Budget 2012- INCOME FROM CAPITAL GAINS

[Swati Dodhi]

Budget 2012- INCOME FROM CAPITAL GAINS

EXEMPTIONS UNDER SECTION 54B ON SALE OF AGRICULTURAL

LAND BY HUF

• It is proposed to extend the exemption under section 54B to HUF on capital gains derived from sale of agricultural land if the said land has been used by the HUF for agricultural purposes for 2 years preceding the year in which it is sold and the capital gains is reinvested in purchase of agricultural land in the next 2 years of sale.

EXEMPTIONS UNDER SECTION 54GB ON SALE OF RESIDENTIAL PROPERTY

• It is proposed to insert a new section 54GB so as to provide relief from long term capital gains tax to an individual or an HUF on sale of a residential property (house  or plot of land) in case of re-investment of sale consideration in the equity of a new start-up SME company in the manufacturing sector which is utilized by the  company for the purchase of new plant and machinery.
• This relief would be subject to the conditions that :-
1. the amount of net consideration is used by the individual or HUF before the due date of furnishing of return of income under sub-section (1) of section 139, for  subscription in equity shares in the SME company in which he holds more than 50% share capital or more than 50% voting rights.
2. The amount of subscription as share capital is to be utilized by the SME companies for the purchase of new plant and machinery within a period of one year from the date of subscription in the equity shares.
3. If the amount of net consideration subscribed as equity shares in the SME company is not utilized by the SME company for the purchase of plant and machinery before the due date of filing of return by the individual or HUF, the unutilized amount shall be deposited under a deposit scheme to be prescribed in this behalf.
4. Suitable safeguards so as to restrict the transfer of the shares of the company, and of the plant and machinery for a period of 5 years are proposed to be provided to prevent diversion of these funds. Further, capital gains would be subject to taxation in case any of the conditions are violated.
5. The relief would be available in case of any transfer of residential property made on or before 31st March, 2017.

Discussions to this article

[Naresh Bhatia]

How old should be the SME(Small and Medium manufacturing Enterprise).? Can it be established  just between 1.4.2012 and date of filing return  for utilising the capital gain .Is it mandory to utilise whole  consideration value/ sale value or only capital gain value?

Naresh Bhatia Delhi.