Just a moment...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws----
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ----
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
RelevanceDefaultDate
    ManualsIncome Tax
    I have a handicapped dependent who is my cousin ( Daughter of my mother’s sister). She is complete...
    ManualsIncome Tax
    Mr. X is a pensioner and his pension is less than his son’s salary. His daughter is a disabled dep...
    ManualsIncome Tax
    Who can be your disabled dependent?
    ManualsIncome Tax
    What is considered as disability and Severe Disability?
    ManualsIncome Tax
    If office deducts salary for medical insurance for employee and his family, whether the employee can...
    ManualsIncome Tax
    Can somebody having invested the amount from income exempt from tax or by taking loan, claim deducti...
    ManualsIncome Tax
    An individual assessee pays (through any mode other than cash) during the previous year medical insu...
    ManualsIncome Tax
    Part contribution ?
    ManualsIncome Tax
    Mr A, new retail investor has invested in listed equity share/units of equity oriented fund of Rajiv...
    ManualsIncome Tax
    X deposit 1,10,000 in PPF & made a contribution of 410,000 to annuity policy of LIC (eligible for de...
    ManualsIncome Tax
    X deposit 41,000 in PPF & made a contribution of 1,10,000 to annuity policy of LIC (eligible for ded...
    ManualsIncome Tax
    Suppose Mr. has paid premium of 25,000 for policy A taken on 30th June 2011 (sum assured 2,00,000) a...
    ManualsIncome Tax
    I and my wife both paid for education of our one child. My wife paid 70,000 and I paid 1,60,000 can ...
    ManualsIncome Tax
    Can I claim deduction u/s 80C of Income tax Act, 1961 for my adopted child’s school fees?
    ManualsIncome Tax
    What are the inclusions and exclusions in Tuition Fees?
    ManualsIncome Tax
    Example illustrating the Rule of Residence for an Individual for the Assessment year 2015-16
    ManualsIncome Tax
    Example:-During the previous year ending 31st March, 2013, X, a salaried employee received ₹ 1...
    ManualsIncome Tax
    Example:-The employer sells the following assets to the employees on 1st January 2015. Car to Z for...
    ManualsIncome Tax
    Example:-. On 15th October 2014, the company gives its music system to Y for domestic use. Ownershi...
    ManualsIncome Tax
    Example:-X owns car (1400cc). He uses it partly for official purposes and partly for private purpose...
❯❯
MaximizeMaximizeMaximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

    +

    Are you sure you want to delete "My most important" ?

    NOTE:

    Notes
    Showing Results for :
    Reset Filters
    Results Found:
    Show All SummariesHide All Summaries
    ManualsIncome Tax
    Show AI Summary
    Deduction under section 80DD: a cousin does not qualify as a dependent for claiming the deduction.
    The statutory dependent definition limits eligible relatives to spouse, children, parents, brothers, sisters, spouse's siblings, and parents' siblings; a cousin (daughter of mother's sister) is excluded, so expenses for her maintenance and medical treatment cannot be claimed as a deduction.
    ManualsIncome Tax
    Show AI Summary
    Disability deduction eligibility: a dependent sibling may claim 80DD deduction if financially supporting the disabled dependent.
    An Assessing Officer's objection that the son cannot claim the deduction because Mr. X receives pension is incorrect. Deduction under section 80DD covers dependents including brothers and sisters; the son may claim the deduction if the disabled daughter is dependent on him. The son should furnish an undertaking from Mr. X confirming the daughter's dependency on the son rather than on Mr. X.
    ManualsIncome Tax
    Show AI Summary
    Disabled dependent eligibility for income tax deductions requires relatives or HUF members to be wholly or mainly dependent.
    Eligibility for deductions requires that the disabled person be wholly or mainly dependent on the claimant for support and maintenance. For individuals, eligible dependents include spouse, children, parents, brothers and sisters. For a HUF, any member of the HUF may be treated as a disabled dependent for claiming the deduction.
    ManualsIncome Tax
    Show AI Summary
    Disability definition sets qualifying conditions and severity thresholds for income-tax deductions for specified impairments under tax law.
    Definition of disability for income-tax deductions under sections 80DD and 80DDB follows the Persons with Disabilities Act, 1995, listing impairments such as blindness, low vision, leprosy-cured, hearing impairment, locomotor disability, mental retardation, mental illness, autism, cerebral palsy and multiple disabilities; a person is considered disabled when impairment is not less than 40%, and severe disability is an impairment of 80% or more, which determine eligibility for the specified deductions.
    ManualsIncome Tax
    Show AI Summary
    Health insurance deduction allowed when employee bears premium paid non-cash and obtains employer certificate confirming the deduction.
    A deduction under section 80D is available where the employee has paid medical insurance premiums for himself and/or his family by a non-cash mode; the employee should obtain an employer's certificate confirming deduction of the amount for medical insurance purposes.
    ManualsIncome Tax
    Show AI Summary
    Deduction under section 80D requires payment from taxable income; payments from exempt income or loans disqualify.
    Deduction under section 80D is available only where the payment is made out of income chargeable to tax; payments from tax-exempt income or from borrowed funds do not qualify for the deduction.
    ManualsIncome Tax
    Show AI Summary
    Medical insurance deduction under 80D varies by parental senior citizen status, affecting combined family and parental premium allowances.
    Deduction under 80D allows an individual who pays medical insurance premiums other than in cash to claim a deduction for premiums for the assessee, spouse and dependent children as one component and for parental premiums as a separate component; the total allowable deduction depends on whether any parent is a senior citizen, with a higher combined deduction if a parent is a senior citizen.
    ManualsIncome Tax
    Show AI Summary
    Deduction under section 80D: contributors who pay health insurance premiums non cash may claim proportional deductions
    Contributors who partly pay health insurance premiums may each claim a deduction equal to the amount they actually paid, provided each share is paid directly to the insurer and by a mode other than cash; in such cases each payer may claim the deduction against their respective taxable income.
    ManualsIncome Tax
    Show AI Summary
    Deduction under 80CCG limited by eligible investment percentage and income threshold, with recapture on scheme violation.
    Deduction under the Rajiv Gandhi Equity Savings Scheme is computed as a percentage of eligible investments in listed equity shares and equity oriented fund units but is restricted by a monetary ceiling; sale of previously qualifying units can breach scheme conditions and cause partial recapture as taxable income; exceeding the prescribed gross total income threshold disqualifies the taxpayer from claiming the deduction for that year.
    ManualsIncome Tax
    Show AI Summary
    Deduction under section 80CCE limits combined 80C and 80CCC claims for contributions to savings instruments.
    Contributions to Public Provident Fund and an annuity policy eligible under Section 80CCC are deductible but subject to the aggregate ceiling under Section 80CCE; when combined eligible deductions across Sections 80C and 80CCC exceed the statutory limit, the deductible amount is restricted to that ceiling and any excess is disallowed.
    ManualsIncome Tax
    Show AI Summary
    Aggregate deduction under section 80CCE limits combined 80C and 80CCC contributions to the statutory overall ceiling.
    Contributions to a public provident fund and annuity policy premiums are aggregated and the deductible amount is the lesser of the combined eligible contributions and the statutory aggregate ceiling; when the combined total exceeds that ceiling, the deduction is restricted to the statutory limit.
    ManualsIncome Tax
    Show AI Summary
    Deduction under 80C: eligible life insurance premiums allowed up to policy ceilings; excess disallowed; one policy's maturity taxable.
    Deduction under Section 80C allows life insurance premiums up to policy wise ceilings based on a percentage of the sum assured. Policy A (sum assured 200,000) with a ceiling of 20% permits the full 25,000 premium as deductible; Policy B (sum assured 100,000) with a ceiling of 10% permits only 10,000 of the 12,000 premium as deductible. The total deduction equals the aggregate of eligible premiums, and Policy B's maturity proceeds are not exempt from tax.
    ManualsIncome Tax
    Show AI Summary
    Deduction under 80C: spouses can separately claim education-related deductions based on their individual contributions and limits.
    Spouses who each make genuine payments toward a child's education may separately claim a deduction under deduction u/s 80C based on their respective contributions, with each spouse's claim limited by the statutory individual ceiling; the wife may claim her actual payment and the husband may claim up to the maximum permissible individual deduction.
    ManualsIncome Tax
    Show AI Summary
    Deduction under section 80C for adopted child's school fees permitted where the statute is silent on biological status.
    Because 80C does not specify that the child must be biological, deductions for school fees paid for an adopted child are treated as permissible under the provision; the operative legal point is the statute's silence regarding the child's biological status.
    ManualsIncome Tax
    Show AI Summary
    Tuition fee deduction under 80C covers institutional tuition but excludes transport, hostel, library and private tuition charges.
    Deduction under Section 80C allows tuition fee claims only for amounts paid to recognised educational institutions, including pre nursery, play school and nursery class fees; excluded are transport, hostel, mess, library and vehicle stand charges, late fees, part time and distance learning course fees, and private tuition.
    ManualsIncome Tax
    Show AI Summary
    Residence test for individuals sets presence and prior year stay thresholds determining resident status for income tax assessment.
    Rule of residence for individuals for the assessment year 2015-16 uses presence-based thresholds and cumulative prior year conditions to determine resident in India status. Individuals are classified by category-those leaving for employment, visitors who are citizens or persons of Indian origin, and all other individuals-with each category subject to the single year presence test and, where applicable, an additional short term presence requirement plus multi year aggregation criteria assessing residence across preceding years.
    ManualsIncome Tax
    Show AI Summary
    Relief under Section 89(1): compare tax on receipt and accrual bases to determine relief for salary arrears and adjust current tax payable.
    Relief for salary received in arrears or advance is determined by computing tax on the aggregate income on the receipt basis and comparing it with tax computed as if the income had been charged to the earlier year(s); the relief equals the difference. The example aggregates salary and arrears, applies standard and specified deductions, computes net income and tax for the years on receipt and accrual bases, and derives the relief amount which is then deducted from current year tax payable.
    ManualsIncome Tax
    Show AI Summary
    Perquisite valuation: employer sale of movable assets to employees taxed as written down value less sale consideration.
    Taxable perquisite on employer sale of movable assets to employees is the difference between the employer's written down value (after applying depreciation to cost to reach the balance on the relevant date) and the sale consideration; the document demonstrates this by computing successive depreciated written down values for a car, computer and fridge and subtracting the sale prices to determine the perquisite amounts.
    ManualsIncome Tax
    Show AI Summary
    Use of movable assets perquisite taxed at prescribed annual percentage with pro rata computation for period of employer-provided use.
    Use of moveable assets provided by an employer is a taxable perquisite valued by applying a prescribed annual percentage of the asset's cost, with a pro rata adjustment for the actual days of employee use within the year (annual percentage of cost x days of use/365).
    ManualsIncome Tax
    Show AI Summary
    Perquisite valuation for motor car under Rule 3(2): employer reimbursements reduced by official-use deduction, affecting taxable perquisite.
    Valuation of a motor car perquisite requires deducting the official-use portion from employer reimbursements before treating the balance as a taxable perquisite; absent a log book a fixed deduction method is applied, while contemporaneous usage evidence permits apportionment of the reimbursement by the documented official-use percentage.

    TMI Notes

    Back

    All TMI Notes

    Showing Results for :
    Reset Filters
      No Records Found

      TMI Notes

      Back

      All TMI Notes

      whatsappJoin Channel
      Showing Results for : Reset Filters

      Computation of capital gains in case of Market Linked Debenture: Clause 76 of the Income Tax Bill, 2025 vs. Section 50AA of the Income Tax Act, 1961

      13 March, 2025

      Contents
      Acts
      Rules & Regulations
      Summary
      Note

      Note

      -

      Bookmark

      Print

      Print

      Clause 76 Special provision for computation of capital gains in case of Market Linked Debenture.

      Income Tax Bill, 2025

      ```html

      Legal Commentary on Clause 76 of the Income Tax Bill, 2025

      Introduction

      Clause 76 of the Income Tax Bill, 2025, introduces special provisions for computing capital gains in the context of Market Linked Debentures (MLDs). This clause is significant as it aims to address the tax treatment of financial instruments that have gained popularity due to their market-linked returns. The provision is set against the backdrop of evolving financial markets and investment strategies, where traditional tax norms may not adequately address the complexities of new financial products. The clause seeks to ensure clarity and consistency in the tax treatment of MLDs, which could have implications for investors, issuers, and regulators.

      Objective and Purpose

      The primary objective of Clause 76 is to provide a clear framework for calculating capital gains on MLDs, which are financial instruments whose returns are linked to market indices or other underlying securities. The clause aims to ensure that gains from these instruments are treated as short-term capital gains, irrespective of the holding period. This reflects a legislative intent to standardize the tax treatment of MLDs, aligning it with policy considerations that seek to prevent tax avoidance and ensure fair taxation of income derived from speculative or short-term investments.

      Detailed Analysis

      Sub-section (1): Overriding Existing Provisions

      Sub-section (1) of Clause 76 overrides existing provisions in section (clause) 2(101) and section (clause) 72, mandating that gains from the transfer, redemption, or maturity of specified capital assets be treated as short-term capital gains. This provision is crucial as it ensures that taxpayers cannot leverage other provisions to claim long-term capital gains treatment, which typically enjoys a lower tax rate.

      Sub-section (2): Definition of Capital Assets

      Sub-section (2) details the types of capital assets covered under this clause, including units of Specified Mutual Funds acquired post-April 1, 2023, and MLDs. It also covers unlisted bonds or debentures maturing or being redeemed after July 23, 2024. This broadens the scope of the clause to include various debt instruments, ensuring comprehensive coverage of financial products that exhibit similar characteristics to MLDs.

      Sub-section (3): Computation Formula

      Sub-section (3) provides a formula for computing short-term capital gains: X = A - B - C, where A is the full value of consideration received, B is the cost of acquisition, and C is the expenditure incurred exclusively for the transaction. This formula is straightforward, aiming to simplify the computation process and reduce ambiguity in determining taxable gains.

      Sub-section (4): Disallowance of Securities Transaction Tax Deduction

      Sub-section (4) explicitly disallows deductions for securities transaction tax (STT) paid under Chapter VII of the Finance (No. 2) Act, 2004. This provision prevents taxpayers from reducing their taxable gains by claiming deductions for STT, aligning with the broader objective of ensuring fair taxation of speculative gains.

      Sub-section (5): Definitions

      Sub-section (5) defines key terms such as "Market Linked Debenture" and "Specified Mutual Fund." The definition of MLDs emphasizes their debt security nature and market-linked returns, while the definition of Specified Mutual Funds focuses on funds investing primarily in debt and money market instruments. These definitions are critical for identifying the financial instruments subject to the clause and ensuring consistent application of the tax provisions.

      Practical Implications

      Clause 76 has significant implications for various stakeholders. For investors, the provision clarifies the tax treatment of gains from MLDs, potentially influencing investment decisions. Issuers of MLDs may need to adjust their offerings to align with the new tax treatment, while tax professionals and advisors will need to update their strategies to account for the changes. Regulators may also experience an impact, as the provision could influence market behavior and the structuring of financial products.

      Comparative Analysis with Section 50AA of the Income Tax Act, 1961

      Introduction to Section 50AA

      Section 50AA of the Income Tax Act, 1961, introduced by the Finance Act, 2023, also addresses the computation of capital gains for MLDs. Similar to Clause 76, it mandates that gains from these instruments be treated as short-term capital gains, irrespective of the holding period. The section reflects a legislative intent to align the tax treatment of MLDs with policy objectives aimed at preventing tax avoidance and ensuring fair taxation.

      Key Differences and Similarities

      Both Clause 76 and Section 50AA aim to standardize the tax treatment of MLDs by treating gains as short-term capital gains. However, there are notable differences in their scope and application. Clause 76 is part of a new legislative framework, potentially reflecting updated policy considerations and a broader scope, while Section 50AA is part of the existing Income Tax Act, 1961.

      Scope of Covered Assets

      Clause 76 explicitly includes unlisted bonds and debentures maturing post-July 2024, expanding its coverage compared to Section 50AA, which focuses on MLDs and Specified Mutual Funds. This difference indicates a broader approach in Clause 76, potentially capturing a wider range of financial products.

      Computation Methodology

      Both provisions employ a similar formula for computing short-term capital gains, emphasizing the full value of consideration, cost of acquisition, and transaction-related expenditure. This consistency ensures a uniform approach to calculating taxable gains, reducing ambiguity and potential disputes.

      Disallowance of STT Deduction

      Both Clause 76 and Section 50AA disallow deductions for STT, reinforcing the policy objective of taxing speculative gains fairly. This alignment indicates a consistent legislative approach to preventing tax avoidance through STT deductions.

      Definitions and Clarifications

      The definitions of MLDs and Specified Mutual Funds in both provisions are similar, emphasizing the debt security nature and market-linked returns of MLDs. This consistency ensures that taxpayers and stakeholders have a clear understanding of the financial instruments subject to the provisions.

      Conclusion

      Clause 76 of the Income Tax Bill, 2025, and Section 50AA of the Income Tax Act, 1961, represent significant legislative efforts to address the tax treatment of MLDs and similar financial instruments. By mandating short-term capital gains treatment, both provisions aim to align the tax treatment with policy objectives of preventing tax avoidance and ensuring fair taxation. The introduction of Clause 76 reflects evolving policy considerations and a broader approach to capturing a wider range of financial products. As financial markets continue to evolve, these provisions provide a framework for consistent and fair taxation of gains from market-linked investments, with potential implications for investors, issuers, and regulators.

      Suggested Alternative Titles

      • Analyzing the Impact of Clause 76 on Market Linked Debentures
      • Clause 76 vs. Section 50AA: A Comparative Tax Analysis
      • Taxation of Market Linked Debentures: Legislative Insights
      • Understanding Capital Gains Computation for Market Linked Debentures

      ```

       


      Full Text:

      Clause 76 Special provision for computation of capital gains in case of Market Linked Debenture.

      Topics

      ActsIncome Tax