TaxTMI 
TaxTMI 
TaxTMI 
BUDGET 2012
Capital gains
Relief from long term capital gains tax on transfer of residential property if reinvested.
1. Relief from long term capital gains tax will now be available to an individual or HUF on sale of a residential property (house or plot of land) if:
• the taxpayer utilizes the net consideration for subscription to equity shares of a newly setup SME company (where it holds more than 50% share capital or voting rights) in the manufacturing sector before due date of furnishing its return of income; and
• such company utilizes the same for purchase of new plant and machinery within one year from date of subscription.
2. Capital gains will be subject to tax if the shares of SME or the plant and machinery are transferred within a period of five years from the date of their acquisition.
3. The relief would be available in case of any transfer of residential property made on or before 31 March 2017. FMV deemed to be the full value of consideration.
FMV deemed to be the full value of consideration
• If the consideration on the transfer of a capital asset is not determined, then, for the purpose of capital gains, the FMV of the said asset on the date of transfer will be deemed to be the full value of consideration.
Cost of acquisition in case of certain transfers
• The cost of acquisition of asset in the hands of the company will be the same as that in the hand of the sole proprietary concern or the firm.
• Presently, for the purpose of capital gains, there is no reference with regard to the cost to be taken for assets which are acquired in regard to succession of a sole proprietary concern or firm into a company not regarded as transfer.
The above amendment will be effective retrospectively from 1 April 1999.
Reference to a valuation officer
• Presently, the Revenue authority may refer the valuation of a capital asset to a valuation officer if value of asset as claimed by the taxpayer is less than its FMV.
• Now, the Revenue authority will be able to make reference to the valuation officer if in his opinion the value declared by the taxpayer is at variance from the FMV.
The above amendment will be effective from 1 July 2012.
Corporate reorganization
Capital gains in case of amalgamation and demerger
• Presently, where a company amalgamates into its shareholder company, it is not possible to satisfy one of the conditions for exemption to the shareholder company i.e. the transfer of shares by the shareholder is in consideration of allotment of shares in the amalgamated company. This is because the shareholder company cannot issue shares to itself.
• Now, there is no requirement to issue shares to the shareholder where such shareholder itself is the amalgamated company.
• Similar amendment has also been made in the case of demerger.