Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: ACCOUNTING STANDARD :: list of goods taxed at 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT Audit :: due date for vat payment :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: TDS :: cpt :: VAT RATES :: Central Excise rule to resale the machines to a new company :: TAX RATES - GOODS TAXABLE @ 4% :: empanelment :: form 3cd
News Headlines »
  How to check income tax refund status
 GST panel to consult MSMEs in October end to further ease tax rigour
  How to check income tax return status
 Been Served a Notice by the Income Tax Department? Here’s How You Can Respond
 Seeks to amend the CGST Rules, 2017 - 45/2017 - Central GST (CGST)
 Government provides clarity on tax rate
 Processing of returns in Form ITR-I under section 143(1) of the Income-tax Act, 1961
  Filing of Reconciliation return in form 9 for the year 2016-17
  Today is last date for filing GSTR-1 forms for July; govt rules out further extension
 Today is last date for filing GSTR-1 forms for July; govt rules out further extension
 Refund of IGST paid on export of goods under Rule 96 of CGST Rules 2017

Ensure equity in taxing capital gains
January, 02nd 2007

Property sales in the over $12-billion real estate market has been brisk over the last two years or so. Scores of investors are cashing in on the boom in the realty market, which is growing at a scorching 30% and making tidy capital gains.

In the normal course, if an investor sells a capital asset say an immovable property after 36 months from the date of acquisition, the gains from such sale are treated as long-term capital gains and taxed at 20% with indexation benefits. He is exempt from paying tax if these gains are invested in select bonds, known as 54 EC bonds after a section in the Income Tax Act.

The benefit is available to other assesses as well including firms, companies and trusts.Obviously, there is a clamour to invest the gains from sale of property in such bonds to escape tax.

However, this fiscal, investors are a bit hamstrung as the government has restricted the issuance of 54 EC bonds to just two institutions Rural Electrification Corporation and the National Highways Authority of India (NHAI). This was not the case in 2005-06.Before April 1, 2006, the tax benefit could be claimed by investing in bonds floated by Nabard, Sidbi, NHB, besides NHAI and REC.

There were no restrictions on the amount that these institutions could raise from these bonds, which were meant to provide a focussed incentive for infrastructure investments. Investors parked around Rs 14,000 crore in 54 EC bonds in 2005-06.

However, the revenue implications coupled with the intention to phase out exemptions in the medium term prompted the government to allow just two institutions to raise funds through this route this fiscal.For the first time, it also placed a cap on the aggregate subscriptions. REC, which had initially sought an authorisation for around Rs 8,000 crore for its rural electrification projects, was allowed to raise Rs 4,500 crore in the first tranche. NHAI had a mandate to raise Rs 1,500 crore, taking the aggregate amount to Rs 6,000 crore. The move to restrict authorisation was also to ensure that these institutions do not sit on idle funds.
Although it was not explicitly stated, these bonds were practically available on a first-come-first-serve basis. However, investors had the flexibility to invest any amount in these bonds. Subscriptions closed by August, though there were several investors who missed the bus.

Meanwhile, the government got a feedback that the bonds were lapped up by a few big corporate groups and high networth individuals. So, last week, while authorising REC to raise another Rs 3,500 crore through this route, it tightened the norms for issuance.

The intention was to give the tax benefit to investors with a low-risk appetite, while containing it for those making big time capital gains.A limit of Rs 50 lakh has been fixed for each applicant. This means if a person has already invested more than Rs 50 lakhs, he will not be allotted any more bonds. However, if he has invested, say, Rs 35 lakh, he can invest another Rs 15 lakh in the second tranche of REC bonds.

The good news for investors is that the time limit has been extended those who have transferred capital assets between September 29, 2005 and September 30, 2006 can subscribe to these bonds. Is the mid-course correction justified? Policy managers reckon that since the Central Board of Direct Taxes (CBDT) has the power to notify these bonds, it can also tighten the norms to ensure vertical equity among tax payers. Some tax experts, however, disagree, saying that changes should be through amendments in the legislation.

But the fact remains that the real estate market is becoming speculative. Chairman, HDFC, Deepak Parekh, had talked about at least a quarter of the demand for real estate being driven by speculation in his statement in the annual report for 2005-06. According to him, this is an unhealthy trend and has led to unaffordable price levels in many cities.

While this particular tax incentive, Section 54 EC, is up for review with a host of other exemptions, a view that has emerged within the government is that scrapping this exemption in the near term will be not be fair to investors who are not big risk-takers. This segment could cover the middle-class or investors who do not invest in mutual funds or equities.

In case the government continues the incentive in the coming fiscal, one option could be to restrict the tax benefit to investors whose capital gains difference between sale price and cost of acquisition from sale of assets does not exceed, say, Rs 50 lakh or any limit prescribed by the government. This means investors who have capital gains above this limit will not be entitled to this benefit at all.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Web Application Development Web based Software Solution Web Application Deployment Web Application Solutions Web Application Software Development Web Application Deployment Web Application Programming Web Application Design and Development

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions