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Capital Gain

Capital gain

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12 views40 pages

Capital Gain

Capital gain

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maxxvolume86486
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Df CAPITAL GAINS a ondments w.e.f. Assessment Year 2020. 21 igections 49, 50CA, 54, 54GB and 112, Gopital Gains’ is the fourth head of i ~ batt ara income. 7 basis of the charge i The ‘ge is the profits or gains arising from the transfer of ial sein n ofa capital asset in year. It is taxable under the head ‘Capital Gai ains’, ire proviou’ essential ell or elements-of capital gains are? (a) Capital Asset, \p) Transfer of Capital Asset, {C) Computation of Capital Gain, (A) CAPITAL ASSET [see. 204] , whether connected. with means : (a) Property of any kind held b; Ca e yk y an as: his business, Pee or not. (b) Any securities held by a Foreign Institutional Investor which fs invested in such securities in ‘acrordance with the regulations made under the Securities iM Exchange Board of India Act, 1992. Capital asset may be ‘movable or immovable, tangible or intangible, fixed or floating. Capital asset includes Jand, building, plant, machinery, investments, goodwill, leasehold rights, jewellery, shares, @ ‘manufacturing licence, ete. Property includes any right in or in relation to an Indian company, including rights of nanagement or control or any other rights whatsoever. asset does not include the following : tioned in (b)], Exception : The term capital PAny stock-in-trade [other than the securities ment 's of his business or profession. () €ommercial goods : cmgumable stores or raw materials held for the purpose: (ii) Movable assets for personal use: Movable assets (including wearing clothes and furniture) held for personal use bY tne assessee or any member of his family dependent on him. Thus, a car or any other vehicle, refrigerator, television or laptop or other electrical appliances are included in this. Exceptions : The following saets will not be treated as a personal eff tax : : (archaebfogical collections, (P) drawings, of art, (f) jewellery for personal use- Jewellery includes : . (A) Ornaments made of gold, silver, De Se not worked or sewn into any wearint ap! . . (B) Precious or semi-precious Stones, whether OF. not set in an, other article or worked OF sewn into any wearing apparel. Capital asset ct and liable to (c) paintings, (4) sculptures, (€) any work yy other precious metal, whether or y furniture, utensil or vated. y provided it is not situated ; tonment board, haVIME a pop iy INCOME TAX Agricultural land in India, PY or any municipality or 8 © (iii) Agricultural land : (a) within the limi of 10,000 or more (b) within the ar measure “ (1) Not being more than two kilometres” of more than ten thousand but not ex i rs fro (2) Not being more than six kilometers [et dtmore than one lakh but not exceeding {0 (3) Not being more than cight kilomote 3 population of more than ten lakh. a Gv) Gold Bonde : 612% Gold Bonds, 1977 or 7% Gold Boo Bonds, 1980 issued by the Central Governmen’- (v) Special Bearer Bonds, 1991. | ger the Gold Deposit Schem, (GD Gold Deposit Bonds : Gold Deposit Bonds issued ander a se BOTS mote a Gr deposit certificate issued under the Gold Monts bya Central Government. Self-generated Assets : a Some self-generated assets are treated as capital assets : (a) Self-generated goodwill of a business. ; (2) Self generated tenancy rights, stage carriage permits cae loom hours. (3) Right to manufacture, produce or process any article or thing: (4) Right to carry on any business or profession. KINDS OF CAPITAL ASSETS 1 Capital assets are divided into two categories: rN ay uf) (@ Short-term Capital Asset, and (ii) Long-term Capital Asset. 3 ( y > Short-term Capital Asset. [Sec. 2 (42A)] nw x Or 4 ) Short-term Capital Asset means a capital asset held by an ass' S2&for not more than 93 months immediately preceding the date of its transfer. ~ . al mance tal arising from the transfer of the short-term capital asset is called Short-term apital Gain Exceptions :(1) In the case ofa financial asset being (a) security (other than a unit) listed in arecognised stock exchange in India, or (b) a unit of the Unit Trust of India, or (c) a unit of eOre ty oriented fund or (@) zero coupon bond, the short-term capital asset will mean security or unit or zw cot = si i cgupon bond eld by the assessee for not more than 12 months instead of 36 months as ‘in case of In the case of a financial asset, as aforesaid, which is allotted wi u et, b ed without any pa: i bonus shares) on the basis of holding of any other financial asset, the period ofits holding al e reckoned from the date of the allotment of such financial asset. a ‘ana? Wunksted ae (not listed in a recognised stock exchange in India) of a company or fanaa ing or both, is held by the assessee for not more than twenty-four months, eitely Preceding ia date of its transfer, it will be treated as Short. MTerm Capital Asse sets used for business or professio i jation is all f > Long-term Capital Asset. [Sec. 2(29A)] : ong-term Capital Asset means a capil s . " ti smmediatly Preceding the date of transfor ne eld by an assessee for more than 36 mantis ‘apital gain arising from the transfer 5 Fs ‘ansft i Capital Gain. sfer of the long-term capital asset is called Long-te™ Jow, : Timits and which has a poy, ati, on ed avrially specified be! ari pes from the local ceeding one Jal m the local limi} lakh; or _ the local limits and which ,,. Be r and which has a popyy, ating 1980 or National Defence g ol 4 CAPITAL Gaitis 291 (ay In the case of li sto . jana held by the nessa ew riies OF units of ; ssessc sof ssc for Eee than 12 month @ oPeterm ea or units of equity oriented hares of a company or lay asset will mean such Ps Ly or PE pital asset will mean Py OF Taio busing or ne of Land or Building or both : sct held by the ass Laie are held by the 7 Ser after 1-4,2017—24 months (i) Transferred up to 81, Pag eas 24 months is. “ )17—36 months. Gi If od 0 (B) TRANSFER . ‘ OF Cal fer’ in relation t i : PITAI ee ise. 247 7 @, exe i . () the Se enguishment of any Might feoiere eet oF » its company seston under any lav; or asset ; Or i” where ; 7 sset is converted by the owner into stock-i BH or redemption of -in-trade of a business carried 07 the . “ ‘lon of a zer¢ (© Gowerson of business into alimited companyat 6) Soy transaction involving the allowing of te . (a) PM aken or retained in part eechrneance of & contrat of any immovable Pree be Refer of Property Act, 1882; or mntract of nature referred to in the 28 ate ey acompanye2) ‘becoming a member of, or acquiring shares in, @ er opera movable property , etc.) which has the effect of transferring the enjoyment certain transactions not regarded as transfer : Thi ; . ior te pose Seeapitan gains fer ‘The following transactions arenot regarded (@) Any distribution of capital assets on the total or partial partition of a Hindu undivided family. (i) Any transfer ofa pee ‘asset under a gift or Will or an jrrevocable trust. we Breen ‘ ehares or debentures or warrants, allotted by a company directly or indirectly to its employees ‘under the Employees’ Stock Option Plan or Scheme of the __ company are transferred under agiftor Pee cable trust, it will be deemed to be a transfer. ji) Any transfer of a capital ist by a company to its subsidiary comp if: and Gi) (a) the parent company holds the whole of the share capit ) ) the wii sset by the amalgamating an Indian remain (p) the subsidiary company is 2% Indian Company. (i) Any transfer of a capital ny tot by a subsidiary company to the holding company, if: {@) the whole of the share capital of the subsidiary company is held by the holding company; and (p) the holding company is 2° Indian company: ‘any transfer of a capital asset o8 per clause (ii) or Gv) above shall be treated as transfer if the transfer is made as Stock-in-trade- (v) Any transfer, in a scheme of an ‘amalgamation, of @ capital a: 1 company to the -eralgamated company if the amalgamated company 3s company. . . . . (vi) Any transfer, in @ scheme of amalgamation of banking company with @ banking institution sanctioned and ‘brought into force by the Central Government, of a capital asset by the banking ‘company to the banking institution. (vil) Any transfer of shares of an Indian company py a foreign company to another foreign company in pursuance of © scheme of amalgamation Fetween the two foreign com anies, if : . . panies, .25% of the sharebolders oi he amalgamating company continue to *S xmalgamated foreign ‘company; an , (b) shareholders oes not attract ‘tax on capital gains in the country in which the amalgamating company js incorporated. INCOME TAX a os ‘i - ; a cani =~ (viii) Any transfer by a shareholder, in a scheme of amalgamation, of a capital assey 4, > a sharo or shares held by him in the amalgamating company, its i, (a) the transfer is made in consideration of the allotment to him of any share oy in the amalgamated company except where the shareholder itself is the gamated company; and Indi pany. (b) the amalgamated company is an Indian company. . ae (ix) Any transfer of a capital asset, being any work of art, beeen Ecientific ore collection, book, manuscript, drawing, photograph or print, to the Gevernmens mt University or the National Museum, National ‘rt Gallery National Archives ort ch other public museum or institution as may be n re in Offieial Gazette to be of national importance ae Pe eee throughout any sot States, (e.g., Indira Gandhi National Centre for Arts). ; () Any transfer by way ofconversion of debentures, debenture stock. eesereee Certificate i i debentures of that - in any form, of a company into shares or a y : (xi) Any transfer of foreign currency bonds or Global Depository Receipts (specifi ; section 115AC) held by a non-resident to another non-resident, where the transfe; made outside India. . . (xii) Any transfer of land {under a scheme prepared and sanctioned ws 18 of the Sick Indust, Companies (Special Provisions) Act, 1985] by a Sick Industrial Company which is manage; by its Workers’ Co-operative. The exemption will be allowed if the land is transferreq;, the period commencing from the previous year in which the company becomes a gi Industrial Company and ending with the previous year in which the entire net worth the company becomes equal to or exceeds the accumulated losses. : Where a firm is succeeded by a Company in the business carried on by it as a resyy of which the firm sells or otherwise transfers any capital asset or intangible asset, the company. It will not be regarded as transfer provided the prescribed conditions are satisfied. Where any capital asset is transferred to a company in the course of corporatisation or demutualisation of a recognised stock exchange in India as a result of which an Ap or BOI is succeeded by such company, it shall not be regarded as transfer provided the corporatisation or demutualisation of the exchange is carried out in accordance with a scheme approved by the SEBI. Note : Demutualisation is a process that changes a mutual or co-operative association into a public company by converting the interest of members into shareholdings. (xv) Any transfer of a capital asset being a membership right held by a member ofa recognised stock exchange in India for the acquisition of shares and trading or clearing rights acquired by such member in that exchange in accordance with a scheme o demutualisation or corporatisation which is approved by the SEBI, it shall not be regarded as transfer. (xvi) Where a sole proprietary concern is succeeded by a company in the business carried | on by him as a result of which the concern sells or otherwise transfers any capital asset or any intangible asset to the company, it will not be regarded as transfer provided the prescribed conditions are satisfied. (xvii) Any transfer in a scheme for the lending of any securities under an agreement or at arrangement which the assessee has entered into with the borrower of such securitie. The transfer should be as per the guidelines issued by the Securities and Exchané* Board of India or the Reserve Bank of India. | (xviii) Any transfer of a capital asset in a demerger by the demerged company to the resultité company, if the resulting company is an Indian company. | (xix) Any transfer of shares held in an Indian company in a demerger, by the demers*! foreign company to the resulting foreign company, if : shay, Amal, (xiii) (xiv) 7 CAPITAL GAINS i) ADS (ori) its allotte seviti) AD? a dh (ssi) | idemption by an in ‘a unit holder of a capital asset, being a uni ~~ ne shareholders holdi @ conti ing not pany continue to remai less tha: iy auch trans does aerate sharehen oi value of sh : gemerged foreign compai Tact tax o 8 of the result hares of the demerged fore dome rfer oF issue of shares by incorporagpital faaulting foreign eee os shares ‘a in the anys o) Afeholders of the demerged cr/et resulting. he country, in which the ger of the undertaking. "if company, j ‘ny trans i. 5 if the transfor oe scheme of demerger 1 the J fl 2 sue is deme atl a) Bit erative bank in busines the predecessor made in consideration organisation Cr oPeTative bank to the successor fer of a capital asset by nsfer of @ capital as: set being sh ares tral 5 : F isi operative bank in lieu of sh held by gestive bank yf Seale thin as apr .¢ successor co-operative bank ina transfer by way of conversi ii) APY ers isi Gy debentures of any company. ion of bonds purchased in fore gay transfer of & capital asset i foreign currency into shares (ait) Afed by the Central asset in a transaction of @ reverse m vines wre a private com, ment. ortgage under a schem* wo) Where hip and as Bee een company is converted i sens the partnershi ie company t feted ioe Se rr company, a limited liability intangible it will eset to the Pay 85tGe regarded as transfer provided transfer of Government d the prescribed conditions are sati Security carrying a periodic ayant titorest made curities by a non- (ov) Ntside Indi i outside India through an intermedi ing i ouent ‘ another ee eee dealing in settlement of sec vy transfer of a share of a special pur} s d by that trust, 5 the suaieferon of Sovereij Id ii arte al. Bond issued by the Reserve Bank of India, by waY of ‘o vehicle to a business trust in exchange of «Any transfer g a unit or units held by him in + eng Feonsideration of the allotment rine consolidated plan of that scheme inated bond of .r non-resident. to equity shares fa mutual fund scheme, oix) ADY, ansfer by being a unit or units in tr ‘onsolidating plan o! to him of 2 capital asset, of the mutual d. made outside India of a ¢! (000) Any jdian company issued outside India, apital asset being rupee dene py a non-resident to anothe once shares of a company in (Sec. 48) (ood) ‘Any transfer by WaY ‘of conversion of prefe of that company: (Cc) COMPUTATION OF CAPITAL GAINS under the head ‘Capital Gains’ shall be computed as under + gains it of the ‘The income chargeable cerning as a resul hort-term capital jon received or a! > (a) Computation of sl : Deduct from the full value of the consideratit transfer of the capital asset the following amounts : & ea st of acquisition of the capital asset} (i) the Qf improve? ent thereto; ant . . | (iii) re Pa ‘wholly and exclusively 12 connection with such transfer. i fe form of the tusfion a UNECE! tof ca isiti vost of improve — (Cost of: acquisition + a reas). deduction. This may be explained 37 , Capital Gain = Full value of consideration i ansaction tax shall no! Howevi [Link] securities er, the amount ie 7 loss # e is a sho? term capital los - as can Be net-off against any other ‘short-term Set-off of short-term CaP , such 10s ‘hort-term capital asset ng-term capital gain. (b) Computation of long-term capital gains | Deduct from the full value of consideration * (i) indexed cost of acquisition of the a: Gi) indexed cost of any improvement © Gii) expenditure incurred in connection w? However, the amount paid as securities tran: Exception : The provisions relat improvement will not apply to the long- capital asset : (a) being bonds or debentures. However, thi indexed bonds issued by the Government (ii) Sovere! (b) being an equity share in a company or a un! business trust referred to in Sec. 112A. Set-off of long-term capital loss : ; long-term capital asset, such loss can be set-off on! Explanation : (1) Indexed cost of acquisition shall be computed a: Cost of acquisition x Cost inflati Cost inflation index for the first year or cost inflation index on 1.4.2001, i (2) Indexed cost of improvement shall be computed as under : Cost of improvement x Cost inflation index for the year which the asset Cost inflation index for the year in whi ing to indexet term capital gai efit of indexation will be availa, ereign Gold Bond. t of an equity oriented fund or a yy, ty set; t; and f the ate transfer of the asset. ax shall not be allowed as a gg, isition and ind 1d cost of acquisi! lexeq ins arising from the transfer often 7 ‘th the tran saction t: e bent If there is a long-term ca} index for the year in whick set i in which the asset was held whichever is later sold hthe improvement to asset took place If the expenditure is incurred for improvement prior to 1.4.2001, it shall not be deducte: (3) ‘Cost inflation index’ in relation to Previous Year means the index as the Centr) Government may, having regard to 75% of the average rise in the consumer price inix (urban) for the immediate preceding Previous Year, notify in this behalf. The Government have notified the following ‘Cost Inflation Index’ : s under : in which the asset i pital loss on the tra y against any other long-term ca, UCtiog my le on, fj NS fer op ital pi sold Ea na ‘[Link]. Financial Year Cost Inflation Index_| Sl. No. Financial Year 2 0 ae is 2 2002-03, 105 |. 22. 2012-13 200 3. 2003-04 109 | 2013-14 220 4. 2004-05 u3 ) MW 2014-15, 240 5. 2005-06 uz | 1. 2015-16 6 2006-07 122 16. 2016-17 7 2007-08, 129 a7. 2017-18 8 2008.09 137 18. 2018-19 9. 2009-10 48 | a9 2019-20 10. 2010-11 167 20. 2020-21 Z e of depreciable assets on which depreciation Is alow (c) Computation of Capital gains in Cas. on the basis of the written-down meth (1) The capital gains on dey (i) Find out the written- depreciable assets on which thi down v; are known as ‘block of assets’. 1od preciable assets shall be computed as under : ‘alue on the first day of the previous year of all th e depreciation is allowed at the same rate. All such (See. 2 v vari CAPITAL Gattis aw asset of the same bloc . should be included ne jurehased during t a ing the previous yea f evious year, the cost 8 , 1. is sold out fany of such «i? ould be deduct Tram tre ry eek during the previ sholine balance under (iii) com; lance under (ii), vious year, the net consideration © the balance under (i Pute the deprecinti : r (iii), Preciation at the pi bed » prescribed rate and deduct i) On om it ro janco under (iv) sh it Fralance under (iv) shall be w) Pe eth be the written-down value of th x Jnet consideration of a alue of the ‘block of assets’ for the next et consideration of an asst mA gy sttht eno capital gain. If th out of the block is we etal atin tho not out ofthe bac is ess than the balance unde Gi, im he valtots of the block are block, the excess shal bo eset is more than the balance steel ance under, the lass shall in the previous year odecmd to ae a ion capital git sideration for transfer of asset ¢ deemed to hea short-term capital ideraticn is eee ay expenses connection with transf “ W.D.V. on Ist April ter ysl Gf) cost of the new asset purchased during the year consideration for transfer of all assets onsifpenses in connection witht pas iD V. on Ist April ansfer Weerof the new asset purchased during the year Balance (a spthe balance is positive S..C.G. Jance is negative 8.T.C.L. able at the same rate of z jgthe bal mustration 1 Depreciable assets on 1-4-2017 on which the depreciation is avail g5%h are as WK ler: ‘Asset (1) 1,00,000 ‘Asset (2) 2,00,000 ‘Asset (3) 3'00,000 : ‘Total 600,000 Compute capital loss oF capital gains if: —— somPt018-19 asset (1) is sold for {20,000 and anew asset (4)is purchased for ® 2,50,000- i) in 2019-20 assets (2), (3) ‘and (4) are sold for ® 5,00,000 ‘and spent 7 5,000 on such sale. Gi) in 2019-20 assets (2), (3) ant (4) are sold for % 4,00,000 and spent ® 5,000 on such sale. Solution Computation of Capital Gaine Loss {Jor the Assessment Year 2020-21) z () WD.V. of assets (1), (2) and (3) on 14.2017 6,00,000 Less : Depreciation 1,50,000 WD. re 2018 of block of ASSe*5 og 8.19 450.000 Add : 'd during 2018- 2,50,000 id: Cost of Asset (4) purchased dur ie ae 2 50'000 Leese “Asset (1) sold during 2018.15, at ID. for the Previous Year 201° 80. Less : Depreciation for the ‘Previous Year 2018-19 @ 25% 15 _ (No Capital loss or gains im the Previous Year 2018-19) 4350 (ii) WD.V. for 2019-20 sap 2019-20 “ee are sold during: 5,00,000 65,000 Ifassets (2), (3) and (4) ‘on such sale for % 5,00,000 and spent = 5,000 296 ~e8.0u, “ar 2020-21 BG Nt Less : Solling expenses aggessment Year Wat Short-term enpital gains for the ASSESCG Og0 J sol (ii) assets (2), (3) and (4) are 89 © - om er and spent & 5,000 on such sale -14,35,000-+ 5.0 ss Short-term capital loss = 4,00 ceived a £31, 2016. He re ean, stration 2 900 on AugEst 3 ne ee toe Beaty Serr teetaedtarnenpinat rCiO oe plant amorsed & 2,00,000 00 the Central Government exclusiv' v stroye’ I ‘September 2019, the plant Rites serap sale. ar 2019-20 and profit/loss for thig insurance company e assessee i Play ation up to the AssesSMCP" 1 ciation at 25%. 5 "Gehan Pret eg rte of OP for the assessment . Solution jon of Depreciation Calculatio: eee) (for the Assessment Year at : Cost of Plant on 31.8.2016 ent a Bn rent © Grant received from the Govern’ : et ost sees : ‘ : Depreciation @ 25% for the ‘Assossment Year 2017 3 8 a i 1.4.20 _ 35 Leas Depreciation @: ‘alue on the Assessment Year 2018-19 2 a 4 39 : st z value on 1.4.2018 : it Less: et eration @ op%z for the Assessment Year 2019-20 . 2 i ma ess: ‘Written-down value on 14.2019 2,00,000 32.81) Less : Amount received from the insurance company ena | * ‘amount received from the sale of scrap 20,000 2.10.49 Loss deemed to be short-term capital loss u/s 50(2) for the ‘Assessment Year 2020-21 4.22.81) i abe {des that where any block of assets ceases to exist for the reason that all the assets in the bla, ‘Note: Section 50(2) provides that where sar, the income received by such transfer shall be deemed to be shores are transferred doh, the loss incurred in such a case shall be deemed to be a short-term capital loss. iy cael in this ease, that this plant was the only asset in this block of assets, and hence the loss has been deem} to be short-term capital loss u/s 60(2). = Illustration 3 : ‘The W.D.V. of a Block of Assets consisting of a factory building at the beginning of the Financial Year 2019-20 (Previous Year) is = 10,00,000 and the assessee acquires a godown in May 2019 fort 2,00,000 and then sells all the assets in the block in December 2019 for 9,00,00, Calculate the capital gains or loss for the Assessment Year 2020-21 under section 50(2). Solution Computation of Capital Gains or Loss _____ Yor the Assessment Year 2020-21) W.D.V. at the beginning of the Previous Year 2019-20 - 10,00,000 Add : Cost of godown acquired during the Previous Year 2019-20 _2,00,000 ; Actual Cost of acquisition _12,00,000 Less : Sale Proceeds of all the assets of t Se nr aaa ee of that block sold Loss Deemed to be short-term cay for the Assessment Year 2020-24, 1°88 4/5 50(2) (a) Computation of Capital Gains in case of been claimed on the basis of the Straight Line Gee Sener Cre wohich dept CAPITAL GAINS 27 uisition of such Asset sh Shall bo et of 004 100 TDN. 0 8 rear [Link]. less term tho ind Tran ofthe asset lePFecint WD. adj 05 if Consideratic set ion allowed in the yon at trent ah WD pe 0 am + Pol 0 year of transfor shall be taken Value of : ue of consideration means th ang the price at which an n gold ase of an excl ie she case exchange, the fai oon ange ir mar change will be the full Valgenarket value of the of consideration of sh of considorati property granted in exchange ender a gift or an irrevocable tage EmPloyee Maes Oia cnee Oa ete : Where ndcTpe Tull value of the consi rust, thoes Stock Option Plan or Scheme are toe pital gas Sits the market value on the date of transfor shall mation of eat ge ved or accruing as a result of transfer ter! nt ve Ee ° ioe oes pele wake of consideration of land or buil were, being land or received or accruing as a result eater tel sal 885°° y authority of a State ng or both, is less than the ena ee acoaared or 1 a yin respect cern aan thy theparmse r the purposes of section 48, feat the value so adopted or assessed or ing as a result of such caper ed tobe the full value of the consideration exceed 105% of the ment am hall, or acer Jue asse’ sessed by the stamp valuation authority does not hall be deemed to be the full value of id te of (Sec. 50C) eae , ‘where the va : iero0io™ the consideration received or accruing s eideration- ae Jaims beft a) the assessee © fore any Assess (a) theessable by the stamp valuation st iy exoeo property as oa te isa of transfer; (p) the value so adopt or assessed or assessable b; not been disputed in any appeal or revision or oy aferonce hia Piner authority, court or the High Court, the Assessing: Officer may refer the ‘valuation of the capital ass Where the value ‘ascertained by Valuation Officer : (i) is less # amp duty PUrposes, the A.O. may take such fair market eile to be the full value of (ii) exceeds the value adopted or assessed or ‘assessable by the stamp valuation ‘dor assessable by stamp valuation ‘authority shall be ‘result of the transfer. \dopted or assessed or t the value a t value of the ds the fair market valuation authority has s been made before any et to a Valuation Officer. consideration; stthority, the value SO ‘adopted or assesse ‘ull value of the consideration tecaived or accruing as @ oo the price which the stamp valuation authority hority for the purposes of the Explanation : Expression “assessable” met would have adopted or assessed, if it were referred to such aut payment of stamp duty. (v) Special provision. forthe full value’ of consideration, for the transfer of share other than quoted share: Where the consideration received or accruing aS @ result of the transfer by an assessee of acapital asset, being a share ofa company other than & {quoted share, is less than ‘the fair market value of such share ‘determined in suc’ manner as may be prescribed, the value so determined be deemed to Jue of the consideration receive hall for the purposes of section 48, be the full val ved or aceruing as oraccruing as a result of: ‘such transfer. — sderation 760 ‘The provisi rsuch tran’ ‘311 not apply to any conn’ leration rece’ provisions of this section & py fo 7 gach conditions 88 b ‘ibed. (Sec. 50CA) aresult of transfer by such class of persons and s taken as the it is not ascertainable + Hl oa r accruing as @ Te: of a capita Seed, then, for computing chargeable ‘or ghall be deemed t0 (vi) Determination of full value transfer. apatthere the consideration rece e an assessee is not ascertainab le or canne firital gains, the fair earket value of the Maid asset on the date ote the full value of the consideration re g aS ee INCOME TAX COST OF ACQUISITION aby the assessee. It mean, Cost of acquisition of an asset is the value for which it 8" oe incurred 10 Bear it is the ota, what ‘er cost is incurred for getting a0 asset plus all Ge ‘ora capi asset would constityty 4 Acquisition, Interest paid on money borrowed fOr "Ne purgeen deducted ‘under any other provigi! of the cost of acquisition, provided ‘such interest hast rt notional figure + m In the following cases the cost of ‘acquisition 1S ion : If the asset is acgy, i (1) Cost to the previous owne’ Ee of the asset shall be depy' | ‘acqui deemed t0 be t earl cquisition of te in = by an assessee, in the following iret" 28, juired it. creased hy 4 | previous OW e ASSESSEL. (Ser, 4a 5 i mstanet roperty acd to be the cost for which the mer of the P! oe ron he cost of any improvement of the assets 10° in a Circumstances when the cost of the one eee a (a) on any distribution ‘ofasset on the tol Hin se (b) under a gift or Wills oF — (© by suocession, inhoritane or devolution; on ora compen a teansfe i ple trust; © | irrevocal i / cable or an i i: bsidiary company Which is wig, l | arent compa atpy the parent companys OF | | eee . (@) or the transfer py a subsidiary company © — aa ae 4 pany which a on hole of the share capital ofthe subsidiary cong company 10 ae (m on the transfer of a capital ‘asset by the amalgan pmpany gamaty Onapany if the amalgamated comPANy san Indian company; or @ on the transfer of shares of an van company by amalgamating foreign company, | algamated foreign company; OF ; ; (j) on the transfer: seb in a scheme of amalgamation of @ banking company vig a banking institution ‘sanctioned and brought into force by the Central Government; «r Fthe members of a H.U.F. converts his self-acquired property into HU; ithe property to the H.U.F. will be taken as the cost of the proper, g the property.); or y predecessor co-operative bank to the succs, or erative bank in lieu of shares allotte () on transfer by 2 P: (when any 0 property (The cost E the individual convertin @ onthe transfer of a capital asset by the oo pe vative bank in a business reorganisation; (am) on the transfor of shares in the predecessor co-op ) in the susessor ‘co-operative bank in a business reorganisation; or | in) on the transfer of a capital asset by a private company or unli i | the time of conversion into a limited iiability partnerships or Se cee | (0) on the transfer of a capital asset or intan; ible on the transfer ofa capital asset or intangible asset by a firm to a company asa rest: (p) on a succession of a sole i : proprietary concern by a com| The Lad ng 1 previous owner of the asset means the last previous owner who acquired the ass¢!y “other than those stated from (a) to (p) above. oo nr t Apri, (2) Cost ai 2001, ‘bo orat ample peered @ pire share or security was acquired before 1s shicheve: te benctal & the dktees actual cost or fair market value on Ist April 200 (ii) If it is acquired afte: ‘arck (3) Cost of Bonus per eee the actual cost will be the cost of acquisitie assessee without “ onus shart y «oh i .. y the sce without any payment on the bass of his holding any financial nesct receive Oe a security wa: Ei 8 cial asset will be 25 value on 1st April, 2001; 's received prior to 1; e «matt 10 . + eS) ars (ii) In any other case—Nil. April, 2001, the fair = CAPITAL GAINS 299 “4 2 The assessee pure yan 500 bone See ee gtsee 1.000 equi : 8 to him i $30,000 he may opt 2 20 pa nt 1999. tke tae oy and the Shure as the market value res (1,500) 09 the fair market. val ares «of cet value of shares cost of a arte ost ofnequisilion of original shee oe sf arqusiton a I shares ple BE Tee ce purchased 1 shares and % 8 por Twas ¢ 12,000 he may opt ® 15 mpl 2* 59,900, 250 bonus share ,000 shares in 180htr ao00, shares. a and of bonus shares—Nil. are issued to him i 2007-08 fs el cpt OF acquisition of Goode, ete : Th nel trademark or bran : Tho cost of acquisition i 0 tray entcle 0 ad associated aa peti Lion in relation to (a) goodwill sarriage Per or thing, right to carry on a business; (b) a right to manufacture, jolt gpstage Cm permits; or (e) loom h any business or profe Fate Une assets purchased from a previ hours shall be determined as under : u : 1 ious owner— . . in other ‘case—Nil. However, this will nner - eam of purchase price; a ge the previous 01 er the cases specified i ie a adc no ee ei ce t of acquisition of Right ner had acquired such asset. : [See ppcenta)l , : : [See. 5E ) ies oF ety becomes & Meal Set :In the case where an assessee by holding a share ot sion the basis of right i 0 subscribe additional shares or security (known as & fo cial a58@4 oe of entit right issue, the cost of acquisition shall be ¥ on the asis of ent lement if the assessee subscribed to the Ti ht issue—Amount aval aid to acquire it. ie! ct? of the assessee renounced the ri ) ight .d the right to subscribe shares ion; (c) tenancy psi of mace or pro’ prot gystag in favour of any other person—Nil for the additional shares/security Ms the amount paid to the i (ii) Ifthe assessee has purchase (gnancial asset)—Purchase Price paid to purchase the right plu company £07 ‘acquiring the rights shares/security. {See, 55(2)(aa)] grample wir. X holds 1,000 ® 10, units of a Mutual Fund. The MF. has announced a rights iss¥° of 20%: oforiginal units held pya person @% 13 per unit. X exercises his right for his entire holding. Find out his cost of acquisition of rights units. Solution Mr. Xis entitled to 200 units of the rights issue 07 his holding of 1,000 units. Hence, cost of acquisition of 200 units @@ 18 per unit =@ 2,600. 1 Example (i) , Mr. X purchased from Mr. Y the ‘rights’ to subscribe for 200 rights units ofa Mutual Fund @%2 per unit and paid = 13 per unit to the MF. Find out the cost of acquisition of 200 rights units. Solution z ‘Amount paid to Mr. ¥ to purchase the right for subseribing 200 rights units @® 2 per uit , ‘Amount paid to the M.F- for 200 units @% 43 per unit Cost of acquisition of 200 Rights Units «Illustration 4 = tered bi Mr. Ram, ani eld 1,000 equity shares, jna company. The company offere nev equity shares verter Fe Spares at @ 1 essional price on 3 Oth Oct., 2019. He renounced his 19. The market * aue of the equity share before the issue OF cet vale same down to® 350 Per ‘share. compute tights for 75,000 on 20th Oct. 2087. urenoe eas ead ~» 201 rer such issues iby es was? 400 per SHAE OP ye renouncemens of his rights. the amount of capital gains, if py Solution 75.04 ; me ital Gains Nj Amount received on the renounce? 4-term Capita’ Pa net Bost of acquisition of Fights ison onooenur® im Cater of Fight to “honstts sppecause it for —sehort-term capital gain Decay it hips before tans Note Proc ct rm spe tan 1208 for ¢ 40 per share in 2007, 7 7 = Mlustration 5 ; of ZH ‘or eceives 100 bonus a 4 ty Shares 1 he recei US shared ‘Mr. Kishore, purchases 309 Baits rage. 10 May 2011 2 Too bonus shares in No re incur an expenditure of ¢ 400 0" Frcs for € 20 e802, ‘share in Decome 2019. Find gat 2 30 per Share Aion index for 2011-12 way ft September 2019 he gets 1 i 1S 019 he Bete nd 100 rights SPATS 57 The cos 2019 at % 90 per {otal capital gains for the Assess™ : and for 2019-20 it was 289- station of Total capil a Gains Solution Comb ahe Assessment Year 2020- a 009 Sale Proceeds of 100 Bonus Shares Toss : Cost of 100 Bonus Shares Long-term Capital Gain xa Sale Proceeds of 100 Rights Share’ @x30 each 5 Less : Cost of 100 right shares @z 20 eat Short-term Capital Gain rig i ans = £9,000 + 1,000 = % 10,000. 1000 ‘Total Capital Gains Oana ired before 1-4 re th 1, 2001, the cost of acquisition of the assy ‘sition of a Capital asset acd y one of the following : 6) Cost of acquis r tooae the ‘property of the assessee before Ist Apr! may, at the option of the assessee, be taken to be an: @ the cost of the asset to the assessee; Of ; (i the fair market value of the asset on 1st April, 2001. = Mustration 6 ‘Mr. Krishna purch on 2-9-2019 for % 15,00, on sale were 2% of the trans! the Cost Inflation ased a piece of Jand on 4-1-1998 for ¥ 50,000. This land was sold by hin ‘as on 1-4-2001 was % 1,00,000. Expenses ‘000. The market value of land for price, Compute the Capital Gains (taxable) for the Assessmet Index for 2019-20 to be 289. [Sec. 55(2Xbyiy | Year 2020-21. Assume Solution Computation of ‘Taxable Capital Gains (for the Assessment Year 2020-21) z t Sales Proceeds of Land 15,00,00 Less : Expenses incurred @ 2% of Sales "30,000 Net Sales Consideration —_14,70,000 Less : Indexed Cost of acquisition (% 1,00,000 x 289 + 100) 2,89,000 Taxable Capital Gains _11,81,00 | Note : Actual cost in 1998 is 60,000 and fait is ina ee seer has an oendesel forthe purpose fining thecodls a val ensidered forthe purpose of indexing, the cost. any & DA Cost of acquisition of an asset acquired by the previous owner before 1st April, 2001 by cllowed) became ‘the 70) econ! asset (other than an asset on which depreciation has beet neeoniales y previous owner before i td ae the asset may, atthe option of the assessee, be abe Os beeep on othe fallow ore acquisition of the asset to the previous ow: £09 one ot eae ite :In case ee value of the asset on Ist April, 2001 eae 5(2nbxi! In cas of npital assets, being land or bulding or both the fair market value of such an ee / Assessment Year 2021-22) uch asset as on Ist April 2001 where such stamp duty value CAPITAL Gains 7 — ju! ond idontint hous top ——# Joc pitued Ube hoo to ¥ ino in 1998.9 . in 20 99. The fii . The fair market value on 1.4.2001 wan ¢ 420,000. % filed a uit 004-05. The fai i ONY claimine Mut Market value of the house on the re oC fw smpromising, Uno wt fr com Ir Uho suit, ¥ ning the yuo 2 jarycouble pital wold Uh tho title i ne a tg-20 wore 100, Yuan in ineiaeane on 10th Decor ao property. Y paid at WH ened ante eX and [Link] December, 2019 for % 23,00,000. Cone in ost inflation index in 2001-02, atv eee inniment Your 2002) gil dese cost of acquisition to X (@ 2,99 : ,00,000 x 289 23,00,000 Char eae . 5,78,000 igeable Capital Gains ~17,22,000 ul tho property to ¥ 0 Yaw 0 git 1 Lhe nat ti The transaction isnot regarded no arded as a transfer. Hence, there is Hii natte te far market value on the dat of itn ahs aapsakeves tote donee hs 10 Thea pa / npromising the suit dont af improvemen thoroto. "The paymont in made fe Go 7 uting cond ial gains arising on transfor Widor sift or wi Goa GORGES eee nee adr crown ower fit hold he onan nk ctpute ith satrene tothe ser write nO ea and nota year in which sense ‘became the owner | _ Plewse ‘note, the Commissioner (Appeals) as ral a the Tabane a (2012) 204 Taaman 691 (Bom) (g)Cost ofacquisition of shares inan amalgamated Ci una allowed the stresses a m INCOME TAX 5,00,000 10,95 004 Amount paid (o tenant 2 7 20,0048 + Indexed cost of nequisition 8,67,000 = §,00,000 s 289 + 100. Indexed cost ‘of improvement 1,44,500 10,1) Dy the assensee 12885, Sica ete i Notes :(1) Adyanes money forfeited 0 ae ii rte and changeable wee ‘i from the cost or FMV of tho ASE 6 property qoductible as selling exPenSeS- on eee co Mate tenant for vacating the 00 ees COMPUTATION OF CAPITAL GAINS o Sere cs ise struction ol ae. 45 f damage or dest ious year any money OF oer gt me during count of di quake, or other conv! ~ (1) Capital Gains in case 0! Where any person rece! under any insurance from an as a result of : amage to or destruction of, any capital gt ee, Ision of nature; o, spoon, hurricane, cyclone, earth i] disturbances, or ot dental fire or explosions OF | (iv) action by an enemy or action taken in combating 4) iMgeclaration of war), then, any profits or gains ans Ghargeable to tax under the hea ere come of the previous year i Computing capital gains, the valve of any mon\ comPisd on the date of receipt shall be deeme’ received or accruing as a result of the transfer 0 = (2) Transfer by way of Conversion of Capital Assets into Stock-in-trade [See. 4549) ‘The profits or gains arising from the transfer by way of conversion by the owner of a capi, asset into stock-in-trade of a business ine tied on by him, shall be charged to tax under the hee ‘Capital Gains’ in the year in which such wick js sold or otherwise transferred by him. Forty purpose of computing the Capital gain in sudl fair market value of the capital ass on the date on which it was ‘converted into stock-in-trade shall be deemed to be the full valued the consideration received or accruing as a result of the transfer of the capital asset. Hower, the conses of actual sale consideration over the fair market value on the date of conversions deemed to be a business profit. = Mlustration 11 Siddharth converts his plot of Jand purchased in the year 2001-02 for = 40,000 into sto in-trade on Ist April, 2019. The fair market value on 1st ‘April, 2019 is % 4,50,000. The stot in-trade is sold for % 4,90,000 in May, 2019, Find out the taxable income, if any, and ifso unde itch ‘head of income’? The cost inflation index in 2001-02 was 100 and in 2019-20 it was 28 n enemy (whether With or with, t eceipt of such money OF other asset sh, ad ‘Capital Gains”. The income shall be deemed w ‘in which such money OF other asset is received, y, ey or the fair market value of an aa” I to be the full value of consideratin f damaged asset. Solution Computation of Taxable Income i (for the Assessment Year 2020-21) z ‘ 1. Business Income (¥ 4,90,000 — % 4,50,000) so. 2; Long-term Capital Gains : 4,50,000 1,15,600 sate ’ Taxable Income 3:25 Notes: 1. ater esate 4512), the fair market value of the asset converted into stock on the date of eonversitn® a ee einerer te value of the consideration and the excess of this consideration over {h¢ inte Bee ecstasy factual the asset shall be capital gain and taxable under the head ‘Capital Gains, ea ee eae Fair market value of lands on 1.4.2019 Less : Indexed cost of acquisition (¥ 40,000 x 289 + 100) a CAPITAL GAIN: stration 12 ° = sed a capital fo pital asset on & n-trade as on Au orp 10, 2017 1 aaa dO: 2017 for ® 3,00,000. He e ed thi Oe Aug. 8, 2019 the fair nase value ofthe ea or 550,000, Calculate total taxable income. pureh into stoc 150,000. He sold this stock on Jan, tio” 5 * Computatio: (for the Assert Taxable Income ment Year 2020-21) ncome from the business & professio ‘sion : Inger price of stock — Pair market Capital gains et value (& 5,50,000 — 4,50,000) 1,00, 000 hing price (being fair market v; soritGost of acquisition cman) 450,000 ‘ Short term capital gains 300.000 1,50,000 fer of Securities hi ‘Taxable Income _2,50,000 — (3) Trans eld with Depositor 2,50,000 ry [Sec. 45(2)] \yhere any person has had at any ti - anties, then, any profits or gain: as time during the previous year any beneficial interest in secur peneficial interest in res arising from transfer made by the Depositary ¢f articipant ofsuch Towner of the previous pect of securities shall be chargeable to ta Qe inpome of the 7 year in which transfer took place and not of the Depository who is deemed to be the registered owner of Securities. (4) Transfer of Capital Asset to a Firm, AOP or BO! (see, 4618) Maret b oe et Fo of the association of persons or body of individuals transfer a ae “s ont a eatitiven or otherwise to the firm/association, the gains arising transfer takes place. -geable to tax as his income of the previous year in which such ‘The amount recorded in the books of firm/association as the valu ff the asset sha deontri to be the full value of the consideration received or fas te ae a Iilustration 13 X, Y and Z for building as his capi value of the building capital account by? for relevant years is : 2004 11 be rmed a partnership firm in 2019-20 to carry on & business, X contributes a ‘tal. He purchased this building in May 2004 for @ 2,00,000. The fair market ‘on the date of contribution was @ 20,00,000. However, the firm. credited his 19,00,000. Compute the amount of capital gains. The cost inflation index 05-113; 2019-20—289. Solution J Computation of Capital Gains {for the Assessment Year 2020-21) r Amount Credited to the capital account 12 F + (€ 2,00,000 x 289 + 118) 511, Less : Indexed Cost Long-term Capital Gains _13,88, 3,496 a jehitis transferred to a firm, is not considered for computing arthg asset on tbe daton ie oat of tho frm i emldered fl valve Note: The fair market value Jue of the asset capital gains. The val consideration of asset Is 45(4)] > Bol ec (6) Transfer by a Firm, AOP oF BOF body ofindividuals transfer a capital asset on its i ising to the firm/association shall be tion of pers' vember the gains a7 é ich such transfer takes place. The fair ‘Where a firm or associa the full value of dissolution or otherwise to 2 partner/m™ i i whi chargeable to tax as its income of the previous yon fer Bhall be deemed to be market value of the asset on the Gate of such tr: consideration received or accruce- ae INCOME TAX 00 are taken over by My = Illustration V4 costing € 60.0 Vina i alissotved Hts investments Show Wer costing % 60¥ Se eeaael A parmer at an ayreed pri ts inert ge meet wala ar nes stmentin® 1,193 Compute the amount of capital gains: Solution : tomputa of Capital Gains Fair market value of the asset 21000, Short-term Capital Gains 3h pot elored ta ealewlate profit. Pair marke isnot Cideration of the asset, eT Enhanced Compensation USee, 45, er any law the capital gains in such a ¢, ° shall be chargeable to tax of rst js taken by the partner is Considered full val n Asset and acquired und! re asset ofthe firm fhe date of trans Acquisition of al compulsorily Note: At what price th of the asset on t (6) Compulsory set UI We ¥ Where an i shall be dealt with 2 under suet (a) Capital £ ‘computed at the time of acquisition b ' i ‘Pat Guch compensation or part ‘hereof or such consideration or ,.% previous year in W! Pre neof, was first received. (b) The amount of compensation enhanced or furthe’ a it shall be deemed to be the capital gains of the previ i voceived by the assessee. i ie rere compensation is received in pursuance of an interim order of any authority Trncreart, it shall be deemed to be income ee geable of the previous year in which final order of authority or court is made. . (@) Where in the assessment for any year, (16 capital Where in tpeen computed under (a) or (b) and Subsequently such compensation asset jeration is reduced in an appeal, such 208 Sed capital gain of that year shally consi dented by taking reduced compensation oF ‘consideration. Explanation : In relation to (b) ire fost of acquisition and the cost of impr GD Where the assessee expires or for any oth spersnsation is received by any other person, comPeh amount under the head capital gains. = (7) Computation of Capital Gains in case of Specified Agreement (Sec. 45(64) [Specified agreement” means a registered agreement in which = i building or both agree to allow another person to develop. a I nctate project on auch laa building or both in consideration of share in land or building or fot in stich project, ate Ruth on without part of the consideration in cash. Project, whethr Anscsoce : A individval or HUE, who enters into specified agreement. iI value of consideration : Stamp duty value of his share in the develo i date of asue of completion certificate plus cash consideration if any. ped projest oe are : Full value of consideration less cost of the asset tr: Tax liability : Tax liabilit ital gai ei certificate of completion for the Reiser earcer th would arise in the previous year it nd eae eae re eae Bere project is issued by the competent author! Full value of consideration : Stam, ao a the date of issue of a certificate af com? on the date of transfer of asset under ap duty value or: actual consideration, whichever is big Capital gains : Full value ofeonsideration Te: eens agresne ion less cost of the asset transferred un rax liability : Tax liability of capital gai ; eee would arise in the previous year in which | +; enhanced by any authority or ae year in which such om gain arising on transfer of capitg ovement shall be taken to be nil. er reason the enhanced/further enhance, ‘the other person shall be liable to pay ta ansferred under speci! der specifid 307 — @ Transfer of Units * “the diffe .d the cap FS units and, previous year in which Tuck ball be deemed to be wel uurchased is terminated. ‘The “purch; er assessee in the units, capital 1 (@) Computation of Capital Gai (2) Caiea securities Gains on purchase by Company of its own shares or oth res or other (Sec. 46A) ‘Where a company purchases i " its own sh m its holder, then the capital gai ‘ares from a sh; i iti 1 er bea sea al chargeable to aan te hand of the transfor 1M hed securities are purchased by ee ia Bee: 48 fa the yoann whic such shares or ia mputati i it A > OO ei eee ee jasine in case of Slump Sale (See. 50B) long-term capital gains ofthe previous sal fete nthe previous ene shal e chargeable peale res pi year in which the transfer took place. However, gains on or more undertakings owned and held by the assessee for slur] t more than 36 months i i : no immediately preceding the date of its transfer shall be deemed to be mport-term capital gains. ‘The ‘net worth’ of an undertaki: visi spb ne bot of acquisition and aking or division transfered by way of sump sale shal be deemed a ‘indexed cost of acquisiti provement for purposes of sections 48 and 49. It is to be noted quisition of long-term capital asset shall not b idered i sh ie ‘The assessee shall furnish in th i eee ein ly, a report of Ch: aA, in the prescribed form along with the return of income electroni- cally. a0 part inattered poate indleating the ‘computation of net worth of the under- sic srtifying that the net wort ived at i taking or division om fils eset ‘et worth has been correctly arrived at in accordance ‘Slump Sale’ It means the transfer of one or more undertakings as a result of the sale for alump-sum consideration without values being assigned to the individual assets and liabilities [Sec. 2(42C)] in such sales. ‘Explanation 1 : “Not worth” shall be the aggregate value of total assets of the undertaking or division as reduced by its liabilities as appearing in books of account. However, any ange in the ‘all be ignored for computing the net worth. onjue of the assets on account of revaluation of assets sh ‘txplanation 2: For computing net worth, the aggregate ‘value of total assetghall be = the W.D.V. of the block of assets determined ‘ws 43(6) (a) in the case of depreciable assets, item (d) (See ‘Depreciation’ W.D.V.); (b) in the case of capital asset in ‘respect of which the whole of the expenditure has been allowed as a deduction ‘ws 35AD—Nil; and (c) in the case of other assets, the ‘book value of such assets. > Capital Gains Exempt from Tax ‘Any profits or gains arising from the following assets are exempt from tax, for tax purposes the transfer of idence : Any capital gain f the assessee ies thay Pin mot be included in the income oT ry used for resi . is isi: the transfer of P! - rr res! oe erie eet of house or land appurtenant thereto is exempt subject to the ellen jee. 5: conditions : coe 7 ra 7 one erie individual or Hindu Undivided Family. (i) The building is owned bY 7,5 a residential house: isrgeable under the head ‘Income from House Gi) Such property was being ; (ii) The income of such house property is ch Property’. * i aly in relation to house property which (iv) The exemption will be ava eesing ‘oa months before transfer. by the tax-payer fF Pethin ‘a period of one year before or two years after the date of (o) (a) The “assesses sed within ental house in Indias or ral had been held we INCOME TAX safer the date of transfer construe, ~~ od A) He has within a poriod of three years y residential house in India, hy Quantum of exemption - identi 2 ino Moe ee tie ning from the tranafor of auch resident) house is exempt talent aE rant BERET FESTTERETAT ea ce ee ie acauisg, ’ i tal ynin is not utilised by the assess im ji) Were the amt anni HN et gata of mene isting Ee ee niateneelee serene of furnishing the return of income iy deposited by him on or before the d in < Account Scheme, 1988, with a specitigg faa necount opened under the Capital Gains A me entitled for exemption. . . Wi ee ot cemption and Tax on Sale of the new house : Ir the new house (pure, or constructed) is transferred within a period of three youre of its purchase or constructig%ed x eempted capital gains and new capita” the will be withdrawn. The old fer of the new residential Ms 4 rt fe previous year in which the new residential exemption given earh (ifany) arising on the trans’ gain and chargeable to tax as the income of thy is transferred a _ Tox on the unutilised amount : If the amount deposited is not utilized fully for ag the new house within the period stipulated (i.e., le a see ne ne amount not so utilized shalll be treated as the long-term capital gain of the pr house) uthich the period specified expires. The taxpayer shall be entitled to withdra {amount in accordance with the scheme. Effect of Capital Gains Account Sch if the assessee cannot utilise the capital due date for furnishing the return of income, aforesaid date in order to avail this exemption. for acquiring the new house within 3 years from the date of transfer of the old house, Amendment we.f. the Assessment Year 2020-21 : cme : The effect of the new scheme for deposits 3 years from the date of transfer of gy. 1 house shall be treated as short-term gets me Binal "EVious 1 such is thay gain for the acquisition of a new house on or before he may deposit it under this scheme up to a ‘After such deposit, he must utilise the depo. posit It the amount of capital gain does not exceed two crore rupees, the assessee, may at hy option, purchase or construct two residential houses in India instead of one. be entitled to exercise the option for any other assessment year. = Example In the following cases determine the taxable capital gains u/s 54: Ifthe assessee has exercised the aforesaid option during any assessment year, he shall nt (a) (i) Indexed cost of residential house Sent (ii) House sold in P. Y. 2019-20 Tero (ii) Two New residential houses purchased in P. Y. 2019-20 __ cost ¥ 3 crore and % 2 crore 5 erore (b) ( Indexed cost of residential house 2.5 crore {@) House sold in P. ¥. 2019-20 4.5 ere iii) Two new residential houses purchased in P. : a ea P in P. ¥, 2019-20 & 0.75 crore each. | Computation of Taxable Capital Gains oe (for the Assessment Year 2020-21) u (a) Consideration received erat | Less : Indexed Cost 3 erat : Terme Less : Exemption w/s 54 (Residential house purchased) te Serr | Len Taxable Capital Gains Note : Capital Gains excee et benes ae . fore: Capital Gai 'd ¥ 2 crore, hence assessee is eligible for exemption in respect of one residential ho! ase om deration received Indexed cost Consi Less: iss: Exemption w/s 54 i d} le (Two residential } houses purchased) ° pital Gains do not exceed & 2 crore Tax: hone, : , exomption is avaitanie able Capital Gains ’ ae Mr. P owns & residential house at Agra whi galls the pouse for t 35,00,000 on Ai \ich he acquired i es apruary 14, 2020 for Z 20,00, O00 Ping 2029. He Se eee oe jy 202296808 dt harm rl an re . ains chargeable to tax fo tion in -10 ans -21 spective] ‘The cost infla ion in 2009-10 and 2019-20 is 148 and 289 res] ly. Computation of Taxable Capi i or the Assessment Year 2020-20) sale Proceeds z [oss : Indexed cost of acquisition (¥ 2,96,000 x 289 « 148) 35,00,000 " * : 5,78,000 ‘Vonp-term Capital Gains 29,22,000 20,00,000 Less : Exemption ws 54 : Cost of new house ‘Taxable Capital Gains 9,22,000 Mustration 16 ‘Mr. Ram had been living in a house which he purchased in 2001-02 for 4,00,000. The acquired by the Government in July, 2019 and compensation of Z 25,00,000 was paid (00,000. The additional compen- ‘lls the new residential house in house Was to him. He purchased a residential house in Feb. 2019 at % 15, 70,000 will be given to him in March, 2021. If he sel sation of € Setober, 2020 at % 16,00,000, compute the ar nt of capital gains, chargeable to tax for the “Assessment Years 2020-21 ‘and 2021-22. The cost inflation index in 2001-02 was 100 and in 2019-20 it was 289. Solution Computation of Taxable Capital Gains (for the Assessment Year 2020-21) z Compensation received 25,00,000 Less : Indexed cost of the house (© 4,00,000 x 289 + 100) 11,56,000 Long-term Capital Gains 3,44, 000 15,00,000 ypased in February, 2019 15 ouse is more than the amount Cost of the new house pure eal ‘as the cost of the new h Capital gain chargeable to tax—Nil, of capital gain. ji ital Gains tion of Taxable Capital Ga Compan OP sessment Year 2021-22) 16,00 PY Selling price of the new House ased in February 2019 ae sone Cost of the new house oo Capital Gains) __1,56,000 eae Short-term Capital Gains 14,44,000 @ 15,00,000 — Additional Compensation ‘Taxable Capital Gains 15,14,000 the new house 27° ghort-term capital gains beeause the new house is not held by the Note : The gains on #ANSFE 94 months ‘assessee for mor

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