Amendment of section 54GB.
20. In section 54GB of the Income-tax Act, with effect from the 1st day of April, 2020,-
(i) in sub-section (4), the following proviso shall be inserted, namely:-
‘Provided that in case of a new asset, being computer or computer software, acquired by an eligible start-up referred to in the proviso to clause (d) of sub-section (6), the provisions of this sub-section shall have effect as if for the words “five years”, the words “three years” had been substituted.’;
(ii) in sub-section (5), in the proviso, for the figures “2019”, the figures “2021” shall be substituted;
(iii) in sub-section (6), in clause (b), in sub-clause (iii), for the word “fifty” at both the places where it occurs, the word “twenty-five” shall be substituted.
Notes on Clauses:
Clause 20 of the Bill seeks to amend section 54GB of the Income-tax Act relating to capital gain on transfer of residential property not to be charged in certain cases.
The said section, inter alia, provides that where the capital gain arises from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the eligible assessee; and the assessee, before the due date of furnishing of return of income under sub-section (1) of section 139, utilises the net consideration for subscription in the equity shares of an eligible company; and the company has, within one year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of new asset, then, the amount so utilised shall not be charged to tax as the income of the previous year. It is further provided that the new assets shall not be sold or otherwise transferred within a period of five years from the date of their acquisition; the capital gains arising from transfer of residential property made after the 31st day of March, 2017 (in case of eligible start-up, the 31st March, 2019) shall not be eligible for the benefit under the said section; and the assessee shall have more than fifty per cent. share capital or more than fifty per cent. voting rights after the subscription in shares in the eligible company.
It is proposed to amend the said section so as to provide that in the case of an eligible start-up, in place of five years, the restriction of three years on transfer from the date of acquisition of new asset, being computer or computer software shall apply; the capital gains arising from transfer of residential property made upto the 31st March, 2021 shall be eligible for the benefit under the said section; and the assessee shall have more than twenty-five per cent. share capital or more than twenty-five per cent. voting rights after the subscription in shares in the eligible company.
This amendment will take effect from 1st April, 2020 and will, accordingly, apply in relation to the assessment year 2020-2021 and subsequent assessment years.
