The receipts relating to ordinary sources, such as employment, house property, business and capital gains, will be classified under income.

The gains arising from the transfer of assets will be treated as capital gains that is to be added to the total income of the financial year in which the investment asset is transferred irrespective of the year in which the consideration is received.

If you sell a property in 2009 and register it in 2009 but the full and final payment happens in 2010, the year 2009 will be taken for tax purpose.

In case of compulsory acquisition, capital gains will be taxed in the year in which the compensation is actually received.

For immovable property, if the period of holding is less than three years, capital gains will fall under short-term and the gain made by transfer of the property is added to income from other sources and income tax has to be paid for the total amount.

In case of the property held for more than three years, capital gains is taxed at 20 per cent of the gain made. The tax will be exempted if the gain made is deposited in specified bonds (issued by the National Highways Authority of India or the Rural Electrification Corporation Ltd.) within six months from the date of transfer.

This is set to change. In the proposed code the distinction between short term and long term is removed. Gains made from the property, irrespective of the years of holding, will be added to the income of the year.

 News Published Under:  The Hindu