Income Tax - Government Amends Capital Gains Accounts Scheme, 1988
A new Section 54GB was inserted in the Income Tax Act by the Finance Act 2012 to provide that where the capital gain arises from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the eligible assessee and such assessee before the due date of furnishing of return of income under sub-section (1) of section 139 utilises the net consideration for subscription in the equity shares of an eligible company and such company has, within one year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of new asset then, instead of the capital gain being charged to income-tax as the income of the previous year in which the transfer takes place, it shall be dealt with in accordance with the provisions of this section, that is to say, if the amount of the net consideration is greater than the cost of the new asset, then, so much of the capital gain as it bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45 as the income of the previous year or if the amount of the net consideration is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45 as the income of the previous year.
It further provided that the amount of the net consideration, which has been received by the company for issue of share to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the said due date of furnishing of the return of income by the assessee under section 139, shall be deposited by the company, before the due date of furnishing, in an account in any such bank or institution as may be specified and shall be utilised in accordance with any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and the return furnished by the assessee shall be accompanied by proof of such deposit having been made.
It is also provided that the provisions of this section shall not apply to any transfer of residential property made after the 31st day of March, 2017.
It was also provided to define the expressions "eligible assessee", "eligible company", "net consideration" and "new asset" for the purpose of this section.
These amendments will take effect from the 1st day of April, 2013 and will, accordingly, apply in relation to the assessment years 2013-2014 and subsequent assessment years.
Consequently, the Government has now amended the Capital Gains Accounts Scheme, 1988 and this new section 54GB is inserted in various provisions of the Scheme, apart from other minor changes.
CBDT Notification No. 44/2012, Dated: October 25, 2012