Special
Impact of LTCG Tax Decoded
Particulars Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5
Sales Consideration (A) `10,00,000 `10,00,000 `10,00,000 `10,00,000 `10,00,000
31/03/18 01/04/18 01/04/18 01/04/18 01/04/19
`8,00,000 `8,00,000 `8,00,000 `8,00,000 `8,00,000
01/01/17 01/01/17 01/01/17 01/01/17 01/03/18
Quoted Price on
Stock Exchange as on
31/01/2018 (C) `8,50,000 `7,50,000 `9,00,000 `11,00,000 `11,00,000
Deemed Cost of
Acquisition (D)* `8,00,000 `8,00,000 `9,00,000 `10,00,000 `8,00,000
Long-term Capital
Gains (E = A-D) `2,00,000 `2,00,000 `1,00,000 - `2,00,000
Exemption for Capital
Gains (F = E - 1,00,000)# `2,00,000 `1,00,000 `1,00,000 - `1,00,000
- `10,000
Date of Sale
Actual Cost of
Acquisition (B)
Date of Purchase
Tax on Capital Gains
(F * 10%)
-
`10,000
-
*D shall be higher of following: a) Actual cost of acquisition b) Lower of sales consideration and quoted price on stock exchange as on 31/01/2018.
#If equity shares are sold on or before 31/03/18, this new tax provision will not apply
`2,00,000 from the sale of listed equity shares, he shall be
liable to pay tax of `10,400 (`10,000 tax on capital gains
plus `400 as health and education cess).
Variation from stamp value now accepted
Currently, under Income Tax Act provisions, there is
a concept of inflating the sale consideration for the
purpose of calculating capital gains tax by taking stamp
value into consideration. If the sales consideration
received by an investor from the transfer of an
immovable property is lower than the stamp value
fixed by the stamp authorities, then the stamp value
is deemed as the actual sales consideration. Due to
this reason, the amount of capital gains seems higher
even if the seller has not gained anything and the tax
becomes due because of such higher stamp valuation.
Further, the difference in the stamp value and the actual
consideration disclosed by the parties is also taxed in the
hands of the buyer.
The actual sales consideration even for similar
properties in the same area may vary because of a variety
of factors, including shape of the plot or the location.
Therefore, this deeming provision of considering stamp
duty valuation as the actual sales consideration creates
undue hardship. In order to minimise hardship in the
case of genuine transactions in the real estate sector, the
Budget has proposed that no adjustments will be made
if the variation between stamp duty value and the sales
consideration is not more than five per cent of the sales
consideration. These amendments will be applicable for
all transactions that occur on or after April 1, 2018.
Exemption for immovable properties
Currently, an investor can claim an exemption of up to
`50 lakh if any long-term capital gain arises from the sale
of any long-term asset and this profit is invested in the
specified bonds of NHAI and RECL within a period of
six months from the date of such transfer. Such bonds
come with a lock-in period of three years.
The Finance Bill has significantly curtailed the scope
of this exemption. As per the proposed amendment,
this exemption under Section 54EC shall be allowed
only if long-term capital gains arising from transfer of
immovable properties (land or building, or both)
are invested in the specified bonds. Other long-term
assets will no longer be eligible for this concession.
Additionally, the lock-in period of such bonds has also
been increased to five years.
The author is a Director at Taxmann
www.outlookmoney.com February 2018 Outlook Money
45