Digital economy needs re-skilled workers

Q: Everybody is talking about the digital economy changing the way by which business will be done. Will this not result in unemployment, especially for unskilled workers in developing countries?

A: A well known international agency has recently surveyed 600 companies across all sectors and come to the conclusion that the digital economy has the potential to create 60-65 million new jobs by 2025. This will require workers to re-skill themselves to take advantage of the new opportunities. E-commerce portals and food delivery apps are examples of changes taking place in the digital world. The new digitising sectors are retail, logistics, education and agriculture.

Even sectors like construction and manufacturing are increasingly embracing digital technologies. This will have an impact on countries where mobile data users are increasing every year. In India, mobile data users consume on an average 8.3GB of data every month. Indians have 1.2 billion mobile phones and downloaded more than 12 billion apps in 2018. In fact, it was found that half of the total growth in mobile internet users has come from States in India which have individuals with lower than average incomes.

Q: I have a property in Nagpur which has appreciated in value as I have inherited it from my father. I would like to purchase two new residential houses so that my two sons can live after marriage in their own house. I want to know whether I can purchase two separate properties and get exemption of tax from capital gains. I want to complete the transaction in this financial year itself.

A: Under section 54 of the Income-tax Act, capital gains are exempt from tax provided the full amount is reinvested in purchasing one residential house in India within a period of two years from the date of selling the old house. Therefore, if two properties are purchased, the exemption is restricted to the capital gains invested in buying one house only. However, the law has been amended last month to permit investment of capital gains in two residential properties. This new law will apply only once in the lifetime of a tax payer, whereby he can invest the capital gains in two residential properties instead of one. Further, this benefit of investing in two properties is available only if the taxable capital gains made in one financial year are ?20 million or less.

Therefore, you will first have to compute your taxable capital gains when you sell the property in Nagpur. If after claiming the benefit of indexation, after determining the fair market value of the house on April 1, 2001, the taxable capital gains are within the limit of ?20 million, you can purchase two residential houses within the stipulated period of time. If the taxable capital gains exceed ?20 million, you will be able to claim exemption in respect of capital gains invested in only one residential house.

Q: About two years ago I had signed an agreement with a builder for purchase of an apartment which is still not ready despite his commitment that he would give possession by February this year. Under the agreement, I am liable to pay him interest at the rate of 18 per cent per annum for any delay in the payment of installments. However, if he delays in giving possession after the stipulated date, he is liable to pay interest at the rate of only six per cent to compensate for the delay. I have refused to pay him the balance amount due in view of his default, for which he is charging me 18 per cent interest. Am I bound to pay this?

A: The Supreme Court of India has recently held on similar facts that one-sided and unfair agreements between a builder and a house buyer are not enforceable. The court has expressly held that the terms of a contract are not binding where the contract is one-sided and the purchaser has to sign on the dotted line of the contract drafted by the builder. The court further held that if the buyer so wishes he may refuse to take possession of the flat which is handed over at a later date and the builder would have to pay interest on the amount paid by the buyer at the same rate of 18 per cent. In short, the builder cannot get away by paying the lower rate of interest of six per cent, which was stipulated in the contract.

If the buyer agrees to take possession of the apartment after the date promised by the builder, the buyer would be entitled to suitable compensation from the builder for such delay. It may be noted that in some cases the delay in giving possession may be disastrous for the buyer because he may lose the capital gains tax exemption which requires him to acquire the new residential accommodation within two years from the date of sale of the old one.

The writer is a practicing lawyer specialising in tax and exchange management laws of India.