EXEMPTION ON CAPITAL GAIN ON AGRICULTURE LAND U/S 54B

EXEMPTIONS FOR CAPITAL GAINS ARISING ON TRANSFER OF LAND USED FOR AGRICULTURAL PURPOSE

[Section 54B of Income-tax Act, 1961]

Under Income-tax Act, 1961, there are certain exemptions given to different class of assesses from Capital Gain provided certain investment is done. One of such exemptions are given on capital gain arising on sale of agricultural land under section 54B of Income-tax Act

Condition to avail Benefits under Section 54B

Who Can avail Benefits under Section 54B	Individual or Hindu Undivided Family (HUF)*
Assets Transferred	Land which was used for Agricultural Purpose by Individual or his parent or a HUF, two years immediately before date of transfer of land
Type of Capital Assets transferred (Depending upon period of holding of capital assets)	Long Term Capital Assets **(If period of holding)
When New Land should be purchased	For Purchase of Land for Being used for Agricultural Purpose *** Within a period of two years after the date of transfer of old land,
How many years the New Land should be held	For 3 years from the date of purchase/ from the date of completion of construction of New House

*   Whether resident or non-resident

**Period of holding for becoming Long term Capital assets is reduced from 36 months to 24 months w.e.f. assessment year 2020-2021

 *** The assessee shall have option to invest the unutilized investment to claim exemption U/s 54 of the Act in Capital Gain Saving Scheme on or before due date for filing of Income Tax Return and to utilize the deposited amount for the purpose of purchase of new land for agricultural purpose.

How much amount exempted from Capital Gain Tax

Sr. No.	Situations	Amount Exempted
1	(amount of capital gain on Old Land) < (amount of investment in New Land)	Amount of Capital Gain
2	(amount of capital gain on Old Land) > (amount of investment in New Land)	Amount of long term capital gain as reduced by amount of investment in new land

 

CONSEQUENCES IF THE NEW LAND TRANSFERRED BEFORE STIPULATED TIME PERIOD

If the new Land is sold before 3 years from the date of purchase, then cost of acquisition of new land at the time of sale of new Land shall be as follows:

Situations	Cost of acquisition
Where amount spent on purchase of New Land equal to or greater than amount of Capital Gain (LTCG) on Old Land	Amount spent on purchase of new land as reduced by amount of Capital gain exemption on sale of old land
Where amount spent on purchase of New Land less than amount of Capital Gain on Old Land	NIL

 

DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.

 

EXEMPTIONS FOR CAPITAL GAINS ARISING ON TRANSFER OF RESIDENTIAL HOUSE PROPERTY U/s 54 of Income-tax Act, 1961

EXEMPTIONS FOR CAPITAL GAINS ARISING ON TRANSFER OF RESIDENTIAL HOUSE PROPERTY

[Section 54 of Income-tax Act, 1961]

Under Income-tax Act, 1961, there are certain exemptions given to different class of assesses from Capital Gain provided certain investment is done. One of such exemptions are given under section 54 of Income-tax Act which is discussed in below lines:

Condition to avail Benefits under Section 54

Who Can avail Benefits under Section 54	Individual or Hindu Undivided Family (HUF)*
Assets Transferred	Residential House Property (“Old House”)
Type of Capital Assets transferred (Depending upon period of holding of capital assets)	Long Term Capital Assets **(If period of holding is more than 36 months)
When the New Residential House Property should be acquired or be Constructed	i)          For Acquisition of New house Property*** Within a period of one year before or two years after the date of transfer of old house,     OR ii)         For Construction of New House Property*** within a period of three years from the date of transfer of the old house
How many years the New House should be held	For 3 years from the date of purchase/ from the date of completion of construction of New House

Amendment with effect from assessment year 2020-2021,

1)    There is amendment in section 54 of the Act and benefits of section 54 shall be available in respect of investment made in two residential house properties if the long term capital gain in not more than two crores. However, this option of investment in two residential house properties shall be available for only one time during his lifetime.

* Whether resident or non-resident

2)   **Period of holding for becoming Long term Capital assets is reduced from 36 months to 24 months

    *** The assessee shall have option to invest the unutilized investment to claim exemption U/s 54 of the Act in Capital Gain Saving Scheme on or before due date for filing of Income Tax Return which shall be utilised on or before expiry of 2 or 3 years depending upon type of investment he has opted for.

HOW MUCH AMOUNT EXEMPTED FROM CAPITAL GAIN TAX

Sr. No.	Situations	Amount Exempted
1	(amount of capital gain on Old House) < (amount of investment in New Land)	Amount of Capital Gain
2	(amount of capital gain on Old House) > (amount of investment in New Land)	Amount of long term capital gain as reduced by amount of investment in new House

CONSEQUENCES IF THE NEW HOUSE TRANSFERRED BEFORE STIPULATED TIME PERIOD

If the new House is sold before 3 years from the date of purchase, then cost of acquisition of new house at the time of sale of new Land shall be as follows:

Situations	Cost of acquisition
Where amount spent on purchase of New House equal to or greater than amount of Capital Gain (LTCG) on Old House	Amount spent on purchase of New House as reduced by amount of Capital gain exemption on sale of Old House
Where amount spent on purchase of New Land less than amount of Capital Gain on Old Land	NIL

EXAMPLE

To understand this, we calculated capital gain taxability in the assessment year 2020-2021 and 2021-2022 in below facts

Year		Amount
01.08.2012	Cost of Purchase of residential House (House 1)	500000
10.04.2019	Sale consideration of House 1	1200000
	Long Term Capital Gain	350000
01.08.2019	Purchase of new residential House (House 2)	450000
31.07.2020	Sale consideration for House 2	500000

CAPITAL GAIN TAXABILITY 

In the assessment year 2020-21

Period of Holding	More than 24 months
Type of Capital gain	Long Term Capital Gain
Sale Consideration of House 1	1200000
Less: Indexed Cost of Acquisition of House 1 (say)	850000
Long Term Capital Gain	350000
Less: Exemption Under section 54 (lower of Investment in house 2 or capital gain)	350000
Taxable LTCG in Assessment year 2020-2021	Nil

 In the assessment year 2021-2022

Period of Holding	Less than 24 months
Type of Capital gain	Short Term Capital Gain
Sale Consideration of House 2	500000
Less: Cost of Acquisition of House 2 as reduced by Capital gain exemption as claimed under section 54 for house 1 (Cost of acquisition of House 2: 450000 Less: Exemption claimed U/s 54 claimed earlier 350000)	100000
Short Term Capital Gain	400000

 DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.

MSME Part 2 (w.e.f. July 1, 2020)...UPDATION OF INFORMATION IN UDYAM REGISTRATION AND GRIEVANCE REDRESSAL

MSME Part 2 (w.e.f. July 1, 2020)

----- Contd. From Part 1

MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES vide notification No. S.O. 2119(E) dated 26^th June 2020 notified certain criteria for classifying the enterprises as micro, small and medium enterprises and specifies the form and procedure for filing the memorandum (“Udyam Registration”), with effect from the 1st day of July, 2020……………

UPDATION OF INFORMATION AND TRANSITION PERIOD IN CLASSIFICATION

(1)  An enterprise having Udyam Registration Number shall update its information online in the Udyam Registration portal, including the details of the ITR and the GST Return for the previous financial year and such other additional information as may be required, on self-declaration basis.

(2)  Failure to update the relevant information within the period specified in the online Udyam Registration portal will render the enterprise liable for suspension of its status.

(3)  Based on the information furnished or gathered from Government’s sources including ITR or GST return, the classification of the enterprise will be updated.

(4)  In case of graduation (from a lower to a higher category) or reverse-graduation (sliding down to lower category) of an enterprise, a communication will be sent to the enterprise about the change in the status.

(5)  In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent re-classification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration.

(6)  In case of reverse-graduation of an enterprise, whether as a result of re-classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the Act or not, the enterprise will continue in its present category till the closure of the financial year and it will be given the benefit of the changed status only with effect from 1st April of the financial year following the year in which such change took place.

FACILITATION AND GRIEVANCE REDRESSAL OF ENTERPRISES

(1)  The Champions Control Rooms functioning in various institutions and offices of the Ministry of Micro, Small and Medium Enterprises including the Development Institutes (MSME-DI) shall act as Single Window Systems for facilitating the registration process and further handholding the micro, small and medium enterprises in all possible manner.

(2)  The District Industries Centres (DICs) will also act as Single Window facilitation Systems in their Districts.

(3)  Any person who is not able to file the Udyam Registration for any reason including for lack of Aadhaar number, may approach any of the above Single Window Systems for Udyam Registration purposes with his Aadhaar enrolment identity slip or copy of Aadhaar enrolment request or bank photo pass book or voter identity card or passport or driving licence and the Single Window Systems will facilitate the process including getting an Aadhaar number and thereafter in the further process of Udyam Registration.

(4)  In case of any discrepancy or complaint, the General Manager of the District Industries Centre of the concerned District shall undertake an enquiry for verification of the details of Udyam Registration submitted by the enterprise and thereafter forward the matter with necessary remarks to the Director or Commissioner or Industry Secretary concerned of the State Government who after issuing a notice to the enterprise and after giving an opportunity to present its case and based on the findings, may amend the details or recommend to the Ministry of Micro, Small or Medium Enterprises, Government of India, for cancellation of the Udyam Registration Certificate.

[Source: http://egazette.nic.in/WriteReadData/2020/220191.pdf ]

DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.

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MSME (w.e.f. July 1, 2020) certain criteria for classifying the enterprises as micro, small and medium enterprises and basis for calculation of Investment and Turnover

MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES vide notification No. S.O. 2119(E) dated 26^th June 2020 notified certain criteria for classifying the enterprises as micro, small and medium enterprises and specifies the form and procedure for filing the memorandum (“Udyam Registration”), with effect from the 1st day of July, 2020

CLASSIFICATION OF ENTERPRISES

Manufacturing Unit or Service Unit can be registered under MSMED Act, 2006 and will be classified as per their investment in plant and machinery or equipments and their turnover:

Type of Enterprises	Criteria ** for Manufacturing Enterprise and Services Enterprises ( W.e.f. July 1, 2020)
Micro	Investment < Rs. 1 Crore AND Turnover < Rs. 5 Crores
Small	Investment < Rs. 10 Crore AND Turnover < Rs. 50 Crores
Medium	Investment < Rs. 50 Crore AND Turnover < Rs. 250 Crores

COMPOSITE CRITERIA OF INVESTMENT AND TURNOVER FOR CLASSIFICATION

(1)     A composite criterion of investment and turnover shall apply for classification of an enterprise as micro, small or medium.

(2)     If an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.

(3)     All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) shall be collectively treated as one enterprise and the turnover and investment figures for all of such entities shall be seen together and only the aggregate values will be considered for deciding the category as micro, small or medium enterprise.

CALCULATION OF INVESTMENT IN PLANT AND MACHINERY OR EQUIPMENT

(1)     The calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous years filed under the Income Tax Act, 1961.

(2)     In case of a new enterprise, where no prior ITR is available, the investment will be based on self-declaration of the promoter of the enterprise and such relaxation shall end after the 31st March of the financial year in which it files its first ITR.

(3)     The expression “plant and machinery or equipment” of the enterprise, shall have the same meaning as assigned to the plant and machinery in the Income Tax Rules, 1962 framed under the Income Tax Act, 1961 and shall include all tangible assets (other than land and building, furniture and fittings).

(4)     The purchase (invoice) value of a plant and machinery or equipment, whether purchased first hand or second hand, shall be taken into account excluding Goods and Services Tax (GST), on self-disclosure basis, if the enterprise is a new one without any ITR.

(5)     The cost of certain items specified in the Explanation I to sub-section (1) of section 7 of the Act shall be excluded from the calculation of the amount of investment in plant and machinery.

CALCULATION OF TURNOVER

(1)     Exports of goods or services or both, shall be excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification.

(2)     Information as regards turnover and exports turnover for an enterprise shall be linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN.

(3)  The turnover related figures of such enterprise which do not have PAN will be considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be mandatory.

REGISTRATION OF EXISTING ENTERPRISES

(1) All existing enterprises registered under EM–Part-II or UAM (Udyog Aadhar Memorandum) shall register again on the Udyam Registration portal on or after the 1^st day of July, 2020.

(2)     All enterprises registered till 30^th June, 2020, shall be re-classified in accordance with this notification.

(3)     The existing enterprises registered prior to 30^th June, 2020, shall continue to be valid only for a period up to the 31stday of March, 2021.

(4)     An enterprise registered with any other organisation under the Ministry of Micro, Small and Medium Enterprises shall register itself under Udyam Registration.

[Source: http://egazette.nic.in/WriteReadData/2020/220191.pdf ]

DISCLAIMER

The material and information contained in this blog are for general information purpose only.  Though we have made every efforts to make our interpretation correctly, we do not make representation either express or implied about the completeness or correctness of the subject matter.  Under no circumstances the author is not responsible / liable for any loss or damage caused to anyone due to any mistake / error / omissions.