The Central Board of Direct Taxes has released the Income Tax Amendment (18th Amendment), Rules, 2021 to further amend the Income Tax Rules, 1962. Under the said amendment, changes have been notified in Rule 8AA with regard to the amount chargeable to Income Tax under the head "Capital Gains" and a new Rule 8AB has been inserted after Rule 8AA. Read the official notification below:
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 2nd July, 2021
G.S.R. 470(E).—In exercise of the powers conferred by section 48 read with section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct taxes hereby makes the following rules further to amend the Income-tax Rules,1962, namely:-
1. Short title:- (1)These rules may be called the Income tax Amendment (18th Amendment), Rules, 2021.
2. In the Income-tax Rules, 1962, (hereinafter referred to as the principal rules) in rule 8AA, after sub-rule (4), the following sub-rule shall be inserted, namely:-
"(5). In case of the amount which is chargeable to income-tax as income of specified entity under subsection (4) of section 45 under the head "Capital gains",-
(i) the amount or a part of it shall be deemed to be from transfer of short term capital asset, if it is attributed to,-
(a) capital asset which is short term capital asset at the time of taxation of amount under subsection (4) of section 45; or
(b) capital asset forming part of block of asset; or
(c) capital asset being self-generated asset and self-generated goodwill as defined in clause (ii) of
Explanation 1 to sub-section (4) of section 45; and
(ii) the amount or a part of it shall be deemed to be from transfer of long term capital asset or assets, if it is attributed to capital asset which is not covered by clause (i) and is long term capital asset at the time of taxation of amount under sub-section (4) of section 45".
3. In the principal rules, after rule 8AA, the following rule shall be inserted, namely:
“8AB. Attribution of income taxable under sub-section (4) of section 45 to the capital assets remaining with the specified entity, under section 48.-
(1) For the purposes of clause (iii) of section 48, where the amount is chargeable to income-tax as income of specified entity under sub-section (4) of section 45, the specified entity shall attribute such amount to capital asset remaining with the specified entity in a manner provided in this rule.
(2) Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of the balance in his capital account, chargeable to tax under sub-section (4) of section 45,relates to revaluation of any capital asset or valuation of self-generated asset or self-generated goodwill, of the specified entity, the amount attributable to the capital asset remaining with the specified entity for purpose of clause (iii) of section 48 shall be the amount which bears to the amount charged under sub-section (4) of section 45 the same proportion as the increase in, or recognition of, value of that asset because of revaluation or valuation bears to the aggregate of increase in, or recognition of, value of all assets because of the revaluation or valuation.
(3) Where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of the balance in his capital account, charged to tax under sub-section (4) of section 45 does not relate to revaluation of any capital asset or valuation of self-generated asset or self-generated goodwill, of the specified entity, the amount charged to tax under sub-section (4) of section 45 shall not be attributed to any capital asset for the purposes of clause (iii) of section 48.
(4) Notwithstanding anything contained in sub-rules (2) or (3), where the aggregate of the value of money and the fair market value of the capital asset received by the specified person from the specified entity, in excess of the balance in his capital account, charged to tax under sub-section (4) of section 45 relate only to the capital asset received by the specified person from the specified entity, the amount charged to tax under sub-section (4) of section 45 shall not be attributed to any capital asset for the purposes of clause (iii) of section 48.
(5) The specified entity shall furnish the details of amount attributed to capital asset remaining with the specified entity in Form No. 5C.
To read more in details, find the enclosed file
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