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**Capital Gains Tax

Definition of Short term Capital asset – Section 2(42A)

Section 2(42A) has been amended to provide that securities (other than a listed security), listed or unlisted units and units of mutual funds (other than equity oriented) funds shall be regarded as short term capital assets where the same are held for a period of less than 36 months.

(w.e.f. 01/04/2015)

Capital Gains – Section 45

In case of compulsory acquisition of capital asset, any enhanced compensation received by the order of the Court, Tribunal or other authority, is chargeable to tax in the year in which such amount is received by the assessee.

It is proposed to provide that, if any amount of compensation is received pursuant to an interim order passed by the Court, Tribunal or other authority, such amount shall be taxable in the year in which the final order of such Court, Tribunal or other authority is made. (w.e.f. 01/04/2015)

Transaction not regarded as transfer – Section 47

Any transfer of Government Security carrying a periodic payment of interest, made outside India through an intermediary dealing in settlement of securities, by a non-resident to another non-resident, shall not be regarded as “transfer”.

Section 2(b) of Securities Contracts (Regulation)Act, 1956 defines the expression “Government Security”. (w.e.f. 01/04/2015)

**Taxation regime for Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (Invit)- Chapter XII – FA

A specific taxation regime is proposed for two new categories of investment vehicles namely, the Real Estate Investment (REIT) and Infrastructure Investment Trust (Invit). Business Trust means a trust registered as an REIT/Invit, the units of which are required to be listed on a recognized stock exchange in accordance with SEBI. Trust would be given a pass-through status.

Listed units of business trust when traded on stock exchange would attract STT and long term capital gains would be exempt while short term capital gains would be taxable at 15%.

However, the period of holding of units would be reckoned as long term only when the units have been held for more than 36 months. (w.e.f. 01/10/2014)

Sponsor will not be liable to capital gains tax arising at the time of exchange of shares in SPCs with the units of the business trust. However, sponsor shall be liable to tax at the time of disposal of such units and no preferential capital gains tax regime (consequential to levy of STT) will be available to sponsor in respect of units of business trust.

For the purpose of computing capital gains, the cost of unit shall be the original cost of shares to the sponsor. The holding period of shares shall also be included in the holding period of such units for the sponsor.

Income by way of interest received by the business trust from SPV is not taxable in the hands of trust when the SPV makes an interest payment to the trust. However, withholding tax at the rate of 5% (not-resident unit holders) and 10% (resident unit holders) shall be applicable in case of payment of interest component of income distributed to unit holders.

In case of  ECBs availed by the business trust, the benefit of reduced rate of 5% tax on interest payments to non-resident lenders shall be available for a prescribed period as specified in section 164LC of the Act.

The dividend received by the trust will be subject to DDT at the level of SPV but will be exempt in the hands of trust, and the dividend component of income distributed by the trust to unit holders will also be exempt in the hands of unit holders.

Income by way of capital gains on disposal of asset by the trust shall be taxable in the hands of the trust. However, if such capital gains are distributed, then the component of distributed income attributable to capital gains would be exempt in the hands of unit holder.

Any other income of the trust shall be taxable at the maximum marginal rate.

The business trust is required to furnish its return of income.

In Next Part:   

International Tax

Personal Tax and

Miscellaneous Provisions


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Member (Account Deleted)
(CA-Final, ICWAI -Inter)
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