The benefit u/s 54 of Income tax was reported to be withdrawn (TOI). When does it come into effect ?

Question

TOI reported about a month back that the benefit under section 54 is being overused resulting in a lossof tax revenues to the Govt. It said that now the only way of saving the capital gains arising out of sales from your property is to invest in infrastructure bonds. Is this already a law or just a proposal ?

Answer 1

The report in Times of India is patently wrong
Section 54 of Income Tax Act is on the link below:
http://www.allindiantaxes.com/incometaxch-4s54.php
54. Profit on sale of property used for residence


(1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head Income from house property (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,


(i) if the amount of the capital gain is greater than the cost of the residential house so purchased or constructed (hereafter in this section referred to as the new asset), the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or


(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.


(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :


Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,


(i) the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and


(ii) the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.

Amendment of section 54EC.

13. In section 54EC of the Income-tax Act, after sub-section (3), in the Explanation, for clause (b), the following clause shall be substituted, namely:

(b) long-term specified asset means any bond, redeemable after three years and issued on or after the 1st day of April, 2006,

(i) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988), and notified by the Central Government in the Official Gazette for the purposes of this section; or

(ii) by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), and notified by the Central Government in the Official Gazette for the purposes of this section
http://www.allindiantaxes.com/incometaxch-4s54ec.php
Capital gain not to be charged on investment in certain bonds.

It is only Section 54EC which has been amended by finance Act 2006 as under:
54EC. (1) Where the capital gain arises from the transfer of a long-term capital asset (the capital asset so transferred being hereafter in this section referred to as the original asset) and the assessee has, at any time within a period of six months after the date of such transfer, invested the whole or any part of capital gains in the long-term specified asset, the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,


(a) if the cost of the long-term specified asset is not less than the capital gain arising from the transfer of the original asset, the whole of such capital gain shall not be charged under section 45;


(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45.


(2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1) shall be deemed to be the income chargeable under the head Capital gains relating to long-term capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money.


Explanation.In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on the date on which such loan or advance is taken.


(3) Where the cost of the long-term specified asset has been taken into account for the purposes of clause (a) or clause (b) of sub-section (1),


(a) a deduction from the amount of income-tax with reference to such cost shall not be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;


(b) a deduction from the income with reference to such cost shall not be allowed under section 80 C for any assessment year beginning on or after the 1st day of April, 2006.]


Explanation.For the purposes of this section,


(a) cost, in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset;


(b) long-term specified asset means any bond, redeemable after three years and issued on or after the 1st day of April, 2006,


(i) by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988), and notified by the Central Government in the Official Gazette for the purposes of this section; or


(ii) by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 1956 (1 of 1956), and notified by the Central Government in the Official Gazette for the purposes of this section.

Answer 2

I think TOI only reported on what a school of thought running in the Tax administration.The budget date is coming near , and so is the preparatory measures.

I don't think Govt will delete section 54 , maybe some amendment to plug the misuse.

Answer 3

latest article on section 54 of income tax act

Answer 4

Please refer http://incometaxindia.gov.in/ u will still find Sec 54 listed here. So it is not withdrawn. Sec 54 is alive and u can claim benefit under this section. finance act 2006 did not changed anything concerned to this section. ok

Answer 5

mere pass 1 house pahle se hai 2nd maine 4sal pahle buy kiya tha ab april14 me sale kiya and 1 house same day buy kiya kya mujhe u/s54 long term tax se rebate milegi