The Finance Bill, 2021 was introduced in Lok Sabha on 1st February 2021 and passed by Lok Sabha on 23rd March 2021 with 127 new amendments in comparison to the bill presented in Lok Sabha on 1st February 2021. There were multiple key changes to note in the Finance Act of 2021.
Relaxation In The Equalisation Levy The Equalisation Levy was introduced on non-resident e-commerce operators on consideration received from e-commerce supply or services, by Finance Act 2020. E-commerce supply or service was very widely defined to include “online sale of goods” and “online provision of services”. The new bill sought to provide an explanation to include any of the following activities for the transaction to be considered as the online sale of goods or online provision of services – acceptance of offer for sale, placing of a purchase order, acceptance of purchase order, payment of consideration, supply of goods or provision of services. Another amendment was also proposed to include consideration received or receivable from e-commerce supply or services irrespective of whether the e-commerce operator owns the goods.
The amendment is now being made to clarify that the equalisation levy would not be applicable on consideration of the sale of goods or services which are owned by persons resident in India or by a permanent establishment of a non-resident in India.
Incentives for affordable rental housing
The existing provision of the section 80-IBA of the Act provides that, the gross total income of an assessee includes any profits and gains derived from the business of developing and building affordable housing project, there shall, subject to certain conditions specified therein, be allowed a deduction of an amount equal to hundred percent of the profits and gains derived from such business. To help migrant labourers and to promote affordable rental, it is proposed to allow deduction under section 80-IBA of the Act also to such rental housing projects which are notified by the Central Government in the Official Gazette and fulfill such conditions as specified in the said notification.
Removing difficulties faced by taxpayers
To boost the demand in the real-estate sector and to enable the real-estate developers to liquidate their unsold inventory at a lower rate to home buyers, it is proposed to increase the safe harbour threshold from existing 10% to 20% under section 43CA of the Act, if the three conditions are satisfied.
Firstly, the transfer of residential unit takes place during the period from 12th November 2020 to 30th June, 2021
Secondly, the transfer is by way of first-time allotment of the residential unit to any person.
Thirdly, the consideration received or accruing because of such transfer does not exceed two crore rupees.
Computation Of Capital Gain In Case Of Slump Sale
In the case of slump sale transactions, under the existing provisions (section 50B), the actual consideration of the slump sale transaction is respected and considered as the full value of consideration for computing capital gains. In other words, there was no need for arriving at Fair Market Value (FMV) or requirement of a valuation exercise.
An amendment has now been made to provide that FMV of the undertaking/division on the date of transfer (to be determined based on the rules, which may be prescribed later) as a full value of consideration. Accordingly, FMV will have to be considered irrespective of the transaction value actually received by the seller. The seller would have to recompute capital gains based on FMV and would be liable to pay the taxes along with interest, as requisite advance tax would not have been paid by the taxpayer. While the government sticks to its promise of no retrospective changes, this clearly is a retroactive amendment which in essence does affect transactions that have taken place till March 23, 2021.
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