CBDT allows Exemption under section 56(2)(x) to Resident of Unauthorised Colony [Read Notification]

The Central Board of Direct Taxes (CBDT) has notified a new Rule 11UAC in the Income Tax Rules, 1962 which provided that provisions of Section 56(2)(x) of the Income Tax Act shall not be applicable to any immovable property received by a resident of the unauthorized colony.

The Newly inserted Rule 11UAC reads that, “The provisions of clause (x) of sub-section (2) ofsection56 shall not apply to any immovable property, being land or building or both, received by a resident of an unauthorised colony in the National Capital Territory of Delhi, where the Central Government by notification in the Official Gazette, regularised the transactions of such immovable property based on the latest Power of Attorney, Agreement to Sale, Will, possession letter and other documents including documents evidencing payment of consideration for conferring or recognising right of ownership or transfer or mortgage in regard to such immovable property in favour of such resident”.

Section 56(2)(x) of the Income Tax Act, 1961 provides that where any person “receives” any specified “property” (which includes shares and securities without consideration or for a consideration which is less than its fair market value, as determined in accordance with the applicable rules, then, the Tax FMV (where the property is received without consideration) or the excess of the Tax FMV over the consideration paid would be subject to tax in the hands of the recipient of “property” as “income from other sources”.

The Newly inserted rule will be applicable from April 1^st, 2020.