Section 45(5) & 45(6) of the Income Tax Act-Capital Gains

Section 45(5)

Section 45(5) of the Income Tax Act

Notwithstanding anything contained in section 45(1) of the Income Tax Act; where the capital gain results from the transfer of a capital asset, being the transfer by way of mandatory acquisition under any law; or the transfer the consideration for which was determined or confirmed by the Central Government or the RBI; and the consideration or the compensation for such transfer is improved or further enhanced by any court, Tribunal or other authority; the capital gain shall be dealt with in the following manner, namely;

Section 45(5) & 45(6) of the Income Tax Act-Capital Gains

Section 45(5)

1. The capital gain calculated with relating to the compensation awarded in the first case or; as the case may be, the consideration ascertained or confirmed in the first instance by the Central Government or the RBI; is chargeable as income under the head Capital gains of the PY in which such consideration or a part thereof; or such compensation or a part thereof, was first received; and

2.The amount by which the consideration or compensation is enhanced or further improved by the court, Tribunal or other authority; is deemed to be income chargeable under the head Capital gains of the PY in which; the assessee receives such amount.

Provided that any amount of compensation received in pursuance of an interim order of a court, Tribunal or other authority; is deemed to be income chargeable under the head Capital gains of the PY in which; the final order of such court, Tribunal or other authority is made;

3. Where in the assessment for any year; the capital gain resulting from the transfer of a capital asset is calculated by taking the consideration or compensation; referred to in clause (a) or, the case may be, enhanced consideration or compensation referred to in clause (b); and afterward such consideration or compensation is reduced by any court, Tribunal or other authority; such assessed capital gain of that year will be recomputed; by using the consideration or compensation as so reduced by such court, Tribunal or other authority to be the full value of the consideration.

Explanation:

For the purposes of this subsection;

  1. In relation to the amount mentioned in clause (b), the cost of improvement and the cost of acquisition shall be taken to be nil;
  2. The provisions of this subsection shall apply also in a case where the transfer took place before the 1st day of April 1988;
  3. Where by reason of the death of the person who made the transfer, or for any other reason; the enhanced consideration or compensation is received by any other person, the amount mentioned in clause (b) shall be deemed to be the income, liable to tax under the head Capital gains, of such other person.

Section 45(5A) of the Income Tax Act

Sub-section (5A) shall be inserted after subsection (5) of section 45 by the Finance Act, 2017, w.e.f. 1st April 2018.

Notwithstanding anything included in sub-section (1); where the capital gain arises to an assesse, being an individual or a HUF; from the transfer of a capital asset, being land or building or both, under a particularized agreement; the capital gains are chargeable to income-tax as income of the PY in which; the competent authority issues the certificate of completion for the whole or part of the project; and for the purposes of section 48; the stamp duty value, on the date of issue of the said certificate, of his share, being land or building or both in the project; as enhanced by the consideration received in cash, if any; will be assumed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset

Provided that the provisions of this subsection shall not apply where the assessee transfers his share in the project on or; prior to the date of issue of said completion certificate; and the capital gains will be deemed to be the income of the PY in which such transfer takes place and the provisions of this Act; other than the provisions of this subsection; shall apply for determination of full value of consideration received or accruing as a result of such transfer.

Explanation:

For the purposes of this subsection, the expression;

  1. Competent authority means the authority empowered to approve the building plan by or under any law for the time being in force;
  2. Specified agreement implies a registered agreement in which; a person owning land or building or both; agrees for allowing another person to develop a real estate project on such land or building or both; in compensation of a share, being land or building or both in such project; whether with or without payment of a part of the consideration in cash;
  3. Stamp duty value indicates the value adopted or assessed or assessable by any authorization of Government for payment of stamp duty; in regard of an immovable property being land or building or both.

Section 45(6) of the Income Tax Act

Notwithstanding anything included in section 45(1), the difference between the repurchase price of the units referred to in section 80CCB(2) & the capital value of such units is deemed to be the capital gains occurring to the assessee in the PY in which such repurchase takes place, or the plan mentioned in that section is terminated and shall be taxed accordingly.

Explanation: For the Purposes of this sub-section; ‘capital value of such units,’ involves any amount, which the assessee invests in the units referred to in sub-section (2) of section 80CCB.

ReadMore Section

Related posts

Leave a Comment