Capital gains taxation more than marginal changes
Q: What are the changes in computation of capital gains?
A: An innovative provision is proposed Sec. 50C authorising substitution of stamp value for registration purposes for transaction price in the document in computation of capital gains. This will be subject only to outcome of appeal before the stamp authorities against such valuation or subject to valuation by Valuation Cell of the Income-tax Department, in an attempt to bring back the earlier Sec. 52, which authorised substitution of market value for apparent consideration.
Sec. 54EC is expanded to permit reinvestment of capital gains to save tax on the bonds issued by National Housing Bank and Small Industries Development Bank of India in addition to existing bonds.
It will no longer be possible to set off losses under the head long term capital gains against short term capital losses vide proposed amendment to Sec. 70.
This is to ensure that revenue does not lose tax on short term capital gains at normal rate, which may exceed 20 per cent by giving set off of losses against long term capital gains, which suffers tax only at 20 per cent. But there is no bar to set off short term capital losses against long term capital gains.
There is also no option to the taxpayer to pay tax on long term capital gains and carry forward short term capital losses. Long term capital losses can only be carried forward and set off against long term capital gains under Sec. 74.
(Proposals in the Finance Bill to be continued)
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