “amount so deposited shall”. (ii) A new proviso will be inserted, stating that “the net consideration in excess of ten crore rupees shall not be taken into account for the purposes of this sub-section.”
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