The Finance Minister has proposed some provisions related to capital gains in the budget presented today. In this article I will discuss the main propositions related to capital gains.
Cap on long-term capital gains arising on investment in residential house
The current tax laws allow you exemption from long-term capital gains if you invest in buying a residential house within a specified time frame. Section 54 allows you a deduction on long-term capital gains arising from the sale of a residential house, but this benefit is available only if you use the same for the purchase or construction of a house within a specified period. Similarly, section 54F exempts you from long-term capital gains on sale of any asset other than a residential house, if the investment is made in buying or constructing a house within the stipulated time.
As of now there is no cap on the amount you can claim exemption from long-term capital gains by investing in a residential house. In the budget, it has been proposed to impose a cap of Rs 10 crore on this, which you can claim exemption under section 54 or 54F by investing in a residential house. It is to be noted that there is no cap in the offer on the value of the house you are buying or investing in building. Even if your investment exceeds Rs 10 crore, you can claim deduction only for Rs 10 crore.
If the entire amount of capital gain in case of section 54 and the entire amount in case of section 54F is not invested, the exemption available is reduced proportionately.
Taxation on Market Linked Debentures
Market linked debentures are a new innovation in the financial market, wherein your returns are linked to the returns of an external security or equity benchmark. It provides protection to investors’ capital and at the same time gives investors an opportunity to be a part of the returns from the respective securities or indices. There is no clarity in the existing laws on the taxation of such market linked debentures. The budget proposes to make arrangements for taxation of gains on transfer or redemption of such market linked debentures. The Finance Minister has proposed that any gain on market linked debentures, irrespective of the holding period, will be treated as short-term capital gain. The proposal also states that in addition to the cost, the investor will have the facility to claim a deduction for the expenses incurred on such transfer, but no deduction will be allowed on any securities transaction tax paid for such transactions. Will get.
I am sure this article will help you understand the capital gains provisions in a better way.
