Budget Changes: Section 50C and 45CA tolerance band extended to 10% from 5%

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a) Nirmala Sitharam, the Finance Minister of India presented the Union Budget for the Financial year 2020-21 wherein the budget proposed the extension from 5% to 10% under Section 50C and 45CA. Section 45CA and 50C under Income Tax covers the provisions pertaining to the income which is the result of capital gains, any real estate transaction and profit from any business.

b) Section 45CA and 50C also cover that if in case the consideration value does not exceed the circle rate by 5% then the difference can be accounted as income in the hands of both the buyer as well as sellers.

c) The objective of the Union Government behind the extension from 5% to 10% under Section 45CA and 50C is to ease the real estate transactions. Further, in the cases with pertains to the Employees those who possess the Employees Stock Option Plans (ESOP) and start-ups as per the Union Budget 2020 may differ in paying the taxes up to 5 years which will be from the time of exercise to the time of leaving the start-up or until they sell the shares possessed by them, amongst both these events whichever takes place earlier will be considered.

d) The budget also elaborated in the cases wherein the turn-over of the start-ups is up to Rs. 25 Crores then, in that case, the start-ups are permitted to deduct 100% of its profit for 3 years of seven years which are the continuous assessment years, now this limit of  Rs. 25 Crores is increased to Rs. 100 Crores and the time period have now been increased from 7 years to 10 years.

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