Section 54 provides relief to a tax payer who gets gains on account of sale of residential house. The provision u/s 54 provides that tax will not be imposed on long term gains on sale of residential house up to the extent gains same is utilised for buying house within two years from the date of transfer of sold assets or constructing the house within three years from the date of transfer of sold assets.
But the question is whether a tax payer has to spend on new residential house the same money which he got out of sale or the tax payer just needs to buy a house within specified period, no matter, from where the money has come.
Recently, Bombay High Court in CIT vs. Dr.P.S.Pasricha has confirmed the decision of Mumbai Tribunal that for claiming benefit u/s 54(1), law does not make it mandatory that the assessee must use the same funds as received from sale. The source of funds is not relevant.
Thursday, November 5, 2009
Friday, October 10, 2008
Relief for elderly: Income from Reverse Mortgage to be tax-free
The finance ministry has notified that the Reverse Mortgage Scheme would exempt from tax the income they earn by mortgaging their property.
Reverse mortgage would not amount to transfer and the stream of revenue received by the senior citizen would not be income.
"Reverse Mortgage means mortgage of a capital asset by an eligible person against a loan obtained by him from an approved lending institution," the CBDT in its notification has said. Further, the loan under reverse mortgage should not be for more than 20 years.
Accordingly, the CBDT now said that under the scheme, a capital asset would mean a residential house property which is located in India and individuals or married couples above 60 years of age will be considered as senior citizens. This will imply that the scheme will not be regarded as transfer of a capital asset and so would not attract capital gains tax. Also, the loan amount will be exempt from income tax for the borrower.
The CBDT notification comes into force from 15 April, 2008 and loans in 2007-08 will also be given exemption.
Reverse mortgage would not amount to transfer and the stream of revenue received by the senior citizen would not be income.
"Reverse Mortgage means mortgage of a capital asset by an eligible person against a loan obtained by him from an approved lending institution," the CBDT in its notification has said. Further, the loan under reverse mortgage should not be for more than 20 years.
Accordingly, the CBDT now said that under the scheme, a capital asset would mean a residential house property which is located in India and individuals or married couples above 60 years of age will be considered as senior citizens. This will imply that the scheme will not be regarded as transfer of a capital asset and so would not attract capital gains tax. Also, the loan amount will be exempt from income tax for the borrower.
The CBDT notification comes into force from 15 April, 2008 and loans in 2007-08 will also be given exemption.
Amendment of Section 20 of the Indian Trusts Act, 1882
Amendment to Section 20 of the Indian Trusts Act, 1882 (2 of 1882) which relates to investment of trust money has been approved by the Cabinet today. A Bill will be introduced in the ensuing Session of Parliament.
In accordance with this section, where the trust property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money in securities enumerated in clauses (a) to (f) of that section.
Accordingly, section 20 of the Act is now proposed to be substituted by the following:
“20. Investment of trust-money – Where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money on any security or class of securities expressly authorized by the instrument of trust, or by the Central Government by notification in the official Gazette.
Provided that, where there is a person competent to contract and entitled in possession to receive the income of the above trust-property for his life, or for any greater estate, no investment on any security or class of securities mentioned above shall be made without his consent in writing.” Provided further that no such consent shall be required where such investment is made in the securities of the Government.
In accordance with this section, where the trust property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money in securities enumerated in clauses (a) to (f) of that section.
Accordingly, section 20 of the Act is now proposed to be substituted by the following:
“20. Investment of trust-money – Where the trust-property consists of money and cannot be applied immediately or at an early date to the purposes of the trust, the trustee is bound (subject to any direction contained in the instrument of trust) to invest the money on any security or class of securities expressly authorized by the instrument of trust, or by the Central Government by notification in the official Gazette.
Provided that, where there is a person competent to contract and entitled in possession to receive the income of the above trust-property for his life, or for any greater estate, no investment on any security or class of securities mentioned above shall be made without his consent in writing.” Provided further that no such consent shall be required where such investment is made in the securities of the Government.
Wednesday, October 8, 2008
Tax Liability on Anonymous donations
Anonymous donations in the hands of individuals would be governed by the relevant clause of Section 56 dealing with gifts. If gifts have been received in cash during the previous year in excess of Rs 50,000 in aggregate, the entire gifts would be treated as one’s income.
However in the hands of educational institutions and hospitals claiming tax exemption under Section 11 or Section 10(23C), such anonymous donations would attract 30 per cent tax. For good measure, Section 115BBC defines ‘anonymous donation’ as any voluntary contribution received from sources whose identity, including name and address, has not been recorded.
Presently it is stated that any voluntary contribution in respect of which the charitable trust/institution does not keep desired records then it would be deemed to be an anonymous donation.
Presently it is provided that in respect of voluntary donations if the name and address of the person contributing for voluntary donations are not maintained in such event these donations would be treated not as “Voluntary Donations” but as “anonymous donation” and thus subjected to a maximum marginal rate of 30% tax.
However in the hands of educational institutions and hospitals claiming tax exemption under Section 11 or Section 10(23C), such anonymous donations would attract 30 per cent tax. For good measure, Section 115BBC defines ‘anonymous donation’ as any voluntary contribution received from sources whose identity, including name and address, has not been recorded.
Presently it is stated that any voluntary contribution in respect of which the charitable trust/institution does not keep desired records then it would be deemed to be an anonymous donation.
Presently it is provided that in respect of voluntary donations if the name and address of the person contributing for voluntary donations are not maintained in such event these donations would be treated not as “Voluntary Donations” but as “anonymous donation” and thus subjected to a maximum marginal rate of 30% tax.
Court rejects move to tax dividend stripping
The Bombay High Court has ruled that losses arising from the purchase and subsequent sale of mutual fund units, soon after receiving dividend on the units, can be allowed as an expense for deduction from taxable income.
In all its tax claims, the I-T department was of the view that losses arising from such transactions amounted to artificial or coloured transactions for evading taxes and was not a sound commercial decision.
For the assessment year 2001-02, Mumbai-based broking firm Walfort Share, purchased 4.55 billion units from Chola MF on March 23, 2000, at Rs 17.57 per unit totalling Rs 8 crore. On the same day, Chola MF distributed a dividend amount of Rs 1.8 crore.
On the next day (March 27, 2000), the assessee sold the units by way of redemption and Chola MF repurchased them at Rs 12.97 each and paid Rs 5.90 crore as the repurchase price. The assessee (Walfort) had also received Rs 2.3 crore as an incentive for purchase and sale of such units.
At the same time, on the units sale, the broking firm made a loss of around Rs 2.1 crore (Rs 8 crore less Rs 5.90 crore). Since the dividend income was exempt from tax under Section 10(33) of the I-T Act, the assessee claimed business loss of around Rs 2.1 crore to be set off against other income.
However, the tax authorities were of the opinion that the loss was created through pre-designed set of transactions to avoid paying tax and added it back to the trading income of the assessee. However, HC in its ruling in August was of the view that such transactions need to be seen with reference to Section 94(7) that deals with tax avoidance transactions.
The section provides that where the units are purchased and sold within a stipulated time and the income from such units is exempt, then, while computing losses of such persons, the losses to the extent of the income received should be ignored.
Thus, losses in excess of the income should be allowed for deduction.
In all its tax claims, the I-T department was of the view that losses arising from such transactions amounted to artificial or coloured transactions for evading taxes and was not a sound commercial decision.
For the assessment year 2001-02, Mumbai-based broking firm Walfort Share, purchased 4.55 billion units from Chola MF on March 23, 2000, at Rs 17.57 per unit totalling Rs 8 crore. On the same day, Chola MF distributed a dividend amount of Rs 1.8 crore.
On the next day (March 27, 2000), the assessee sold the units by way of redemption and Chola MF repurchased them at Rs 12.97 each and paid Rs 5.90 crore as the repurchase price. The assessee (Walfort) had also received Rs 2.3 crore as an incentive for purchase and sale of such units.
At the same time, on the units sale, the broking firm made a loss of around Rs 2.1 crore (Rs 8 crore less Rs 5.90 crore). Since the dividend income was exempt from tax under Section 10(33) of the I-T Act, the assessee claimed business loss of around Rs 2.1 crore to be set off against other income.
However, the tax authorities were of the opinion that the loss was created through pre-designed set of transactions to avoid paying tax and added it back to the trading income of the assessee. However, HC in its ruling in August was of the view that such transactions need to be seen with reference to Section 94(7) that deals with tax avoidance transactions.
The section provides that where the units are purchased and sold within a stipulated time and the income from such units is exempt, then, while computing losses of such persons, the losses to the extent of the income received should be ignored.
Thus, losses in excess of the income should be allowed for deduction.
RBI cuts cash reserve ratio
In a bid to ease the current cash crunch in the financial system, the Reserve Bank of India on Monday announced a percentage point reduction in the cash reserve ratio (CRR) to 7.5 per cent from 8.5 per cent.
The revision in CRR, which will come into effect from the fortnight beginning October 11, 2008, will release Rs 60,000 crore into the system, RBI said in a statement.
CRR is the portion of the deposits banks have to keep with the Reserve Bank of India.
The CRR cut will now increase the lendable resources of banks, which had been tightening their loan taps as liquidity came under pressure.
The revision in CRR, which will come into effect from the fortnight beginning October 11, 2008, will release Rs 60,000 crore into the system, RBI said in a statement.
CRR is the portion of the deposits banks have to keep with the Reserve Bank of India.
The CRR cut will now increase the lendable resources of banks, which had been tightening their loan taps as liquidity came under pressure.
Wednesday, June 4, 2008
March payments: TDS relief for tax-payers
Taxpayers are to get relief on their tax deducted at source (TDS) obligations with regard to their payments for expenses in March — the last month of the financial year for income-tax purposes.
“They will now get six months time to deposit the TDS related to payments made in March and also escape disallowance of expense under the Income-Tax law.
This relief forms part of the amendments moved to the Finance Bill 2008, which has been passed by Parliament recently. The important thing is disallowance of expenses will not be there in such cases,” Mr G. Ramaswamy, Central Council Member, ICAI, told.The amendments to the TDS provisions have been made on a retrospective basis from assessment year 2005-06.
“They will now get six months time to deposit the TDS related to payments made in March and also escape disallowance of expense under the Income-Tax law.
This relief forms part of the amendments moved to the Finance Bill 2008, which has been passed by Parliament recently. The important thing is disallowance of expenses will not be there in such cases,” Mr G. Ramaswamy, Central Council Member, ICAI, told.The amendments to the TDS provisions have been made on a retrospective basis from assessment year 2005-06.
Petrol, diesel prices hiked by Rs 5, 3 a litre
The government on Wednesday hiked petrol and diesel prices by Rs 5 and 3 a litre and that of LPG by Rs 50 a cylinder, while sparing poor man's cooking medium kerosene from any increase.
The government also announced customs and excise duty cuts on petroleum products with immediate effect. These cuts would entail a revenue implication of Rs 22,660 crore for the remaining 10 months of this fiscal. However, the hike was far less than the required Rs 21.43 per litre on petrol and Rs 31.53 per litre on diesel. The actual increase in LPG price necessary was Rs 353 per cylinder, Oil Minister Murli Deora told reporters.
The government also announced customs and excise duty cuts on petroleum products with immediate effect. These cuts would entail a revenue implication of Rs 22,660 crore for the remaining 10 months of this fiscal. However, the hike was far less than the required Rs 21.43 per litre on petrol and Rs 31.53 per litre on diesel. The actual increase in LPG price necessary was Rs 353 per cylinder, Oil Minister Murli Deora told reporters.
Vital amendments in service tax vide Finance Act 2008
Some Vital amendments have been notified in the Service Tax Act vide Finance Act, 2008.
1) The definition of ‘input service' has been amended to provide that ‘clearance of final products up to the place of removal' will alone be considered as input service. It has also substituted the words ‘from the place of removal', used earlier, by ‘up to the place of removal'.
2) The definition of ‘output service' has been amended to exclude the taxable service of goods transport agency (GTA) from its purview. Since GTA service is no longer an output service, a GTA service provider cannot utilise input CENVAT credit towards the service tax payable by him on such GTA services.
3) Another amendment about the duration of removal of capital goods to any place by the service provider for output services. Now, there is no time limit for return of such goods. Earlier, a limit of 180 days was stipulated
1) The definition of ‘input service' has been amended to provide that ‘clearance of final products up to the place of removal' will alone be considered as input service. It has also substituted the words ‘from the place of removal', used earlier, by ‘up to the place of removal'.
2) The definition of ‘output service' has been amended to exclude the taxable service of goods transport agency (GTA) from its purview. Since GTA service is no longer an output service, a GTA service provider cannot utilise input CENVAT credit towards the service tax payable by him on such GTA services.
3) Another amendment about the duration of removal of capital goods to any place by the service provider for output services. Now, there is no time limit for return of such goods. Earlier, a limit of 180 days was stipulated
RBI guidelines on FCEBs
The RBI is likely to come out with guidelines on Foreign Currency Exchangeable Bonds (FCEBs) within a month, a move that would give corporate more options to raise money from overseas markets.FCEBs are financial instruments similar to Foreign Currency Convertible Bonds (FCCBs) in nature and allow corporate to raise money by issuing bonds.While funds raised through FCEBs cannot be invested in capital markets and real estates in the domestic market, corporate will be able to use the funds for their operations overseas.
Subscribe to:
Posts (Atom)
