Union Budget: Personal income tax googlies you must watch out for

A. While calculating deduction from long term capital gains available on the purchase of new residential property, cost exceeding 10 crore will not be considered. The intention of this proposal was to limit deduction to 10 crore. Practically, taxpayers may find it difficult to claim deduction of 10 crore on the sale of capital assets other than property as the deduction in such cases is proportioned (cost of new property as a proportion of consideration from
sale of original capital asset).

B. Transfer, redemption or maturity of Market Linked Debentures (MLDs) which are currently being taxed as long-term capital gain (after holding period of 1 year) at the rate of 10% without indexation are proposed to be taxed as short-term capital gains at the applicable slab rates.

C. It is proposed that interest on housing loan which is claimed as a deduction while calculating income from house property or as a deduction from total income cannot be added to the cost of acquisition or improvement while
computing capital gains on the sale of such property. This is done to avoid double deduction of such interest.