Amendment in Capital Gain sections proposed in Budget 2023

The value of investment in residential house in respect of which an assessee will be able to claim exemption either under Section 54 or 54F shall be restricted to Rs. 10 crores.

Earlier there was no restriction on the amount on which an assessee can claim exemption by investing in a residential house.

Taxation of Market Linked Debentures

Market linked debentures are new innovation in the financial market where the returns are linked with the return generated by some external security or equity benchmark. This provides capital protection to the investors and at the same time lets the investors participate in the returns generated by underlying security or indices. Earlier there was no clarity on taxation of such market linked debentures.

Now in Budget 2023 there will be taxation of profits realised on transfer/redemption of such market linked debentures.

Any profit made on market linked debentures shall be treated as short term capital gains irrespective of the holding period. Further the investor in addition to the cost of acquisition/purchase can claim deduction in respect of expenditure incurred in connection with such transfer but no deduction shall be available in respect of any Security Transaction Tax (STT) paid for such transaction.

Conversion of Physical Gold into Electronic Gold receipts

In order to encourage the investors to buy electronic gold, the government has proposed that there would be no capital gains tax if physical gold is converted to an Electronic Gold Receipt (EGR) and vice versa. The cost of acquisition of the EGR for the purpose of computing capital gains shall be deemed to be the cost of gold in the hands of the person in whose name Electronic Gold Receipt is issued, and the holding period for the purpose of capital gains, would include the period for which gold was held by the assessee prior to its conversion into EGR.

-BY MANOJ TYAGI