The Finance (No. 2) Bill, 2024, introduced in the Lok Sabha, has accommodated certain amendments to the Income-tax Act, 1961, which were initially proposed, while also proposing significant amendments to the Customs Tariff Act, 1975, and various Finance Acts. These changes aim to streamline and standardize the application of the Customs Act of 1962 and the Central Excise Act of 1944 across different duties and taxes.

At the enactment stage of the Finance (2.0) Bill, 2024, there are two significant amendments with regard to Capital Gains.

Summary of Proposed Changes:

• A new proviso has been introduced in Section 112(1)(a) of the Act, which states that when a resident individual or HUF transfers a long-term capital asset, being land or building or both, which has been acquired prior to July 23, 2024, then the Capital Gains shall be computed in the following manner:

1. 1. Compute Capital Gains in accordance with the provision of the Act as they stood before amendments made by the Finance (No. 2) Bill, 2024
   2. Compute Capital Gains in accordance with the provision of Finance (No. 2) Bill, 2024.

If the Capital Gain tax computed in point (b), i.e., 12.5% without indexation is higher than the tax computed in point (a), i.e., 20% with indexation, then such excess tax amount shall be ignored for computing Capitan Gains Tax.

A similar benefit of indexation is not extended to Non-Resident Individuals.

The Capital Gains taxation provisions proposed by the Finance (2.0) Bill 2024 in respect of all other classes of assets remain unaffected

• The provision of Section 112(1)(c)(iii) of the Act have been amended to provide that Non-Residents will not be able to avail the benefit of indexation and foreign exchange fluctuation on the sale of unlisted securities or shares of closely held companies even post July 23, 2024 (indexation benefit was already removed under the Finance Bill initially in respect of transfer post-July 23, 2024). This appears to have been an oversight in the Finance Bill initially proposed as the benefit was removed for transactions prior to July 23, 2024, and now ensures indexation and foreign exchange fluctuation benefits not being available post-July 23, 2024, as well.

The proposed amendments to the Customs Tariff Act of 1975 involve changes to Sections 3, 8B, 9, and 9A. The amendments ensure that the provisions of the Customs Act, 1962, and all related rules and regulations apply to the duties or taxes under these sections in the same manner as they apply to duties levied under the Customs Act, 1962.

Summary of Proposed Changes:

Section 3(12)

Aligns the application of Customs Act provisions to the duties or taxes chargeable under this section.

Section 8B(9)

Ensures that the Customs Act provisions apply to the duties chargeable under this section.

Section 9(7A)

Specifies that the Customs Act provisions are applicable to the duties chargeable under this section.

Section 9A(8)

States that the Customs Act provisions apply to the duties chargeable under this section.

These amendments aim to standardize the application of Customs Act provisions across various sections of the Customs Tariff Act.

The bill also proposes changes across various sections of the Finance Acts to broaden the applicability of the provisions of the Central Excise Act of 1944 and the Customs Act of 1962.

Summary of Proposed Changes:

The amendments include a specific mention of the “date for determination of rate of duty” to ensure clarity and consistency in how the rate of duty is determined across different types of levies.

The term “all rules and regulations” is added to emphasize that every rule and regulation under the respective Acts applies to the specified duties and cesses, broadening the scope to cover any existing or future rules and regulations.

The language is standardized across different sections to ensure uniformity, including the addition of phrases like “including but not limited to” and listing relevant aspects such as assessment, non-levy, short-levy, refunds, exemptions, interest, recovery, appeals,  offences, and penalties.

Table Summarizing Proposed Changes Across Various Finance Acts:

These changes reflect a comprehensive effort to ensure consistency and clarity in the application of tax provisions, ultimately aiming for a more streamlined and efficient tax administration system.

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