7.

1 CAPITAL GAIN

CAPITAL GAIN {Sec 45-55A}

Sections PHASE - I Sections PHASE – II

45(1) Charging Sections 45(1A) Destroyed-Insurance
Compensations
2(14) Capital Assets Means 45(2) Conversion of Capital assets into
SIT
2(47) Transfer Means 45(3) Admission of Partner
48 How to Compute Capital Gain 45(4) Dissolutions of Firm
2(42A) Meaning of Short Term Capital Gain 45(5) Compulsory Acquisitions
2(29A) Meaning of Long Term Capital Gain 10(37) Compulsory Acquisitions of
Urban Agricultural Land
1st Proviso NRI-Foreign Money-Shares/Debentures 46(1)/(2 Company on Liquidations
2nd Proviso Any LTCG: Indexations benefit available 46A Buy Back of – Listed Shares
3rd Proviso No Indexations when 112A apply 115QA/ Buy Back of – Unlisted Shares
4rd Proviso No Indexations on bond or debenture 10(34A)
5th proviso Rupee appreciated bonds 55A Reference to Valuations officer
7th Proviso Equity Shares- STT- Not allowed PHASE –III
- Meaning of Sale Considerations (Investment - Exemptions)
- Meaning of Transfer Expenses 54 RHP Sold – RHP Buy
55(1) Cost of Improvement 54B Urban Agricultural Land Sold -
Any Agricultural Land Buy
55(2) Cost of Acquisitions 54D Transfer of Land & Building for
Industrial Undertaking
50C Sale considerations in case of Land & 54EC Transfer of Any LTCA
Building
51 Treatment of Advance Money Forfeited 54F Transfer of Any LTCA – Buy RHP
10(38) Equity Shares-LTCG-STT-Exempt 54G Transfer of P/M or L/B used for
Industrial u/t in Urban Area
111A Equity Shares-STCG-STT-15% 54GA Transfer of P/M or L/B used for
industrial u/t in SEZ
112 Long Term Capital Gain to Assessee- 54GB Transfer of Residential Property
20% if invested a new manufacturing
SME Co.
112 Option on Security: 54H In case of Compulsory
Proviso a. Without Indexations:10% Acquisition -Investment time
b.With Indexations:20% limit start from Receipts
PHASE –IV
47 Transaction not regarded transfer
49(1) Cost of Previous Owner
47A Withdrawal of Exemptions
Exp 2(42A) Period to be included in computations of Capital Gain
-------------------------------------------------------------------------------------------

1. GENERAL CHARGEABILITY [SEC 45(1)]

Any PROFIT OR GAINS arising from

The TRANSFER of CAPITAL ASSETS
Shall be chargeable to Income under CAPITAL GAIN HEAD and
Shall be DEEMED TO BE INCOME OF P/Y in which the Transfer
took place

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.2 CAPITAL GAIN

Exceptions: In following case Tax will be levy in the year of RECEIPT:

45(1A) Destroyed-Insurance Compensations
45(2) Conversion of Capital assets into SIT
45(5) Compulsory Acquisitions
45(5A) Joint Development Agreement [JDA]
46(2) Company on Liquidations
-----------------------------------------------------------------------------------------------------

ASSETS

NO CAPITAL ASSETS CAPITAL ASSETS {SEC 2 (14)}

No Capital Gain No Transfer {(Sec 2(47)} Transfer {(Sec 2(47)}

Transfer Cover u/s 47 Transfer Not Cover u/s 47

CG will be levy in year of Transfer

--------------------------------------------------------
Exceptions: Sec 45(1A), 45(2), 45(5), 46(2)
---------------------------------------------------------------------------------------------------------------

2. CAPITAL ASSETS MEANS [SEC 2(14)]

CAPITAL ASSETS MEANS:

CAPITAL ASSETS NOT INCLUDE:
 Property of ANY KIND held by Assesses
 STOCK IN TRADE [O/T securities held
✓ Whether or not connected with B&P.
by FII)
✓ Whether Movable or Immovable or
 PERSONAL EFFECT: PE means
Tangible or Intangible.
✓ Any MOVABLE PROPERTY
✓ Held for PERSONAL USE of
 ANY SECURITIES held by Foreign
✓ Assessee or any dependent member
Institutional Investors (FII) (which has
invested in securities as per SEBI guidelines)
-------------------------------------------------
Following are not personal effect & CG
will be levy:
1. Jewellery
2. Archaeological Collections
3. Drawings
4. Painting
5. Any Art Work
6. Sculptures {ewfrZ}
-------------------------------------------------
 RURAL AGRICULTURAL LAND in India
 GOLD DEPOSIT BONDS, 1999

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.3 CAPITAL GAIN

3. TRANSFER MEANS [Sec 2(47)]

SALE EXCHANGE Relinquishment {R;kxuk} Extinguishment {Destroyed)

COMPULSORY CONVERSION OF REDEMPTIONS OF

ACQUISITIONS UNDER CAPITAL ASSETS INTO ZERO COUPON BONDS
ANY LAW STOCK IN TRADE

Any transaction involving the allowing of the Allotment or lease under a house building
possession in part performance of scheme of society, Co or other association
Contract –53A
-------------------------------------------------------------------------------------
CASE LAWS
 Redemptions of Preference shares : is transfer
 TV, Car, Mobile used for personal purpose is not capital assets.
------------------------------------------------------------------ ------------------
MEANING OF FOLLOWING TERMS:

1. JEWELLERY: includes anything made of Gold, Silver, Platinum or

other Platinum or Precious Metals. Further it’s including Precious or
semi-precious stones:
❖ Whether or not set in any furniture, utensil or other article or
❖ Whether or not worked or sewn into any wearing apparel;
--------------------------------------------------------------------------------------

2. DEFINITIONS OF AGRICULTURAL LAND: Urban Agricultural land

Means land situated in India:

 In Area within limit of Municipality & which has population > 10,000
OR
 If land situated in below area Measured Aerially will be urban land:

Shortest Aerial distance from Populations as per last preceding

Local limits of Municipality census
< 2 kilometers ➢ 10,000 < 1,00,000
< 6 kilometers ➢ 1,00,000 < 10,00,000
< 8 kilometers ➢ 10,00,000
Ex 1:
LAND SITUATED IN: POPULATIONS IS Nature
Jaipur Municipal Limit 8,000 Rural
2 Kilometers 90,000 Urban
2 Kilometers 1,90,000 Urban
3 Kilometers 90,000 Rural
7 Kilometers 9,00,000 Rural
7 Kilometers 19,00,000 Urban
-------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
7.4 CAPITAL GAIN

4. METHOD OF COMPUTATIONS OF CAPITAL GAIN [SC 48]

CAPITAL GAIN shall be computed as under:

--------------------------------------------------------------------------------------
COMPUTATIONS OF SHORT TERM CAPITAL GAIN
--------------------------------------------------------------------------------------
CONSIDERATIONS RECEIVED OR RECEIVABLE XXXXX
LESS: EXPENSES ON TRANSFER XXXXX
--------
NET CONSIDERATIONS XXXX

LESS: COST OF ACQUISITIONS XXX

LESS: COST OF IMPROVEMENT XXX
---------
SHORT TERM CAPITAL GAIN BEFORE EXEMPTIONS XXXX
LESS: EXEMPTIONS U/S 54B, 54D, 54G, 54GA XXXX
--------
TAXABLE STCG XXXXX
--------------------------------------------------------------------------------------

2nd PROVISO TO SEC 48

IF there is a transfer of LTCA, then LTCG shall be computed as under
after allowing indexations:
--------------------------------------------------------------------------------------
Note: The word Cost of Acquisitions or Cost of improvement will
substitute with INDEX Cost of Acquisition or INDEX cost of
improvement.
--------------------------------------------------------------------------------------

A. COST OF ACQUISITIONS MEANS:

CII for the year in which Assets is Transferred

COA x ------------------------------------------------------------------
CII for the 1st Year in which Assessee held the Assets
---------------------------------------------------------------------------------------
Dispute: A per Bombay HC CII shall be taken from the year when the
asset was first held by PREVIOUS OWNER [Manjula J. Shah (Bom.)]
---------------------------------------------------------------------------------------

B. INDEX COST OF IMPROVEMENT MEANS:

CII for the year in which Assets is Transferred

COI x ---------------------------------------------------------------------
CII for the Year in which the improvement took place.

---------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.5 CAPITAL GAIN

3rd PROVISO TO SEC 48

1st and 2nd Proviso of Sec 48 shall not apply for computations of
LTCG in case of Equity shares or Unit of Equity oriented fund or unit of
Business Trust referred u/s 112A.

Means when 112A apply then Indexations benefit not available.

----------------------------------------------------------------------------------------

4TH PROVISO TO SEC 48

 3RD PROVISO OF 48: In case LTCG arise on transfer of Bond or

debenture, then no indexations benefit available. Except:
✓ Capital Index Bond issued by Government.
✓ Sovereign Gold Bond issued by RBI under Sovereign Gold Bond
scheme,2015
--------------------------------------------------------------------------------------
KEY NOTES ON SOVEREIGN GOLD BOND:

a. No capital gain arising in hands of individual in case of redemptions

of Sovereign Gold Bond. { i.e. gain arising after maturity}

b. Further Interest received on this bond 100% Exempt [i.e. Interest on

Gold Monetization bonds.
--------------------------------------------------------------------------------------

7TH PROVISO TO SEC 48

SECURITIES TRANSACTIONS (STT) PAID will not add in COA and

will not reduce from Sale considerations.
--------------------------------------------------------------------------------------
However shares held as Stock in trade and then income will be
taxable under PGBP. If income is taxable under PGBP then such STT
will be allowed while computing PGBP income {Sec 36}
--------------------------------------------------------------------------------------

6. MEANING OF SHORT TERM CAPITAL ASSETS [SEC 2(42A)]

Nature of Assets Period of Holding Nature of Capital Gain

Listed Shares Upto 12 months Short term
Unlisted Shares { FA 2016} Upto 24 months Short term
Listed Debenture/Bond Upto 12 months Short term
Unlisted Debenture /Bond Upto 36 months Short term
Zero Coupon Bond Upto 12 months Short term
Units Of UTI or Equity oriented fund Upto 12 months Short term
Units Except UTI and Equity oriented fund Upto 36 months Short term
Land, Building etc. {By FA 2017} Upto 24 months Short term
Any assets other than above – Gold, land, Upto 36 months Short term
Building etc.

Period exceed above will call Long Term Capital Gain

------------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.6 CAPITAL GAIN

COST INFLATION INDEX [CII]

FY CII FY CII FY CII

2001-02 100 2008-09 137 2015-16 254
2002-03 105 2009-10 148 2016-17 264
2003-04 109 2010-11 167 2017-18 272
2004-05 113 2011-12 184 2018-19 280
2005-06 117 2012-13 200 2019-20 289
2006-07 122 2013-14 220 2020-21 301
2007-08 129 2014-15 240
------------------------------------------------------------------------------------

MEANING OF TERMS FOR KNOWLEDGE PURPOSE

A. SALE CONSIDERATIONS: Sale value will be sale considerations,

whether it is less than FMV or more than FMV. Except: (1) Land
& Building refer u/s 50C
B. TRANSFER EXPENSES: Expenses related to transfer will reduce from
Sale considerations EXCEPT
(1) STT Paid on Equity shares or
(2) Expenses allowed under any other head.
--------------------------------------------------------------------------------
9. COST OF IMPROVEMENT & COST OF ACQUISITIONS [SEC 55]

COST OF IMPROVEMENT [Sec 55(1)] COST OF ACQUISITIONS [Sec 55(2)]

If Incurred Before 1/4/01 By Assessee or If Incurred Before 1/4/01 By Assessee or

Previous Owner: Previous Owner:

ALWAYS IGNORE ALWAYS TAKE COST HIGHER OF FOLLOWING:

▪ COST OF ACQUISITIONS OR
▪ FMV OF 1/4/01

SUCH CHOICE NOT AVAILABLE ON BELOW 3 ASSETS:

▪ Depreciable assets
▪ Self generated assets (other than bonus shares)
▪ Stock Membership Card
-------------------------------------------------------------------------------------
Note: In case of capital assets being land or building the FMV of
such assets as on 01-4-20 shall not exceeds the Stamp duty
value, wherever available of such assets as on 1st day of April,
2001. {Inserted by FA 2020}

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.7 CAPITAL GAIN

Nature of assets Indexations benefit Option to take

FMV 01-04-01
Bonds or Debenture
Capital Index Bond
Shares or Units
Self generated assets
Any other capital assets
--------------------------------------------------------------------------------

D. COST OF ACQUISITIONS [SEC 55(2)]

For computing Cost of Assets, we will divide assets in 3 parts: [A]

A. Self Generated Assets
B. Bonus Shares
C. Right Shares
D. Stock Exchange Membership Card {Demoralizations}
C. Any other assets other than above
--------------------------------------------------------------------------------------
A. SELF GENERATED ASSETS:

SELF GENERATED ASSETS MEANS: COST OF ACQUISITIONS

▪ Goodwill of Bussiness {Not Profession}
▪ Tenancy Right
▪ Stage Carriage Permits Self Generated Nil
▪ Loom Hours
▪ Right to manufacture of any article
▪ Trade Mark or Brand name
▪ Right to Carry any Business or Acquire Purchase Price
Professions
-------------------------------------------------------------------------------------
IMPORTANT POINTS:
1 COA of Other Self Generated As per [SC], Cost is indeterminate. Therefore no capital
(Assets not cover Above) gain shall arise. E.g. Sale Goodwill of Profession.
2 Choice to Take FMV as of 01-04-01 ▪ Not Available.
▪ Whether Acquired or self generated
---------------------------------------------------------------------------------------

B. BONUS SHARES:

RECEIVED BEFORE 01-04-01 RECEIVED AFTER 01-04-01

FMV as of 01-04-01 NIL

---------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.8 CAPITAL GAIN

C. RIGHT SHARES:

ASSESSEE HIMSELF ACQUIRE RIGHT ASSESSEE SELLS THE RIGHT OFFER

SHARES (Means renounce in favour of other person)

ACQUIRE BEFORE ACQUIRE AFTER COST OF SELLER

01-04-01 01-04-01 OF RIGHT: NIL

HIGHER OF Following: Purchase Price COST OF Amount paid to

▪ Cost of acquisitions PURCHASER OF Seller of Right
Or RIGHT +
▪ FMV 01-04-01 Amount paid to
Company
---------------------------------------------------------------------------------------
Note: If Assessee has options to buy right shares, but he sell his right
(renounce in favor of other), Then CG will levy in hands of Seller of
right. COA will be nil in his hands and nature of CG will be STCG.
---------------------------------------------------------------------------------------
[D] ANY OTHER CASE:

Assets acquire BEFORE 01-04-01 Assets acquired ON OR AFTER

01-04-01
COA or FMV on 01-04-01(Higher) Purchase Price
--------------------------------------------------------------------------------------
Note: In case of capital assets being land or building the FMV of
such assets as on 01-4-20 shall not exceeds the Stamp duty
value, wherever available of such assets as on 1st day of April,
2001. {Inserted by FA 2020}
-------------------------------------------------------------------------------------

C. COST OF IMPROVEMENT [SEC 55(1)

COI incurred before 01-04-01 by COI incurred on or after 01-04-01

Assessee or Previous owner on On Below Three assets Any other case
ANY Assets
Completely Ignore (No benefit in 1. Business Goodwill Actual exp.
Income tax) 2. Right to Carry Incurred
Business
3. Right to manufacturing
Tax treatment: COI will be
NIL in above 3 case
-------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.9 CAPITAL GAIN

10. THERE CAN BE BELOW 5 SITUATIONS

Situations 1 Assessee Acquire Assets After 01-04-01
Situations 2 Assessee Acquire Assets Before 01-04-01
Situations 3 Previous Owner Acquire Assets After 01-04-01 & Same Is Transferred To
Assessee After 01-04-01
Situations 4 Previous Owner Acquire Assets Before 01-04-01 & Same Is Transferred To
Assessee After 01-04-01
Situations 5 Previous Owner Acquire Assets Before 01-04-01 & Same Is Transferred To
Assessee Before 01-04-01
--------------------------------------------------------------------------------------

12. SALE CONSIDERATIONS IN SPECIAL CASES [SEC 50C]

(1) APPLICABLE: Only for LAND OR BUILDING OR BOTH

SALE CONSIDERATIONS: Will be HIGHER of following:

o Amount received or
o Value assessed or assessable by Stamp Valuation Authority (SVA)

---------------------------------------------------------------------------------
Note: Where SDV does not more than 110% of considerations,
then sale considerations shall be treated full value of
considerations. { Means as per FA 2020 10% variance allowed}
---------------------------------------------------------------------------------

(2) IF ASSESSEE CLAIM that the value assessed by SVA > the FMV
of the property AND value so assessed by SVA is not disputed (i.e.
challenged) in any Court.

Then A.O may refer the case to a Valuations officer for valuation
of the capital Assets

(3) IF AO REFER MATTER TO VALUATION OFFICER and

Valuation officer Value is Then Sale considerations will be
▪ Less than Assessee value Assessee Value
▪ Greater Than SVA Value Stamp Valuation Authority (SVA)
▪ Greater than Assessee Value Valuation Officer Value
But Less than SVA Value
----------------------------------------------------------------------------------
Ex 6.1: Mr. X had purchased a land on 15-08-96 for Rs. 800000. The said
Land is sold on 02-03-06. Mr. X declared sale consideration of
Rs. 15, 00,000 & whereas value assessed by SVA is 18 Lakh.

Mr. X claimed that FMV of assets is less than from value assessed
by SVA and he has not appealed in any manner against the order
of SVA. Hence AO refers the valuation to Valuation officer as per
provision of 50(2) and he ascertains the value of land as:-

Case I: 16 lakhs Case II: 20 lakhs Case III: 12 lakhs

16,00,000 18,00,000 15,00,000

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.10 CAPITAL GAIN

Ex. 6.2: Mr. A sold a house to his Friend Mr. Y on 30-07-14 for
considerations Rs. 25 lakhs. The Registrar refused this value and
fixed Stamp value Rs. 45 lakhs. Mr. A preferred appeal to Court
and Court decided the House Value Rs. 35 lakhs (22 lakhs for Land
& 13 lakhs for Building).
Mr. A purchased this land on 02-06-06 for Rs. 5, 19,000 &
Completed house on 02-10-12 For Rs. 14 lakhs. Compute Capital
Gain For PY 14-15?

Particulars Land Building

Holding Period 02-06-06 to 30-07-14 01-10-12 to 30-07-14
Sale Considerations 22,00,000 13,00,000
Less: COA of Building - 14,00,000
Less: ICOA of Land: -
= [5,19,000 x
Long Term Capital Gain (1,00,000)
Short Term Capital Loss
Taxable Capital Gain 10.76,000
------------------------------------------------------------------------------------
Property constructed on a land purchased earlier: if land is held by
Assessee more than 24 months and building constructed over it is held
for not more than 24 months, in that case, the gain arising from sale of
Land would be LTCG & gain arising from sale of Building shall be
STCG. [Bombay High Court]
------------------------------------------------------------------------------------

STAMP DUTY WILL BE TAKEN ON DATE OF AGREEMENT

[SEC 50C]
FA 2016 Where on date of agreement & Date of registrations, Stamp Duty are
Amendments not same, the SVA on date of agreement may be taken for purpose of
computing the full value of considerations if following conditions are
satisfied:
❖ The FULL OR PART amount of considerations has received by
account payee cheque or draft or by Electronic Clearing system
through Bank.
❖ Such consideration has been paid on or before the date of
agreement for transfer of such immovable property.
--------------------------------------------------------------------------------------
This amendment brings parity in tax treatment under S: 43CA & 50C.
--------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.11 CAPITAL GAIN

13. TREATMENT OF ADVANCE MONEY RECEIVED [SEC 51]

EARLIER: IF ADVANCE MONEY FORFEITED NOW: IF ADVANCE MONEY

UPTO 31-03-14
❖ There was no tax treatment AT TIME OF
FORFEITED the same
❖ However when assets actually sold then same
is reduced from COA, FMV or WDV
❖ If it is forfeited by Previous Owner, then there
will be NO TAX TREATMENT IN HANDS OF
PO AS WELL ASSESSEE.
❖ If advance money forfeited is more than COA,
then there will be no tax treatment. Means we
don’t reduce it from COI.
❖ If advance money forfeited on or before
31-03-14, then still above treatment will do
--------------------------------------------------------------------------------------
FORFEITED ON OR AFTER 01-04-14
• Any advance money forfeited on or after
01-04-14, it will treated the income and
same will be taxable under head of other
source & SHALL NOT REDUCE FROM
COA
• Definitions of Sec 2(24) amended.
Advance money will be treated income of
Assessee in the year of forfeited under
head of IFOS

14. CAPITAL GAIN ON EQUITY SHARES ON WHICH STT LEVY [Sec 10(38)/111A

Applicable ALL ASSESSEE

Nature of ✓ Capital gain arising on Transfer of
Assets ✓ EQUITY SHARES of Company (not preference shares) or
✓ A UNIT OF AN EQUITY ORIENTED FUND
✓ UNIT OF BUSINESS TRUST
Conditions STT LEVY AT THE TIME OF TRANSFER

TYPE OF GAIN

LTCG STCG

112A – 10 % Tax Rate 15% - 111A

% TAX STRUCTURE
S. Nature of Income Tax Rates
1 Income From Salary Slab Rate
2 Income from House property Slab Rate
3 Income from Business & Professions Slab Rate
4 ANY LTCG on any Assets - Sec 112 apply Special Rate @ 20%
5 ANY STCG on any Assets [other than Equity Shares on Slab Rate
which STT levy].
6 STCG on Equity shares [no STT Levy] – Sec 111 A apply Special Rate @ 15%
7 Income from other source [other than casual income] Slab Rate
8 Casual income [Sec 115BB] Special Rate @ 30%
----------------------------------------------------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.12 CAPITAL GAIN

SPECIAL PROVISION REGARDING LONG TERM CAPITAL GAIN ON

LISTED SECURITIES [ Sec 112 v/s Proviso of Sec 112]

 As per Sec 112 – Tax rate on any long term capital will be 20%. However
Due to proviso of Sec 112 - in case of LTCG on listed securities then
there is following choice for Assessee:

If Assessee wants to Take benefit of If Assessee does not wants to Take

Indexations then Sec 112 apply benefit of Indexations then Proviso
of Sec 112 apply
In this case after indexations tax rate In this case Tax rate will be 10%.
will be 20%
1.We can say in case of LISTED SECURITIES [Shares, Debenture, bonds],
Assessee has following choice.
(a) If Take benefit of indexations : Then Tax rate will be 20%
(b) If not take benefit of indexations : Then tax rate will be 10%
2. Proviso of Sec 112 apply only on listed securities – on other assets only sec
112 apply.
-------------------------------------------------------------------------------------------
TAX ON LTCG ON CERTAIN ASSETS [SEC 112A]

✓ LTCG on transfer of
• Equity shares or
• Equity oriented fund or
• Unit of business trust
✓ In excess of Rs. 1,00,000 shall be taxable @ 10% if the
✓ STT paid on Acquisitions & transfer of equity shares
----------------------------------------------------------------------------------
Analysis
1. Deductions under chapter VIA is not allowed against capital gain
referred u/s 112A
2. Rebate u/s 87A is not available against LTCG taxable u/s 112A
3. If any equity shares acquired on or after 01-10-04, then
benefit of Sec 112A 111A available if STT levy at the of
purchase as well as sale.
However there is no condition of STT levy at time of
purchase, if:
o Shares acquire by way of IPO, FPO, Right shares or
bonus shares or
o Shares acquire before 01-10-04.
-----------------------------------------------------------------------------------
COST OF ACQUISITIONS WHERE SHARES ACQUIRED BEFORE
01-02-18

In case of equity shares referred u/s 112A acquired before 01-02-

18, COA shall be:
HIGHER OF STEP 1 & 2
STEP 1: Cost of Acquisitions +++++
STEP 2: Lower of HIGHER
• FMV as on 31-03-18 ++++
Lower
• Sale value ++++ +++++
------------------------------------------------------------------------------------
CA SACHIN AJMERA CLASSES
` M: 99502-90358, 810760-26660
`
 7.13 CAPITAL GAIN

EXAMPLE OF SEC 112A

Case I II III IV V
Cost of acquisitions on 16-09-17 410 710 900 800 30
FMV as on 31-01-18 730 780 300 1000 100
Selling price on 10-10-18 760 650 910 825 400

Computations of Capital gain:

Case I II III IV V
Sale considerations 760 650 910 825 400
Transfer expenses - - - - -
Net considerations 760 650 910 825 400
COA 730 710 900 825 100
LTCG u/s 112A 30 (60) 10 - 300
Note: Loss of Rs. 60 lakh can be set off with any other LTCG.
-----------------------------------------------------------------------------------

QUESTIONS FOR YOUR PRACTICE:

Q.1 Which are capital assets:

1. Stock in Trade
2. Urban agricultural land in India
3. Zero coupon bond
4. AC, TV, Cloth at home
5. Drawing, painting, art work and gold
6. Debenture
7 Land
8 Car, TV, AC in office
9 Equity & preference shares
10 Units of mutual funds

Q.2 On which assets index benefit [ICOA] will available in case Long Term
Capital assets
1 Equity and preference shares
2 Land & building
3 Debenture & Bonds
4 Capital Index bonds
5 Sovereign Gold Bond issued by RBI in 2015
6 Loom hours, patent, Tenancy right
----------------------------------------------------------------------------------------

Q.3 Mr. A purchased a building of Rs. 2, 00,000 as on 01-11-04. He

incurred cost of improvement in following months:
01-09-2011 - Rs. 4, 00,000
15-12-2016 - Rs. 2, 00, 000

He also incurred Rs. 40,000 as a repair of house as on 01-01-10. As on

01-11-17, he sold this house for Rs. 80, 00,000 and paid brokerage 1%
of Sale value. Stamp value authority value of this building was Rs. 70,
00,000 on date of sale. Compute the capital gain for PY 17-18 [AY18-
19] assuming that FMV of building as on 01-04-01 is Rs. 6, 00,000.
CA SACHIN AJMERA CLASSES
` M: 99502-90358, 810760-26660
`
7.14 CAPITAL GAIN

Q.4 Mr. B purchased a Land of Rs. 4, 00,000 as on 01-11-94. He incurred

cost of improvement in following months:
01-09-1997 - Rs. 2, 50,000
15-12-2011 - Rs. 2, 00,000

During 01-11-94 to 30-05-17, he sold the assets to many party and

received advance money from them, but sale agreement conditions not
fulfilled and due to this Mr. B forfeited the amount which details are as
under:
01-09-1997 - Rs. 1, 00,000
15-12-2011 - Rs. 2, 00,000
10-05-2015 - Rs. 50,000

Finally he sold this house to Mr. C as on 12-12-20 for Rs. 90, 00,000
& paid 1% brokerage. However SVA value is Rs. 95, 00,000. Compute
the capital gain assuming that FMV as on 01-04-2001 is Rs. 6,
00,000.

Q.5 What will be your answer of Q.4, if value of forfeited amount is 7,

00,000 instead of Rs. 2,00,000 of 15-12-11?

Q.6 Mr. A purchased Debenture of Rs. 2, 00,000 as on 11-04-99. FMV of

Debenture was Rs. 4, 00,000 as on 01-04-01. These debenture sold
by him as on 11-12-20 for Rs. 75, 00,000.

Q.7 Mr. Z purchased a Routes permits on 02-01-99 for Rs. 1 lakhs. The
same are sold by him on 03-01-20 for Rs. 5, 20,000. FMV was
4,00,000 as on 01-04-01.

Q.8 Mr. A purchased a Tenancy Rights on 02.01.1998 for Rs. 2 Lakhs.

The same was sold by him 03-01-17 for Rs. 37 lakhs. FMV of Tenancy
Rights as on 01-04-01 = Rs. 5 lakhs

Q.9 Mr. Suresh was awarded Route permits between Jaipur to Delhi on
basis of his performance on 05.01.2000. He sells the same on 02-01-
17 for Rs. 6 lakhs. He claims that no capital gains are taxable since
COA is indeterminate. FMV of Route permit was Rs. 4,00,000 as on
01-04-01.

Q.10 Mr. Amit became a tenant in a property on 04.04.78. He did not pay
anything to acquire such tenancy rights. Since 1978 he is paying a
monthly rent of Rs. 1000. On 02-01-18, he vacates the tenanted
premises and received Rs. 20 lakhs from landlord for vacating the
premises. You are given that FMV of tenancy rights as on 01-04-01
was Rs. 5 lakhs.
-------------------------------------------------------------------------------------

Q.11 Mr. A has purchased 100 shares of A ltd on 02-Jan-02 @ 50 per

shares. The Co Announced a rights issue in the ratio of 1:1 in
1/05/05 of shares of paid up value of Rs. 10/- at a premium of Rs. 20
per shares. (FMV 01-05-05 Rs. 100 per shares).

CA SACHIN AJMERA CLASSES

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7.15 CAPITAL GAIN

Mr. A subscribed to the right shares in Jun-05. The share was

allotted to him in Sep-05. Mr. A sells all 200 shares in Jul-17 @
300/each. [Assuming that no STT levy at the time of sale]

Q.12 What will be your answer of Q.12 if Shares are sold through
recognized stock exchange?

Q.13 Mr. A Buy 100 shares of RPL ltd on 02-02-91 per shares. On 02-01-
09, the Co B ltd sent him a letter of offer whereby he was offered 100
rights shares of paid up value of Rs. 10 at a premium of Rs. 50 per
shares (FMV as on 02-01-09 was Rs. 200). Mr. A on 29.01.09
renounced the right in favour of Mr. P and charged Rs. 75 per shares
from Mr. P. Mr. P applied for 100 shares on 11.02.09 and was allotted
these shares on 05-04-09. These shares are sold by Mr. P on 22.03.18
@ 300 per shares. Compute CG in both hands.
-------------------------------------------------------------------------------------

ADVANCE LEVEL CONCEPTS

Q.15 Mr. A purchased a House on 12-04-79 for Rs. 1, 15,000. He entered

into an agreement with Mr. X for sale of house on 15-09-82 and
received advance of Rs. 25000. Later Contract conditions could not fill
and Mr. A forfeited this amount. Mr. A Gift this property to Mr. Z
on 14-06-1986.
o FMV of Property as on 01-04-01 Rs. 1, 50,000.
o Following renovations (COI) made by Mr. A & Z to the house property.
By Mr. A during FY 79-80 Rs. 10,000
By Mr. A during FY 83-84 Rs. 50,000
By Mr. Z during FY 04-05 Rs. 1,90,000

• Mr. Z entered sale agreement with Mr. C in 96-97 and received

advance of Rs. 80000, which is forfeited by Z due to terms of
agreement not fulfilled. Finally House is sold by Mr. Z to Mr. Dinesh
For Rs. 42, 00,000 as on 01-01-18. Compute The CG for PY 17-18.

Q.16 What will be your answer of Q.15, if SVA value is Rs. 43,00,000 & Mr.
Z also Forfeited Rs. 20000 as on 11-11-14.

Q.17 Mr. Y Acquire the Capital Assets as on 01-04-1962 for Rs. 2,00,000.
He Incurred Rs. 3, 00,000 as COI as on 01-09-74. He Gifted this
Property to Mr. X as on 01-09-1976 & Mr. X gifted this Property to V
as on 01-09-1978.
Mr. V Incurred Rs. 4, 00,000 as COI as on 01-09-84.
Mr. V Sold this property as to Mr. D Rs.30,20,000 as on 11-07-20.
Transfer Expenses Rs. 20,000

FMV as on 01-04-62 Rs. 10,00,000

FMV as on 01-04-01 Rs. 1,00,000
FMV as on 01-09-74 Rs. 2,50,000
Compute the Capital Gain for PY 17-18?

CA SACHIN AJMERA CLASSES

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 7.16 CAPITAL GAIN

PART – II SPECIAL CHARGING SECTIONS

COMPENSATIONS RECEIVED FROM INSURANCE COMPANY [SEC 45(1A)]

SECTIONS APPLIES damage or destruction TAX TREATMENT

of Capital Assets arises as Result of:
 Flood, typhoon, hurricane, cyclone, Taxable Year Will be Assets received year
earthquake or other convulsion of Transfer Year Will be Assets Destroyed year
nature Indexations Will stop till date of destroyed
 Riot or civil disturbance Benefit
 Riot or civil disturbance CAPITAL GAIN
 Accidental Fire or Explosion
 Actions by Enemy or action taken in Money received + FMV of Assets Received +++
combating of Enemy (whether Less: COA or ICOA (----)
declarations of war or not Capital Gain/Loss -----
------------------------------------------------------------------------------------
1. If assets destroyed & no insurance compensation is received. 45
& 45(1A) both shall not attract.
2. Compensations received for any other damage to Capital
Assets: e.g. loss of capital assets due to theft, road accident, shall
be capital receipt and not chargeable to Capital Gain.
3. Compensations received for any damages to non-capital Assets:
A revenue receipt may be chargeable u/s 28 or 56.
-----------------------------------------------------------------------------------

CONVERSION OF CAPITAL ASSETS INTO STOCK IN TRADE [Sec 45(2)]

Conversion of Capital Assets into SIT shall be treated transfer u/s

2(47).
SALE CONSIDERATIONS FMV as on Date of Conversion
COA/COA/TRANSFER EXPENSES As usual
INDEXATION BENEFIT AVAILABLE Till Year of Conversion
TAXABLE YEAR In the year in which SUCH STOCK IS
ACTUALLY SOLD
BUSSINESS PROFIT Sale Considerations – FMV as on date of
Conversion.
CAPITAL GAIN FMV on Date of Conversion – COA
Note: For claim exemptions u/s 54EC, the period of 6 month shall start form date
when such SIT is Actually sold.
----------------------------------------------------------------------------------------------------

CONTRIBUTIONS OF CAPITAL ASSETS BY A PARTNER [SEC 45(3)]

SECTIONS APPLIES where a Partner or TAX TREATMENT

Member of firm or AOP/BOI:
✓ Transfers any Capital Assets TAXABLE YEAR In the year of such Transfer
✓ To Firm, AOP/BOI of which he is COA/COA/TRANSF As usual

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 7.17 CAPITAL GAIN

Partner or Member ER EXPENSES

✓ BY WAY OF CAPITAL INDEXATIONS As usual
CONTRIBUTIONS, BENEFIT
✓ The same shall be treated transfer in SALE The AMOUNT RECORDED IN
hands of Partner/Member. CONSIDERATIONS BOOKS of a/c of Firm/AOP
---------------------------------------------------------------------------------------------------------

DISTRIBUTIONS OF CAPITAL ASSETS BY A FIRM [SEC 45(4)]

Applicability Distribution of CA By Firm/AOP/BOI on its

DISSOLUTION OR OTHERWISE
Taxable Year In the P/Y in which such distribution takes place.
Who is liable CG is chargeable in hands of Firm/AOP/BOI
Capital Gain FMV ON DATE OF TRANSFER
Less: Cost or Indexed COA
Nature Of Capital Gain Depend on holding period by firm/AOP/BOI
--------------------------------------------------------------------------------------
1. The Word Otherwise also covers the case where a partner
retires from a firm & CA are given to him
2. Mere Dissolution of firm not attracts 45(4). CG arise u/s 45(4)
only on transfer of assets BY FIRM TO PARTNER.
--------------------------------------------------------------------------------------

COMPULSORY ACQUISITION OF CAPITAL ASSETS [SEC 45(5)]

1 SECTIONS APPLIES IF capital assets are compulsory acquired under any law or
consideration is determined or approved by CG or RBI
2 TRANSFER YEAR Will be the P/Y IN WHICH ASSETS COMPULSORY ACQUIRED
3 HOLDING PERIOD Date of purchase TO date of Compulsory acquire
4 TAXABLE YEAR FOR ORIGINAL Will be P/Y in which FIRST INSTALLMENT RECEIVED.
COMPENSATIONS
5 SUBSEQUENT INSTALLMENT OF No Tax Treatment
ORIGINAL COMPENSATIONS
6 ENHANCED COMPENSATIONS It will be taxable on EACH RECEIPT BASIS
7 COST OF ENHANCED It will be NIL, However there can some transfer expenses.
COMPENSATIONS
8 NATURE OF GAIN OF ENHANCED Nature will be SAME AS nature of Original Compensations.
COMPENSATIONS
9 COMPENSATIONS RECEIVED IN ✓ If any amount of Compensations received in pursuance
INTERIM ORDER ✓ of Interim order of Court, Tribunal etc
✓ Shall be deemed to be income of PY under Capital gain
✓ In which final order of such Court, Tribunal made.
However if Final order made but amount received later year then taxable year will be received
year. We can say amount received year or Final order made year (whichever is later)
10 INTEREST RECEIVED ON ▪ It will taxable under I/F/O/S
ENHANCED COMPENSATIONS ▪ Will be taxable in the year of receipt
▪ Assessee will get 50% deductions from Interest income
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CA SACHIN AJMERA CLASSES

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 7.18 CAPITAL GAIN

COMPULSORY ACQUISITION OF URBAN AGRICULTURAL LAND [Sec 10(37)]

APPLICABLE: CONDITIONS:
❖ It must be URBAN AGRICULTURAL LAND.
INDIVIDUAL OR HUF ONLY ❖ Such Land was USED FOR Agricultural purpose
FROM LAST 2 YEARS.
❖ It has compulsory acquired under any law or
considerations determined by CG or RBI.
❖ Compensation received on or after 01-04-04.
❖ Enhanced compensations: exemptions also
available on it.
-------------------------------------------------------------------------------------
 IF AGRICULTURAL LAND IS RURAL AGRICULTURAL LAND – THEN
NO CAPITAL GAIN WILL LEVY SINCE IT IS NOT CAPITAL ASSETS.
-------------------------------------------------------------------------------------
Analysis
1. Date of Transfer is not relevant. If compensation is received on or
after 01.04.04, then exemptions is available even transfer takes place
before 01.04.04
2. Such land must be held as Capital assets not as Stock in trade.
--------------------------------------------------------------------------------------

CAPITAL GAIN ON LAND & BUILDING UNDER JOINT

DEVELOPMENT AGREEMENT [SEC 45(5A)]

✓ Where the Capital gain arise to Individual or HUF

✓ From transfer of a capital assets (being land or building or
both)
✓ Under a specified agreement
✓ The capital gain shall be chargeable to Tax as income of PY
in which the certificate of completions for whole or part of
the project is issued by Competent authority and
✓ For purpose of Sec 48,
✓ Sale Considerations will be: Stamp Duty value on date of
issue of said certificate, of his share (being land or building)
as increased by considerations received in cash,
---------------------------------------------------------------------------
❖ Year of Transfer: Year in which possession of immoveable
property is transfer under JDA.
❖ Taxable Year: Year in which completions certificate issued by
competent authority.
❖ Sale considerations: Stamp duty value on date of issue of
certificate of his share in project + Cash received
--------------------------------------------------------------------------
Proviso: Provision of above sections will not apply, where
Assessee transfer his share in project on or before date of
issue of said certificate & CG shall be deemed to be income of
PY in which such transfer took place.
CA SACHIN AJMERA CLASSES
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 7.19 CAPITAL GAIN

Cost of Acquisitions of share of project under Joint

Development agreement [Sec 49(7)]

Where capital assets arise from transfer of capital assets

(being share in project), in form of land or building,
The Cost of acquisitions of such assets shall be amount
which is deemed as full value of considerations.
----------------------------------------------------------------------------

enhanced compensation
DISTRIBUTION exemption
OF ASSETS benefit is available.
BY COMPANIES IN LIQUIDATION [SEC 46(1)]

IN HANDS OF COMPANY [Sec 46(1) IN HANDS OF SHAREHOLDER [SEC 46(2)]

NO CAPITAL GAIN CAPITAL GAIN WILL LEVY AS UNDER:

SALE CONSIDERATIONS: [FMV of Assets received + Cash Received] ++++++

LESS: DEEMED DIVIDEND U/S 2(22C) i.e. Share holder shares in reserve (-------)
held on liquidations.
NET CONSIDERATIONS ++++++
LESS: INDEX COST OF ACQUISITIONS Gain/Loss
1. 10(38) not apply on Assets received by shareholder on CO’S liquidations
2. If there is no provision of CDT on General reserve, then we will exclude the CDT
portions from General reserve.
--------------------------------------------------------------------------------
SUMMARY

SEC Sections Transfer year Taxable year

45(1A) Assets destroyed Year of destructions Year in which amount
received
45(2) Conversion of CA into SIT Year of Conversion Year in which Stock is
sold
45(5) Compulsory acquisitions Year of compulsory Year in which first
acquisitions installment received
45(5A) JDA Year in which possession Year in which CC of
transfer project issued
---------------------------------------------------------------------------------------

Buy Back of shares [Sec 46 A read

with 115QA]

Amended – will discuss separately

CA SACHIN AJMERA CLASSES

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7.20 CAPITAL GAIN

QUESTION FOR YOUR PRACTICE

Q.19 Mr. A converts his capital assets acquired for an amount of Rs.
50000 in June, 2003 into stock in trade in the month of Nov-2015.
The Fair market value of assets on date of conversion is Rs.
4,50,000. The Stock in trade was sold for an amount of Rs. 6,
50,000 in the month of September, 2017. What will be the tax
treatment?

Q.20 Mr. U purchased 1000 equity shares in X Ltd, at a cost of Rs. 30 per
shares (Brokerage 1%) in January-1996. She gets 100 bonus shares
in August-2000. She again gets 1100 bonus shares by virtue of
holding on Feb-2006. FMV of shares as on 01-04-01 is Rs. 80 per
shares. In January-2018, she transfers all her shares @ 200 per
shares (Brokerage 2%). Compute the Capital gain in PY 17-18?

Q.21 On January 31-2018, Mr. A has transferred self-generated goodwill

of his profession for sale considerations of Rs. 70000 and incurred
expenses of Rs. 5000 for such transfer. You are required to compute
the capital gain chargeable in hands of Mr. A for AY 18-19.

Q.22 Mr. R holds 1000 shares in Star Minus Ltd an unlisted companies
acquired in 2001-02 at a cost of Rs. 75,000. He has been offered
right shares by company in the month of August-2017at 160 per
shares, in the ratio of 2 for every 5 shares held. He retains 50% of
the right and renounces the balance right in favour of Mr. Q for Rs.
30 per shares in September-2017. All the shares are sold by Mr. Rs.
for Rs. 300 per shares in January-2018 and Mr. Q sells his shares in
December-2017 at Rs. 280 per shares.
What are the capital gains taxable in hands of R & Q?

Q.23 Mr. A purchased a land of Rs. 1, 20,000 in PY 02-03. In PY 06-07,

Mr. A gifts this asset to his son Mr. B which FMV was Rs. 1, 50,000
in PY 06-07. In PY 07-08, Mr. B incurred Rs. 2,35,000 towards
fencing of the plot. Mr. B sells the plot of land for Rs. 14,00,000 in
PY 17-18 after incurring expenses of Rs. 20,000 as brokerage. You
are required to compute the capital gain assuming that SVA value on
date of agreement is Rs. 15, 00,000 and date of Registry is Rs. 18,
00,000. However some advance was received by cheque on date of
agreement.

Q.24 Mr. Dinesh received a vacant site as gift from his friend in Nov-05.
The site was acquired by his friend for Rs. 7, 00,000 in April-02.
Dinesh constructed a residential building during 10-11 in said site
for Rs. 15, 00,000. He incurred out some further extension of the
constructions in the year 2012-13 for Rs. 5, 00,000.
Dinesh sold the residential building for Rs. 55,00,000 in January-18
but the Stamp valuations authority adopted Rs. 65,00,000 as value
of purpose of Stamp duty. Compute the capital gain for AY 18-19.

Q.25 Mr. Kay purchased a house property on 10-04-1992 for Rs. 65,000.
The FMV of the house property on 01-04-2001 was Rs. 2, 70,000.
Mr. Kay enter with sale agreement with Mr Jay and receive advance

CA SACHIN AJMERA CLASSES

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 7.21 CAPITAL GAIN

Rs. 60000. However Mr. Jay could not fulfilled the agreement
therefore Mr. Kay forfeited such advance amount. In May-2008, Mr.
Kay constructed the first floor by incurring a cost Rs. 2,35,000.

Subsequently in Jun-09, Mr. Kay gifted the house to his brother Mr.
Dee. On 10-02-2018, Mr. Dee sold the house for Rs. 12, 00,000.
Compute the capital gain in hands of Mr. Dee for AY 18-19.

Q.26 Mr. A has a Residential House property acquired on 20/01/02 for

Rs. 6 lakhs in which he resides. On 20/01/04 he incurred capital
expenditure on house of Rs. 3 lakhs.
On 15/06/08 office goods brought into home for deliver to his
supplier & same night accidental fire took place and damaged entire
house property, stock worth Rs. 200000 and house hold furniture
worth Rs. 800000 & lost of Diamond Ring & gold chain during fire
which COA of Rs. 180000 (Date of acquisition was 10-06-08).
He received following amount from insurance Co as on 18/09/09:
a. For the house Rs. 100000 in cash and a new house allotted to
him which FMV is Rs. 30, 00,000 on 18/09/09.
b. For household furniture Rs. 300000 and
c. For Stock Rs. 70000
d. Gold chain & Diamond Ring Rs. 200000

Q.27 K & Co, has 2 partners B & C. Mr. C brought his personal Jewellery
in Firm as Capital contributions. The Jewellery recorded in Books of
a/c at an agreed value Rs. 7 lakhs.
As on 07-02-10, C got such Jewellery through the will of his father.
Cost of assets to his father was Rs. 80000 (DOA 08-07-75).
FMV as on:
01-04-01 : Rs. 75000
07-02-10 : Rs. 1000000
Compute capital gain in hands of C?

Q.28 Mr. A, B & C are 3 partners of Firm. Mr. C retires from firm on 30-12-
09 and on that date the balance in his capital account is Rs. 13 lakhs
including the share of profit as on that date.
The firm transfer Jewellery on final settlement the account of Partner
C, which acquires by Firm on 01-01-92 For Rs. 4 lakhs. The FMV of
Jewellery as on 30-12-09 is Rs. 50 lakhs.
What will be the tax treatment in hands of Firm?

Q.29 Mr. A land compulsory acquired by Government which details are as

under:
Land Purchased 1,50,000 (DOA: 01-01-80)
FMV 01-04-01 1,75,000
Land Acquired By CG as on 01-01-08. Award compensations Rs. 10 lakhs
Original amount received On 01-06-08 : Rs. 3 lakhs (first Installment)
On 01-05-09 : Rs. 7 lakhs
Additional Compensations Received Rs. 2,00,000 on 01-01-10
2nd court award Additional Received Rs. 10,00,000 as on 01-Jan-12
Compensations
Interest on Enhanced Received Rs. 480000 as on 01-03-12
Compensations
CA SACHIN AJMERA CLASSES
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 7.22 CAPITAL GAIN

Q.31 Mr. A purchased 10000 equity shares of AB Pvt ltd on 28-02-04 for
Rs. 1,20,000. The Company was wound up on 31-07-14 & following
are financial positions on 31-07-14.
Liabilities Amount Assets Amount
60,000 Equity Shares 6,00,000 Agricultural Lands 42,00,000
General Reserve 40,00,000 Cash at Bank 6,50,000
Provision for Taxations [CDT] 2,50,000 -
48,50,000 48,50,000

The Tax liability of CDT determined Rs. 3,00,000. After considering

this amount, remaining cash transferred to shareholder in ratio of
their holding. The Market Value of 6 acres agricultural land is Rs.
10,00,000 per acre as on 31-07-14. Discuss the tax impact?

A. In Hands of company: No Transfer & no capital gain will levy [46(1)]

B. In Hands of Shareholder [46(2)]: CG will be levy as under:

Holding period of shares: 28-02-04 to 31-07-14 LTCG
Sale Considerations [ 60,00,000 + 3,50,000] x 10000 / 60000] 10,58,333
Less: Deemed Dividend [ 40,00,000 – (3,00,000-2,50,000)] x (10000/60000) (6,58,333)
Net Considerations 4,00,000
Less: ICOA [ 1,20,000 x 1024/463] (2,65,400)
LTCG 1,34,600
------------------------------------------------------------------------------------------------------
Note: COA of land will be Rs. 10, 00,000 in hands of shareholder.
------------------------------------------------------------------------------------------------------

Q.32 Mr. SA purchased a plot of Rs. 5, 00,000 in PY 01-02. On 15-07-18

he entered into a JDA with ARG Group & handover possession of plot
to builder on 16-07-18. FMV on plot on such date is Rs. 33 lakh. As
per JDV, SA is it received 2 flats in development project along with
Rs. 40, 00,000. Mr. SA received money of Rs. 40, 00,000 in PY 20-21.
Completions certificate of project issued on 10-12-2021 & SDV on
such date is Rs. 50 lakh per flat. Mr. SA got possession of 2 flats on
30-06-2022. Compute capital gain.

Q.33 What will be answer if Mr. SA transfer 1 flat of Rs. 98,00,000 on 13-
02-22. Compute Capital gain?

Q.34 From following information calculate tax liability:

PGBP : Rs. 3,00,000

IFOS : Rs 2,60,000
LTCG 112A : Rs. 2,50,000
-------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

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 7.23 CAPITAL GAIN

SEC 54: IN CASE OF TRANSFER OF RESIDENTIAL HOUSE PROPERTIES

Applicability ➢ INDIVIDUAL/HUF
Assets Transferred ➢ Residential House Property (whether let out or self occupied)
Nature of Assets ➢ Long Term Capital Assets
New Assets to be Acquired ➢ ONE Residential House Property situated in INDIA
Amt. to be invested in New ➢ Capital gain on Transfer
Assets
Exemptions amount ➢ Minimum of Following :
▪ Investment in New Assets
▪ Capital Gain
Time limit for investments Purchase Within a period of 1 year before or 2 years
after, FROM DATE OF TRANSFER
Example: If property Transferred on 17-08-07,
then New HP may be purchased at any time
between 17-08-06 to 17-08-09
Constructions Within a period of 3 years FROM DATE OF
TRANSFER.
Note: Constructions may start at any time
but must be completed within time
Unutilized Amounts. 1. The Amount not utilized BEFORE DUE DATE OF FILING
ROI, then amount shall be deposited in Capital Gain
Accounts Scheme of Nationalized Bank within time limit
of u/s 139(1).
2. The Amount should be utilized within prescribed period
3. IF Amount not utilized within prescribed period shall be
treated as LTCG of P/Y in which the prescribed TIME
PERIODS EXPIRE.
POH of new assets 3 years FROM DATE OF acquisitions or constructions
Sale of New Assets within 3 years STCG COMPUTED AS :
Sale Considerations of New Assets Xxx
Less: COA reduced by Capital gain exempt u/s (xx)
54
--------------------------------------------------------------------------------------
Some Important Point for your Knowledge Purpose
Land Cost of House includes cost of Land also.
1st Floor Constructions of First Floor in existing house should be treated
Constructions as Independent Building for exemptions u/s 54 (SC)
More Than He can get benefit only one Residential house
One house
Constructions IF Assessee has partly invested on purchase of another house
v/s Purchase and partly on constructions of new floor to house so purchased
within prescribed time limit. Both expenditures are eligible for
deductions u/s 54.
Treatment of If Assessee is one of Co-owner and obtained the release of right
Co-owner of ownership of other co-owners in his favour. Is deemed to be
an acquisitions u/s 54.
Flat Where Assessee have been allotted the flat and paid a
Allotment and substantial amount towards cost within time limit u/s 54. he
payment v/s shall be entitled to exemptions u/s 54, though sale deed is
sale deed registered in his favour subsequently.

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7.24 CAPITAL GAIN

Ex. 6.1 Mr. A purchased one residential house property as on 31-01-

82 for Rs. 2, 00,000. FMV as on 01-04-01 is Rs. 4, 00,000. Cost of
improvement incurred of Rs. 3, 00,000 as on 11-07-07. Mr. A
transfers this asset as on 15-07-17 to Mr. V for Rs. 90, 01,000. A
transfer expense is Rs. 1000. He deposited 28, 80,000 in Capital
Account scheme as on 30-07-18 & further deposited 5,00,000 in this
account as on 15-08-18.
As on 01-07-20, he has constructed a new house of Rs. 20, 80,000
and balance amount could not utilize. Further new house which was
purchased as on 01-07-20 sold as on 22-07-21 for Rs. 30, 00,000.

PY 17-18
Holding period: LTCG
Sale Considerations
Less: Transfer Expenses
Net considerations
Less: Index Cost of Acquisitions:
Less: Index Cost of Improvement:
LTCG before exemptions u/s 54
Less: Amount deposited in CGAS upto 31-07-18
Long Term Capital Gain
--------------------------------------------------------------------------------------
Utilizations of Amount deposited in CGAS

❖ For maintaing exemptions of Rs.______________, Mr. A should acquire

or constructed new house upto 15-07-19 or 15-07-20 respectively. If
does not do so or use lesser amount, then exemptions will withdrawal
in the PY 20-21 of amount shorter than Rs._____________.

❖ In given questions, since he constructed the house only

Rs. _____________, which is less than Rs.___________. So balance
unutilized amount of Rs. ___________ will be treated income of
Assessee for PY 20-21 as LTCG
--------------------------------------------------------------------------------------
LOCK IN PERIOD OF NEW HOUSE
❖ Further new house which was constructed as on 1-07-2020 should
not sale upto 3 years from date of purchase of new house i.e. upto 01-
07-23. If he does so then exemptions will be withdrawal in the year of
new house sold by following manner.

Holding period: 01-07-2020 to 22-07-2021 STCG

Sale Considerations 30,00,000
Less: Cost of Acquisitions Less exemptions allowed u/s 54 0
[ ]
Short Term Capital Gain 30,00,000
--------------------------------------------------------------------------------------
Refer page for 54 amendment 7.33

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 7.25 CAPITAL GAIN

EC 54B: IN CASE OF TRANSFER OF URBAN AGRICULTURAL LAND

Applicability ➢ INDIVIDUAL / HUF
Assets Transferred ➢ Urban Agricultural Land used for
agricultural by him or by his parents for 2
years immediately prior to DOT
Nature of Assets ➢ Long Term or Short Term Capital Assets
New Assets to be Acquired ➢ ANY Agricultural Land
Amt. to be invested in New Assets ➢ Capital gain on Transfer
Exemptions amount ➢ Minimum of Following :
▪ Investment in New Assets
▪ Capital Gain
Time limit for investments Within 2 Years form Date of Transfer
Unutilized Amounts. Same as per Sec 54
Period of holding of new assets 3 years FROM DATE OF acquisitions
Sale of New Assets within 3 years STCG COMPUTED AS :
Sale Considerations of New Assets xxx
Less: COA reduced by Capital gain (xx)
exempt u/s 54
--------------------------------------------------------------------------------------
Compulsory acquisitions of land or Building [Sec 54D]

Applicability Any Assessee

Assets Transferred Compulsory acquisitions of land or building forming part
of industrial undertaking
Nature of Assets STCG/LTCG - To be used for at least 2 years for business
prior to date of transfer
New Assets to be Acquired Cost of Land or building
Amt. to be invested in New Assets Capital gain
Exemptions amount Minimum of following
▪ Capital gain
▪ Amount invested

Time limit for investments Within 3 years from date of Transfer

Unutilized Amounts. CGAS Scheme concept apply – Sale like Sec 54

POH of new assets 3 Years from date of purchase of new assets
Sale of New Assets within 3 years Cost of new assets will reduce by exemption claimed earlier
– Like Sec 54
--------------------------------------------------------------------------------------

CA SACHIN AJMERA CLASSES

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 7.26 CAPITAL GAIN

SEC 54EC: TRANSFER OF ANY LONG TERM CAPITAL ASSETS

Applicability ALL ASSESSEE
Assets Transferred Land or Building or Both
Nature of Assets Long Term Capital Assets
New Assets to be Acquired Notified Bond (Redeemable After 5 years ) issued by
▪ National Highway Authority of India (NHAI)
▪ Rural Electrifications Corporations Ltd (RECL)
▪ Power Finance Corp. Ltd
▪ Indian Railway Finance corporations
Amt. to be invested in New Assets Capital gain on Transfer
Exemptions amount Minimum of Following :
▪ Investment in New Assets
▪ Capital Gain
Note: He Assessee transfer one or more assets during FY,
then he can take benefit only of Rs. 50 lakhs.
Investment Time limit Within 6 month from Date of Transfer
Unutilized Amounts. Not applicable here.
Period of Holding of new assets 5 years FROM DATE OF acquisitions
Sale of New Assets within 3 years The LTCG so exempted u/s 54EC shall be deemed to be income
as LTCG of the Assessee of P/Y of Transfer of Conversion into
money or loan is taken on security of such new assets.
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SEC 54F: TRANSFER OF ANY ASSETS EXCEPT RESIDENTIAL HOUSE

Applicability ➢ INDIVIDUAL/HUF
Assets Transferred ➢ ANY Capital Assets (O/T Residential House Property)
Nature of Assets ➢ Long Term Capital Assets
New Assets Acquired ➢ Residential House Property
Additional Conditions On Date of Transfer of LTCA, The Assessee should not OWN more
than 1 Residential House Property other then new.
Exemptions amount [LTCG x Amount invested in new Assets / Net Considerations]
Time limit for Purchase Within a period of 1 year before or 2 years
investments after, FROM DATE OF TRANSFER
Constructions Within a period of 3 years FROM DATE OF
TRANSFER.
Unutilized Amounts. 4. The Amount not utilized BEFORE DUE DATE OF FILING ROI,
then amount shall be deposited in Capital Gain Accounts Scheme
of Nationalized Bank within time limit of u/s 139(1).
5. The Amount should be utilized within prescribed period
6. IF Amount not utilized within prescribed period shall be treated
as LTCG of P/Y in the following manner:
Long Term Capital Gain
LTCG = ------------------------------------ x Amount not utilized
Net Considerations
POH of new assets 3 years FROM DATE OF acquisitions or constructions
Sale of New Assets (a) STCG on New Assets shall be taxed Separately
within 3 years (b) LTCG exempt u/s 54F shall be chargeable to tax as
LTCG in the year of Transfer

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
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 7.27 CAPITAL GAIN

KEEP IT MIND:
❖ For maintaing exemptions of Sec 54 F Assessee should not Purchase/
Construct any Residential house [OTHER THAN NEW HOUSE] within
a period of 2/3 years after date of Transfer of Original Assets.
❖ If he does so, the exemptions getting u/s 54F shall be withdrawal in
the year of violations.
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Summary
Sec 54 Sec 54 B Sec 54EC Sec 54F Sec 54D
(Sold RHP- Buy (Sold UAL - (Sold Any CA- Buy Sold Any CA
RHP) Buy Any AL) Bonds of (o/t RHP) – Buy
RECL/NHAI) RHP
Applicable Individual/HUF Individual/HUF ALL Assessee Individual/HUF
Assets Sold ANY RHP Any Urban Land or Building or Any Capital
Agricultural Land both Assets (o/t RHP)
Nature of gain LTCG LTCG/STCG LTCG LTCG
Buy Assets Any RHP Any Agricultural RECL / NHAI BONDS ( ANY RHP
land (U/R) which is Redeemable
after 5 yrs)
Investment Acquire: 2 from 2 Yrs from DOT 6 month from DOT Acquire: 2 from
time DOT or 1 year DOT or 1 year
just before DOT just before DOT
Construction: 3 Construction: 3
from DOT from DOT
Exemptions Amount Amount Amount invested or CG x AI
invested or invested or Capital gain -------------
Capital gain Capital gain (Lower) {Max. 50 Net
(Lower) (Lower) lakh in one FY} Considerations
Other No Conditions Assets used for No Conditions Assessee
Conditions Agricultural should not own
purpose from more than one
last 2 yrs from house on DOT
Date of Transfer
Amount not Amount should Amount should No such conditions Amount should
invested invest in CGAS invest in CGAS invest in CGAS
upto date of
Filling ROI
Unutilized Unutilized Unutilized Not Applicable Unutilized
Amount amount taxable amount taxable amount taxable
as LTCG in the as LTCG in the as LTCG in the
PY in which 3 PY in which 2 PY in which 3
years from DOT years from DOT years from DOT
expires expires expires
(UA X CG)/NC
If new Sales Sales Amount of CG Amount of CG
assets considerations – considerations – exempted earlier exempted earlier
COA of new assets COA of new assets taxable as LTCG in the taxable as LTCG in
transfer (however cost of (however cost of P/Y in which property the P/Y in which
before 3 new assets will new assets will sold. Capital gain on property sold.
years reduced by reduced by new assets shall be Capital gain on
exemptions exemptions claim computed normally new assets shall be
computed
claim earlier) earlier) normally

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
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7.28 CAPITAL GAIN

QUESTIONS FOR YOUR PRACTICE

Q.33 Mr. A purchased a house of Rs. 5, 00,000 as on 01-04-02 and he also

incurred cost of improvement of Rs. 2, 00,000 as on 01-11-12. As on
01-07-17 he sold this house for Rs. 80, 00,000 and value determined
by Stamp valuations authority is Rs. 90, 00,000. For claiming the
exemptions u/s 54 he deposited Rs. 40,00,000 in capital gain
account scheme as on 31-07-18 and Further Rs. 10,00,000 as on 15-
08-17.
He withdrawal the whole amount and constructed new house as on
11-05-20 of Rs. 35, 00,000. Compute the capital gain for PY 17-18
and what will be tax treatment of unutilized amount.

(2) What will be your answer if he sale the new house for Rs. 50, 00,000
as on 11-05-22 which was purchased as on 11-05-20?

Q.34 Mr. B purchased an urban agricultural land of Rs. 4, 00,000 as on

01-07-94. Mr. B sold this asset to Mr. C and received advance money
of Rs. 50,000 as on 01-04-97, but later on Mr. B forfeited this amount
due to Mr. C could not fulfilled the terms of Contract. FMV as on 01-
04-01 Rs. 5, 00,000. This land was using as agricultural purpose by
Mr. B.
As on 15-01-17, He sold the land for Rs. 95, 00,000 and Mr. B
purchased Rural agricultural land as on 12-12-18 for Rs. 30, 00,000.
Compute the capital gain for PY 16-17.

(2) What will be your answer, if he sold new rural agricultural land for
Rs. 45, 00,000 as on 10-12-21 which was purchased as on 12-12-18?

Q.35 Mr. A purchased Land of Rs. 5, 00,000 as on 1-11-03 and same is gift
to his brother as on 11-07-09. FMV as on 11-07-09 was Rs. 40,
00,000. As on 15-03-18, he sold this Land for Rs. 1, 20, 00,000 to
Mr. Deepak.
As on 12-09-18, he invests following amounts:
(a) Rs. 45, 00,000 in RECL bonds which will redeemable after 62 months.
(b) Rs. 40, 00,000 in Notified units of Specified Assets.

Compute the capital gain for PY 16-17.

(2) What will be your answer if Mr. A takes a loan against RECL Bonds
from bank by mortgages the same as on 1-12-19.

Q.36 Mr. A purchased Land of Rs. 2, 00,000 as on 1-11-05. As on 25-03-

18, he sold this land for Rs. 90,00,000 to Mr. D. As on 21-09-18,
He Purchased NHAI bonds of Rs. 60,00,000 which will redeemable
after 6 years.

(2) What will be your answer if Such bonds sold for Rs. 50, 00,000 as on
10-10-19.

Q.37 Mr. B purchased a land of Rs. 2, 00,000 as on 11-11-02 and sold the
same for Rs. 90, 05,000 as on 11-07-17. Transfer expenses were Rs.
5000. On date of transfer of land he is already owner of one house.

CA SACHIN AJMERA CLASSES

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7.29 CAPITAL GAIN

For the getting exemptions benefit, as on 12-05-19, he purchased a

new house for Rs. 40, 00,000. Compute the capital gain for PY 17-18.

(2) What will be your answer if new house which was purchased as on
12-05-19, sold for Rs. 60,00,000 as on 21-05-21?

Q.38 Mr. C purchased gold of Rs. 3, 00,000 as on 11-11-05 and sold the
same for Rs. 85, 05,000 as on 11-10-17. Transfer expenses were Rs.
5000. On date of transfer of land he is already owner of one house.
He deposited Rs. 50,00,000 in capital gain account scheme as on 30-
07-18.
As on 08-10-20, he withdrawal amount from CGAS and constructed
a new house of Rs. 30, 00,000.

Compute the capital gain for PY 17-18 and what will be tax treatment
of unutilized amount.

(2) What will be your answer if new house which was constructed as on
08-10-20, sold for Rs. 80,00,000 as on 21-06-21?

Q.39 A sell shares Private Sector Company on 10-07-09 for Rs. 806000
(COA on 16-06-02 Rs. 60000, expenses on Sale Rs. 6000). On 11-07-
09, he owns one residential house property. To Get benefit of
exemptions u/s 54F, X deposits on 30-05-10 Rs. 600000 in CGAS.
By withdrawing amount he purchases a Residential house property
at Delhi on 07-07-11 for R. 480000. Determine:

a) The Amount of Capital Gain chargeable to tax for AY 10-11.

b) Tax treatment of unutilized amount.
c) What will be your answer if new house, which is purchased as on 07-
07-11 are transferred for Rs. 15, 00,000 as on 07-09-12.

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AMENDMENT BY FA 2019 [Sec 54]

 Where amount of capital gain not exceed 2 Crore, the

assessee may at his options purchase or construct two
residential house in India.

 However where during any AY, the assessee has

exercised the option as above, he shall not be
subsequently entitled to exercise the options for the
same or any other A/Y.
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CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.30 CAPITAL GAIN

CERTAIN TRANSACTIONS SHALL NOT BE REGARDED AS TRANSFER [SEC 47]

Case Following Transactions are “Transfer” but will not be treated as transfer:
1 Any distributions of Capital Assets In kind By a HUF TO ITS FAMILY MEMBER
2 Any Transfer of Capital Assets to Any person Under GIFT OR WILL
3 Any Transfer of Capital Assets By Holding Co TO 100 % Indian Subsidiary Co
4 Any Transfer of Capital Assets By Subsidiary Co TO 100 % Indian Holding Co
5 Any Transfer of Capital Assets IN A SCHEME OF AMALGAMATIONS By Amalgamating Co TO
INDIAN Amalgamated co
6 Any Transfer of Capital Assets By Demerged Company to Indian Resulting company.
7 CONVERSION OF FIRM INTO COMPANY:
 All Assets or Liability of Firm becomes Assets or Liability of Company.
 All partner of Firm Immediately before Succession become the shareholder of Co In the
ratio of their capital balance stood in books
 Partner Receives consideration only in terms of SHARES of the Co
 The Aggregate shareholding of Partner should be at least 50% of Total voting in the Co
and their shareholding continues to be AS SUCH for a period of 5 CONSECUTIVE YEARS
from date of succession.
8 CONVERSION OF SOLE PROPRIETARY CONCERN INTO COMPANY:
 All Assets & Liability of Firm becomes A/L of Company.
 Sole Proprietor receives ONLY SHARES of the Company as Considerations.
 The shareholding of Proprietor in the Co Should be at least 50% of total voting in the Co
 And Their shareholding continues to be as such For a period of 5 consecutive years from
date of succession
9 CONVERSION OF PRIVATE COMPANY/UNLISTED COMPANY INTO LLP:
• Any transfer of Capital Assets By a Private Company Or Unlisted Company TO LLP or
• Any Transfer of Shares Held In The Co BY A SHAREHOLDER As a result of Conversion of
Co into LLP.
PROVIDED THAT:
 All A/L of Co Immediately before the Conversion become the A/L of LLP.
 All Shareholders of Co Immediately before the Conversion become the partners of LLP and
their Capital contribution and Profit sharing Ratio in LLP are in same proportion as their
shareholding in Co on Date of conversion.
 The shareholders of Co do not receive any considerations or benefit, other than by way of
share in profit and capital contribution in LLP.
 The AGGREGATE OF PROFIT SHARING RATIO of Shareholder of CO in LLP shall not be
less than 50% at any time during the period of 5 years form Date of conversion.
 The Total sales, turnover or Gross receipts in Buss of Company IN ANY OF 3 P/Y preceding
the P/Y in which conversion take places does not exceeds 60 lakhs.
 No amount is paid, d/id to any partner out of ACCUMULATED PROFIT of co for a period of
3 years from date of conversion.
 The Total value of assets appearing in books of a/c of Company doe not exceeds Rs. 5
Crore in any of 3 PY preceding the PY in which such conversion TAKE PLACE. {FA 2016}
-------------------------------------------------------------------------------
In all above case Concept of Previous owner apply, therefore no
capital gain will be levy in hands of Transferor and when
transferee will sold the assets then he will take cost of previous
owner [49(1)] & also included previous owner holding period.
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CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
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 7.31 CAPITAL GAIN

PART 2:
Case Following Exchange are “Transfer” but will not be treated as transfer:
10. Any Transfer of Shares, In a Scheme of Amalgamations HELD BY SHAREHOLDER in
Amalgamating Co
CONDITIONS:
 CONSIDERATIONS RECEIVED: Should be SHARES & should not be in CASH
 TRANSFEREE Co: The Amalgamated Co. should be INDIAN
11.  Transfer way of CONVERSION OF
 Bonds or Debentures, Debenture–Stock or Deposit Certificates of a Co
 INTO SHARES OR DEBENTURES OF THAT CO
12 Any transfer by way of conversion of preference shares of a company to equity share of
that company.
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Note: Exchange amounts to transfer as per sec 2(47), however above two
exchanges will not treat as a transfer due to Sections 47.
TAX TREATMENT: When Assessee sold converted asses (new assets), then
cost & holding period of previous assets will consider & no dispute in
Indexations (Everything will be previous assets)
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PART: 3
Case Following Transactions are “Transfer” but will not be treated as transfer:
13. Any Transfer of Capital Assets in a scheme of Reverse Mortgage made by CG
Any Transfer of Sovereign Gold Bond By Individual (only) will not treat as transfer (Such
Bonds should issued by RBI under Sovereign Gold Bond Scheme, 2015
14. KEY POINTS: Inserted by
• Exemptions is available to Individual only FA 2016
• Exemptions are available only when such bonds are redeemed.
• Exemptions not available if such bonds are transferred before maturity.
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WRITE SHORT NOT ON REVERSE MORTGAGE SCHEME

UNDER THIS SCHEME: Senior Citizen borrower mortgages the House to a

Lender. The Lender makes periodic/ Lump sum payments to Borrower
during the Senior citizen life time.
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TAX TREATMENT: Pledging the house with bank will not regard as transfer
as per Sec 47. Further amount received by senior citizen either periodically,
monthly or lump sum will be exempt in hands of borrower.
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However capital gain liability would be attracted at the stage of
alienations of mortgaged property by bank for purpose of recovering
the loan.
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CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
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7.32 CAPITAL GAIN

OTHER ASPECTS
Q.1 How will calculate the period of holding in case of following
assets?
A. Shares hold in a Company in Liquidations: The period after
the date on which company goes into liquidations shall be
excluded while calculating the holding period of shareholder.
B. Bonus Shares or Right Shares: The period of holding shall be
count from date of allotment of shares & will end with date of
transfer.
C. Flat in Co-operative Society: The period of holding will be
count from date of allotment of shares in the society and with
end with date of transfer.
D. Transfer of Security by Depository {i.e. Demat Account}: The
Date of holding shall be computed from date on which security
were credited to the Demat a/c and will end with date of
transfer. The FIFO method shall be adopted for determining the
period of holding.
E. Any specified security or sweat equity shares allotted by
employer free to his employees: The period of holding shall start
from date of allotment of such securities or Sweat equity
shares.
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Property constructed on a land purchased earlier: if land is
held by Assessee more than 36 months and building
constructed over it is held for not more than 36 months, in that
case, the gain arising from sale of Land would be LTCG & gain
arising from sale of Building shall be STCG.
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FMV OF UNQUOTED SHARES SHALL BE TREATED FVOC

[50CA]

In case of shares of a company (other than Quoted shares) held

as Capital assets, if sale considerations is less than FMV, then
such FMV shall be treated as FVOC

WHERE SALE CONSIDERATIONS IS NOT ASCERTAINABLE

OR CAN NOT DETERMINED [50D]

Then FMV of such assets as on date of transfer shall be FVOC

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CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`
 7.33 CAPITAL GAIN

Buy Back of Shares (amended by FA 2019)

Sec 46A, 115QA, 10(34A)

Shares of Domestic Other Case

Company

Whether Shares of :
• Unlisted company Shares of Specified Shares of Foreign
• Listed Company (w.e.f 5-7-20) securities by CG company

Sec 46 A apply
• 115QA shall apply in hands of
company
• Sec 10(34A) apply in hands of
shareholder IT is exempt in hands of Company

No tax treatment in hands of company

Sec 10(34A) Sec 115QA

In hands of company
In hands of Computations of Capital gain in hands of
shareholder Company will pay shareholder
Distributions tax Sale considerations (i.e. buy back price) ++++
on distributed income @ Less: COA /ICOA (-----)
23.296% STCG/LTCG as the case may be ++++
Capital gain
exempt [20% +12% (sur.) +4% cess]

Distributed income is
[Buy back price – Issue price by company] x number of
shares

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Ex. Company issue shares as on 1-7-18 @ 30 [ 10 face value & 20 premium]. Mr. A
Buy 10000 shares from market as on 1/7/19 @ 80 per shares. As on 15/7/20 Company
buy back 10000 shares from MR. A @ 100 per shares [10 face value and 90
premiums]. What will be the tax treatment in hands of company as well as
shareholder?

CA SACHIN AJMERA CLASSES

` M: 99502-90358, 810760-26660
`