Capital Gains Benefits to Entrepreneurs

Finance Minister, Nirmala Sitharaman announced an extension of benefits provided under Section 54GB of the Income Tax Act for a period of two years, wherein entrepreneurs who plan to sell their homes to fund their businesses will be shielded from paying tax on the gains made through the sale of the property. Also, the section has been made less stringent, making it relatively more relevant. Earlier, the norms prescribed that the individual had to hold a minimum of 50 percent of share capital in the start-ups and voting rights. The limits have now been brought down to 25 percent for both shareholdings as well as voting rights. Once the taxpayer took the benefit available under Section 54GB, he/she had to maintain the 50 percent shareholding for up to five years and was not allowed to transfer assets of the start-up during this period. Now, the entrepreneur is allowed to transfer the assets if they are computers or software in three years. In a start-up dealing with technology, five years is a long period. The amendments will enable an entrepreneur to monetize his business assets quickly. However, assets such as plants and machinery will still require to be held for five years.

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