Scrutiny Selection date is fast approaching for cases to be selected for the A.Y.2018-19 by 30th September, 2019. The Finance Act, 2017 has made a slew of changes in various heads of income. aThough adequate care has been taken while filing return of income but the need arises to have a relook at the changes made by Finance Act, 2017 so as to avoid any ambiguity while representing case before the Income Tax Authority. Part 1 of this article briefs about changes applicable under the head Income from Salary, Income from House Property and Income from Capital Gain. In part 2, we shall deal with changes applicable under the head Income from Business and Income from Other Sources.
A. Income From Salary
1. Tax-exemption to partial withdrawal from National Pension System (NPS)
- The provisions of section 10(12A) of the Income-tax Act specify that payment from National Pension System (NPS) trust to an employee on closer of his account or opting out shall be exempt up to 40% of total amount payable to him.
- In order to provide further relief to an employee subscriber of NPS, clause (12B) has been inserted in section 10 of the Income-tax Act so as to provide exemption to partial withdrawal not exceeding 25% of the contribution made by an employee in accordance with the terms and conditions specified under Pension Fund Regulatory and Development Authority Act, 2013 and regulations made there under.
- This amendment takes effect from 1st of April, 2018 and will, accordingly, apply from assessment year 2018-19 and subsequent assessment years.
B. Income From House Property
2. No notional income for house property held as stock-in-trade.
- Section 23 of the Income-tax Act provides for the manner of determination of annual value of house property.
- Considering the business exigencies in case of real estate developers, the said section has been amended to provide that where the house property consisting of any building and land appurtenant thereto is held as stock-in-trade and the property is not let during the whole of the previous year, the annual value of such property or, for the period up to one year from the end of the financial year in which the certificate of completion of construction of the property is obtained from the competent authority, shall be taken to be nil.
- This amendment takes effect from 1st April, 2018 and will, accordingly apply from assessment year 2018-19 and subsequent years.
C. Income From Capital Gain
3. Special provisions for computation of capital gains in case of joint development agreement.
- With a view to minimise the genuine hardship which the owner of land may face in paying capital gains tax in the year of transfer, a new sub-section (5A) has been inserted in section 45 of the Income-tax Act to provide that in case of an assessee, being an individual or a Hindu undivided family, who enters into a specified agreement for development of a project, the capital gains shall be chargeable to income-tax as income of the previous year in which the certificate of completion for the whole or part of the project is issued by the competent authority.
- Further, the stamp duty value of his share, being land or building or both, in the project on the date of issuing of said certificate of completion as increased by any monetary consideration received, if any, shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.
- It is also provided that benefit of this regime shall not apply to an assessee who transfers his share in the project to any other person on or before the date of issue of said certificate of completion.
- It has also been provided that in such a situation, the capital gains as determined under general provisions of the Income-tax Act shall be deemed to be the income of the previous year in which such transfer took place and shall be computed as per provisions of the Income-tax Act without taking into account these provisions.
- Consequential amendment to section 49 of the Income-tax Act has also been made to provide that the cost of acquisition of the share in the project being land or building or both, in the hands of the land owner shall be the amount which is deemed as full value of consideration under section 45(5A) of the Income-tax Act.
- These amendments will take effect from 1st April, 2018 and will, accordingly, apply from assessment year 2018-19 and subsequent years.