Professional Documents
Culture Documents
Submitted to :
Submitted by
Ramesh Sir
Pulkit Pareek
(Asst. Prof.)
B.A.LL.B(7th Sem)
1 | Page
CONTENTS
1.
2.
3.
4.
Contents
Acknowledgement
Introduction
Computation of capital Gain Full Value of Consideration
5.
6.
7.
8.
9.
Cost of Acquisition
Cost to the Previous Owner
Cost of Improvement
Rates of tax on capital gains
Deduction/ Exemption under Capital Gain
ACKNOWLEDGEMENT
2 | Page
I take immense pleasure in thanking Sir Ramesh wish to express my deep gratitude to him for his
insightful guidance which permitted me to carry out this work. My consult faculty has been a
source of inspiration and I am very thankful to him for his guidance which helps me in
completing this project.
Words are in adequate in offering my thanks to him for his encouragement and co-operation in
carrying out the report work last but not the least I would like to thank my friends.
INTRODUCTION
3 | Page
CAPITAL GAIN
1. Chargeability:
Capital gains shall be chargeable to tax if following conditions are satisfied:
a) There should be a capital asset. In other words, the asset transferred should be a capital asset on the
date of transfer;
b) It should be transferred by the taxpayer during the previous year;
c) There should be profits or gain as a result of transfer.
4 | Page
4. Period of Holding
The period of holding shall be determined as follows:
Different situations
6 | Page
time of partition of
family or under a
revocable
or
irrevocable trust or
under amalgamation,
etc.]
Allotment of shares in
amalgamated Indian
company
in
lieu
shares
held
in
amalgamating
company
Right shares
Right entitlement
Bonus shares
7 | Page
Section
Particulars
10 | P a g e
46(1)
47(i)
47(iii)
47(iv)
47(v)
47(vi)
47(via)
47(viaa)
47(vib)
47(vic)
47(vica)
47(vicb)
47(vid)
47(vii)
47(viia)
12 | P a g e
another non-resident
47(viib)
47(ix)
47(x)
47(xa)
47(xi)
47(xii)
47(xiii)
47(xiiia)
47(xiiib)
47(xiv)
47(xv)
47(xvi)
47(xvii)
14 | P a g e
Full
value
consideration
[Section 48]
of Full
value
consideration
Less: Cost
of
acquisition of asset
Less: Cost
improvement
[Section 50]*
of
Less: Expenditure
incurred wholly and
exclusively
in
connection
with
such transfer
of WDV of block
of asset at the
beginning
of
Less: Indexed Cost previous year
of acquisition (See
Note 1)
Add: Actual
cost of assets
Less: Indexed Cost falling
within
of
Improvement that
block
(See Note 1)
acquired during
the year
Less: Expenditure
incurred wholly and Less: Full value
exclusively
in of
connection
with consideration
such transfer
of
assets
15 | P a g e
transferred
during the year
Less:
Expenditure
incurred wholly
and exclusively
in connection
with
such
transfer
* Short-term capital gain or loss from sale of depreciable asset will arise only in the following
two situations:
a) When on last day of the previous year, WDV of the block of asset is nil; or
b) When on last day of the previous year, block ceases to exist.
Note 1: Indexed Cost of Acquisition and Improvement [Second Proviso to Section 48]
a) In case of transfer of long-term capital assets, indexed cost of acquisition and indexed cost of
improvement shall be deducted from the full value of consideration;
b) Indexed cost of acquisition and Indexed cost of improvement shall be computed with
reference to Cost Inflation Index (CII) in the following manner:
16 | P a g e
CII
for
the
Improvement
year
of
However, there are some cases where benefit of indexation is not available, which are as under:
Section
Capital Asset
Transferor
3rdProviso
to
Section48
112
50A
50B
Undertaking/division
Any person
transferred by way of slump
sale as covered by section
17 | P a g e
50B
115AB
115AC
115ACA
115AD
CII in relation to a previous year means such index, as Central Government notifies on year to
year basis.
The Central Government has notified the following Cost Inflation Indexes:
Financial
Year
CII
Financial
Year
CII
Financial
Year
CII
18 | P a g e
1981-82
100
1993-94
244
2005-06
497
1982-83
109
1994-95
259
2006-07
519
1983-84
116
1995-96
281
2007-08
551
1984-85
125
1996-97
305
2008-09
582
1985-86
133
1997-98
331
2009-10
632
1986-87
140
1998-99
351
2010-11
711
1987-88
150
1999-00
389
2011-12
785
1988-89
161
2000-01
406
2012-13
852
1989-90
172
2001-02
426
2013-14
939
1990-91
182
2002-03
447
2014-15
1024
1991-92
199
2003-04
463
19 | P a g e
1992-93
223
2004-05
480
20 | P a g e
* Average exchange rate means the average of the telegraphic transfer buying rate and
telegraphic transfer selling rate of the foreign currency initially utilised in the purchase of capital
asset.
** Buying rate is the telegraphic transfer buying rate of such currency.
S.
No.
Nature
of Section
transaction
Full
Value
Consideration
of
1.
Money
or 45(1A)
other
asset
received
under
any
insurance
from
an
insurer due to
damage
or
destruction of
a capital asset
2.
Conversion of 45(2)
capital asset
into stock-intrade
3.
Transfer
of 45(3)
capital asset
by a partner or
member
to
firm
or
AOP/BOI, as
the case may
be, as his
capital
contribution
4.
Distribution of 45(4)
capital asset
by Firm or
AOP/BOI to its
partners
or
members, as
the case may
be,
on
its
dissolution
5.
Money
or 46(2)
other assets
received
by
share- holders
at the time of
liquidation of
the company
22 | P a g e
6.
Buy-back
of 46A
shares
and
other specified
securities by a
company
Consideration paid by
company on buyback of
shares or other securities
would be deemed as full
value of consideration.
The difference between
the cost of acquisition
and buy-back price (full
value of consideration)
would be taxed as capital
gain in the hands of the
shareholder.
Note: if shares are not
listed on a recognized
stock
exchange,
domestic
companies
would liable to pay
additional tax at 20%
under section 115QA on
the distributed income
(i.e. buy-back price as
reduced by the amount
received by the company
for issue of such shares)
7.
Shares,
debentures,
warrants
(securities)
allotted by an
employer
to
an employee
under notified
Employees
Fourth
Proviso
toSection
48
23 | P a g e
Stock Option
Scheme and
such
securities are
gifted by the
concerned
employee to
any person
8.
In case of 50C
transfer
of
land
or
building,
if
sale
consideration
declared in the
conveyance
deed is less
than
the
stamp
duty
value
9.
If
50D
consideration
received
or
accruing as a
result
of
transfer of a
capital asset is
not
ascertainable
or cannot be
determined
24 | P a g e
S. Particulars
No
.
Notional Cost
Acquisition
of
1.
2.
Assets
received
by
a FMV of such asset on
shareholder on liquidation of the date of distribution
the company
of assets to the
shareholders
3.
Stock
or
shares
4.
5.
6.
Allotment of shares/securities
by a co. to its employees
under
ESOP
Scheme
approved by the Central
Government
a) If shares are
allotted during 19992000 or on or after
April 1, 2009, FMV of
securities on the date
of exercise of option
b) If shares are
allotted before April 1,
2007
(not
being
during
1999-2000),
the amount actually
paid to acquire the
securities
c) If shares are
allotted on or after
26 | P a g e
7.
8.
9.
Cost of acquisition of
shares in demerged
company ? Net book
value
of
assets
transferred
in
demerger ? Net worth
of
the
demerged
company immediately
before demerger
27 | P a g e
10
.
Cost of acquisition of
the assets to the
predecessor
private
company or unlisted
public company
Cost of acquisition of
the shares in the co.
immediately
before
conversion
12
.
13
.
28 | P a g e
14
.
such
15
.
Actual
cost
of
acquisitionminus exe
mption claimed under
these sections
16
.
a) If these assets
were acquired by gift,
will, etc., undersection
49(1) and
the
previous owner had
purchased
these
assets:
Cost
of
acquisition
to
the
previous owner
b) If the owner has
purchased
these
assets: Actual cost of
acquisition
c) If these assets are
self-generated: Nil
17
.
Right shares
29 | P a g e
18
.
19
.
Bonus shares
a) If allotted to the
assessee before April
1, 1981: Fair market
value on that date
b) In any
case: Nil
20
.
other
a) Cost of acquisition
of shares: Cost of
acquisition of original
membership of the
stock exchange
21
.
Cost of acquisition of
shares as referred to
in section 47(xvii)
[applicable from AY
2015-16]
22
.
a) If
it
became
property of taxpayer
before April 1, 1981
b) Cost of acquisition
of trading or clearing
rights of the stock
exchange: Nil
30 | P a g e
When a depreciable asset (which was subject to depreciation on straight line basis) of a power
generating units is sold, discarded, demolished or destroyed then terminal depreciation shall be
deductible from sale consideration while computing capital gains, or balancing charge is taxable
in the relevant year, as the case may be.
S.
No.
Particular
Cost of Improvement
1.
2.
3.
Any expenditure of
capital nature incurred
on or after 01-04-1981
by the assessee or the
previous owner
4.
Any expenditure of
capital nature incurred
by the assessee or the
previous owner
5.
Any expenditure of
capital nature incurred
by the assessee or the
previous owner
a) Short-term capital gains shall be included in the gross total income of the taxpayer and will be
taxed at the normal rates;
b) Short-term capital gains arising from transfer of Equity Shares, Units of an Equity Oriented
Funds or a unit of a business trust which is chargeable to securities transaction tax shall be taxed
at 15% under Section 111A;
2. Long Term Capital Gains
a) Long-term capital gains are subject to tax at 20%;
b) Long-term capital gains arising from transfer of listed securities, units or a zero coupon bonds
shall be taxable at lower of following:
i) 20% after taking benefit of indexation; or
ii) 10% without taking benefit of indexation.
c) Long-term capital gains arising to a non-residents or foreign company from transfer of
unlisted securities shall be taxed at without giving benefit for indexation;
d) Long-term capital gains arising from transfer of listed securities, units of equity oriented or a
unit of business trust which is chargeable to STT shall be exempt from tax under Section 10(38).
14. Reference to valuation officer [Section 55A]
With a view to ascertaining the fair market value of a capital asset, the concerned Assessing
Officer may refer the valuation of the capital asset to a Valuation Officer appointed by the
Income-tax Department in the following cases:
1) Where the value of the asset as claimed by the assessee is in accordance with the estimate
made by a registered valuer (who works in a private capacity under a licence issued by the Board
and his valuation is not binding on the Assessing Officer), but the Assessing Officer is of opinion
that the value so claimed is at variance with the fair market value of the asset;
35 | P a g e
2) Where the Assessing Officer is of opinion that the fair market value of the asset exceeds the
value of the asset by more than Rs. 25,000 or 15 per cent of the value claimed by the assessee,
whichever is less; or
3) Where the Assessing Officer is of opinion that, having regard to nature of an asset and
relevant circumstances, it is necessary to make a reference to the Valuation Officer
36 | P a g e
37 | P a g e
Parti
cular
s
Eligi
ble
taxp
ayer
s
Capit
al
gain
s
eligib
le for
exe
mpti
on
Capit
al
gain
s
arisi
ng
from
trans
fer of
Section 54
Secti
on
54B
Sectio
n 54D
Sectio
n
54EC
Individual
and HUF
Indivi
dual
and
HUF
Any
perso
n
Any
perso
n
Long-term
Shor
tterm
or
Long
-term
Shortterm
or
Longterm
Longterm
Agric
ultur
e
land
used
by
taxp
ayer
or by
his
pare
nts
or
HUF
for
agric
ultur
e
purp
oses
in
last
Comp
ulsory
acquis
ition of
land
or
buildin
g
formin
g part
of
industr
ial
undert
aking
(which
was
used
for
industr
ial
purpo
Residentia
l
House
property
Any
longterm
capital
asset
38 | P a g e
2
year
s
befor
e its
trans
fer
ses for
at
least 2
years
before
its
acquis
ition).
39 | P a g e
Asse
ts to
be
acqu
ired
for
exe
mpti
on
Time
limit
for
acqu
iring
the
new
asse
ts
Exe
mpti
on
Amo
unt
One
residential
house
property
Agric
ultur
al
land
(may
be in
urba
n
area
or
rural
area)
Land
or
buildin
g for
shiftin
g
or
reesta
blishin
g said
industr
ial
undert
aking
Bond
of
NHAI
or
REC,
etc.
Purchase:
within
1
year
before or
2
years
after date
of
transferCo
nstruction:
within
3
years after
date
of
transfer
Withi
n 2
year
s
after
date
of
trans
fer
Within
3
years
from
date
of
receipt
of
compe
nsatio
n
Within
6
month
s from
date
of
transf
er
Investmen
t in new
assets or
capital
gain,
whichever
is lower
Inve
stme
nt in
agric
ultur
al
land
or
capit
al
gain,
whic
Invest
ment
in new
assets
or
capital
gain,
which
ever is
lower
Invest
ment
in new
assets
or
capital
gains,
which
ever is
lower,
howev
er,
40 | P a g e
heve
r is
lowe
r
subjec
t
to
Rs. 50
lakhs
in
a
financi
al
year.
41 | P a g e
With
draw
al of
exe
mpti
on
Dep
osit
in
Capit
al
gain
s
depo
sit
sche
me
befor
e
due
date
unde
r
Sec.
139(
If
new
asset
is
transferre
d within 3
years of
its
acquisition
If
new
asse
t is
trans
ferre
d
withi
n 3
year
s of
its
acqu
isitio
n
If new
asset
is
transf
erred
within
3
years
of its
acquis
ition
If new
asset
is
transf
erred
or it is
conve
rted
into
mone
y or a
loan is
taken
on its
securit
ywithi
n
3
years
of its
acquis
ition
Yes
Yes
Yes
No
42 | P a g e
1)
43 | P a g e
Parti
cular
s
Eligi
ble
taxp
ayer
s
Capi
tal
gain
s
eligi
ble
for
exe
mpti
on
Capi
tal
gain
s
arisi
ng
from
trans
fer of
Section
54F
Secti
on
54G
Secti
on
54G
A
Section
54GB
Individual
and HUF
Any
pers
on
Any
pers
on
Individu
al
and
HUF
Long-term
Short
-term
or
Long
-term
Short
-term
or
Long
-term
Longterm
Any long
term
asset
(other
than
a
residential
house
property)
provided
on date of
transfer
taxpayer
does not
own more
than one
residential
house
property
(except
the new
Land
,
buildi
ng,
plant
or
mac
hiner
y, in
order
to
shift
indus
trial
unde
rtaki
ng
from
urba
n
Land
,
buildi
ng,
plant
or
mac
hiner
y, in
order
to
shift
indus
trial
unde
rtaki
ng
from
urba
n
Resident
ial
property
(house
or a plot
of land)
if
transfer
takes
place
between
01-042012 to
31-032017
44 | P a g e
house)
area
to
rural
area.
area
to
SEZ.
45 | P a g e
Asse
ts to
be
acqu
ired
for
exe
mpti
on
Time
limit
for
acqu
iring
the
new
asse
ts
One
residential
house
property
Land
,
buildi
ng,
plant
or
mac
hiner
y, in
order
to
shift
indus
trial
unde
rtaki
ng to
rural
area.
Land
,
buildi
ng,
plant
or
mac
hiner
y, in
order
to
shift
indus
trial
unde
rtaki
ng to
SEZ.
Subscrip
tion
in
equity
shares
in
an
eligible
compan
y.
The
eligible
compan
y should
utilize
this
amount
for
purchas
e of new
assets
(i.e.
plant
and
machine
ry
except
vehicle,
office
applianc
es, etc.)
Purchase:
within 1
year
before or
within 2
years
after date
of
transferC
onstructio
n: within 3
withi
n 1
year
befor
e or
3
year
s
after
date
of
Withi
n 1
year
befor
e or
withi
n 3
year
s
after
date
Investm
ent
by
the
Assesse
e
-Before
due date
for
furnishin
g
of
return
46 | P a g e
years
after date
of transfer
trans
fer
of
trans
fer
under
Sec.
139(1).I
nvestme
nt by the
compan
y
within 1
year
from
date of
subscrip
tion.
47 | P a g e
Exe
mpti
on
Amo
unt
With
draw
al of
exe
mpti
on
Investme
nt in new
assets X
capital
gain/net
considera
tion
1.
a)
If new
asset
is
transfe
rred
within
3
years
of
acquisi
tion,
2.
b)
if
anothe
r
reside
ntial
house
is
purcha
sed
within
2
years
of
Inves
tmen
t in
new
asset
s or
capit
al
gain,
whic
heve
r is
lower
Inves
tmen
t in
new
asset
s or
capit
al
gain,
whic
heve
r is
lower
If
new
asset
is
trans
ferre
d
withi
n 3
year
s of
acqui
sition
If
new
asset
is
trans
ferre
d
withi
n 3
year
s of
acqui
sition
Investm
ent
in
new
assets X
capital
gain/net
consider
ation
If equity
shares
in
compan
y or new
asset
acquired
by
compan
y is sold
or
transferr
ed within
a period
of
5
years
from
date of
acquisiti
on.
48 | P a g e
transfe
r
of
original
asset;
3.
c)
if
anothe
r
house
is
constr
ucted
within
3 years of
transfer of
original
asset
Yes
Yes
Yes
Yes
49 | P a g e