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PROF.VINIT KUMAR TAXATION 9873126173

INCOME FORM CAPITAL GAIN

BASIS OF CHARGE - SECTION 45

The following are the essential conditions for taxing capital gains:
• There must be a capital asset;
• The capital asset must have been transferred;
• There must be profits or gains on such transfer, which will be known as capital gains; and
• Such capital gain should not be exempt u/s 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA or 54GB.
If all the above conditions are satisfied, the capital gains shall arise and taxed in the previous year in which
the asset is transferred.

Section 2(14) - DEFINITION OF 'CAPITAL ASSET'

EXCLUSIONS: Following items NOT be treated as capital assets:

1. STOCK-IN-TRADE

2. PERSONAL EFFECTS

3. RURAL AGRICULTURAL LAND IN INDIA

4. Gold Deposit Bonds issued under the Gold deposit Scheme 1999 or issued under the Gold Monetisation
Scheme, 2015 notified by the Central Government.
Gold Bonds Following gold bonds issued by the Central Government are not capital asset:
6.5% Gold Bond, 1977 🖸 7% Gold Bonds, 1980; and 🖸 National Defence Gold Bond, 1980
Special Bearer Bond Special Bearer Bond, 1991 issued by the Central Government are not capital asset.
Note: It is not necessary that the assessee should be the initial subscriber.

SHORT-TERM CAPITAL GAINS v/s LONG-TERM CAPITAL GAINS

• The period of holding of a capital asset determines whether such capital asset would qualify as a short-term
capital asset or a long-term capital asset.
• Generally, a capital asset is said to be a short-term capital asset if its period of holding does not exceed 36
months (ie 3 years); if the capital asset is held for a period exceeding 36 months, it is said to be a long-term
capital asset. However, there are certain exceptions to this general rule. The exceptions have been captured
in the table given below (POH = Period of Holding):

Type of Capital Asset Short-Term. Long-Term

Listed Shares (Equity/Preference) POH < 12 Months POH > 12 Months
Unlisted Shares (Equity/Preference) POH < 24 Months POH > 24 Months
Listed Securities (Debentures, Bonds, etc) POH < 12 Months POH > 12 Months
Units of Unit Trust of India ('UTI') (Listed/Unlisted) POH < 12 Months POH > 12 Months
Units of Equity Oriented Mutual Fund (Listed/Unlisted) (in POH < 12 Months POH > 12 Months
an equity oriented mutual fund, at least 65% of the total
funds are invested in equity shares)
Zero Coupon Bond (Listed/Unlisted) POH < 12 Months POH > 12 Months
Immovable Property (Land/Building/Both) POH < 24 Months POH > 24 Months
Any Other Capital Asset POH < 36 Months POH > 36 Months
CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

DETERMINATION OF PERIOD OF HOLDING IN SPECIAL CIRCUMSTANCES

Clause (i) of explanation 1 to section 2(42A)
Circumstances Period of holding
Shares held in a company in liquidation Exclude the period subsequent to the
date of liquidation
Asset becomes property of the assessee by virtue of sec 49(1). Include POH of previous owner
Allotment of shares in the scheme of amalgamation/Demerger Include POH of shares in
Amalgamating/Demerged Co.
Right shares / securities, Bonus shares From the date of allotment of such
share or security
Right to subscribe to any share or security From the date of offer of right.
Units become property of assessee in consideration of transfer of units Include POH of units in
in consolidated scheme of MF referred u/s 47(xviii). consolidating scheme of MF.
Where share/s of a company is acquired by NR assesee on redemption Period from the date on which
of GDRs held by such assessee redemption request was made.
Equity share becomes property of the assessee by way of conversion of Include POH of preference shares.
preference shares into equity shares u/s 47(xb)
Units become property of the assessee in consideration of transfer of Include POH of units in the
units in the consolidated plan referred u/s 47(xix). consolidating plan of MF.
ESOP or sweat equity shares allotted by employer Period from the date of allotment or
free/@ concessional rate to his employees/ former employees. transfer.
Conversion of inventory into capital asset Date of conversion

Section 2(47) DEFINITION OF 'TRANSFER'

Transfer, in relation to capital asset, includes:
❑ the sale, exchange or relinquishment of the asset
❑ the extinguishment of any rights therein (like forfeiture of shares, repayment in case of liquidation of
companies, etc);
❑ the compulsory acquisition thereof under any law for the time being in force;
❑ conversion of a capital asset into stock-in-trade;
❑ the maturity or redemption of zero coupon bonds (Section 2(48) defines a 'zero coupon bond' to mean a
bond in respect of which no benefit is received before maturity or redemption and are generally redeemable
after a period of minimum 10 years and maximum 20 years. Such bonds are generally issued by infrastructure
capital company or infrastructure capital fund or any scheduled bank or public sector companies notified by
the Central Government):
❑ Any transaction allowing possession of any immovable property to be taken or retained in part
performance of a contract of the nature referred to u/s 53A of the Transfer of Property Act, 1882
(Section 53A covers cases where possession of the property has been handed to a proposed buyer and
consideration has been paid/promised to be paid by the proposed buyer to the proposed seller but the
property has not yet been registered in the name of the proposed buyer. Handing over the possession in such
cases shall also be regarded as transfer); and
❑ Any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society,
company, AOP, etc or in any other manner whatsoever) which has the effect of transferring, or enabling the
enjoyment of any immovable property permanently.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

Section 46 & 47 Transactions not regarded as “Transfer” [ Section 47]

46(1) Any distribution of capital assets in the event of liquidation by a company to its share-holders shall not be
treated as transfer in the hands of company.
47(i) Any distribution of capital assets on the total or partial partition of an HUF.
47(iii) Any transfer of a capital asset under a gift or will or an irrevocable trust. Exception: Gift of shares
acquired through Employees Stock Option Plan (ESOP) shall be treated as Transfer
47(iv) Any transfer of a capital asset by a 100% holding company to its Indian subsidiary company.
47(v) Any transfer of a capital asset by a 100% subsidiary company to its Indian holding company
47(vi) Any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the
amalgamated company if the amalgamated company is an Indian company.
Transfer must be in a scheme of amalgamation.
Transferee company must be an Indian company
47(via) Any transfer, in a scheme of amalgamation, of a capital asset being a share or shares held in an Indian
company, by the amalgamating foreign company to the amalgamated foreign company, if –
a) At least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders
of the amalgamated foreign company; and
b) Such transfer does not attract tax on capital gains in the country, in which the amal-gamating company is
incorporated..
Such transfer is in a scheme of amalgamation by the amalgamating foreign company to the amalgamated
foreign company.
Transferred asset must be a capital asset being a share or shares held in an Indian company.
At least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of
the amalgamated foreign company.  Such transfer does not attract tax on capital gain in the country, in
which the amalgamating company is incorporated.
47(viaa) Any transfer of a capital asset by a banking company to a banking institution in a scheme of
amalgamation of such banking company with such banking institution sanctioned and brought into force by the
Central Government u/s 45(7) of the Banking Regulation Act, 1949.
47(viab) Any transfer, in a scheme of amalgamation, of a capital asset, being a share of a foreign company,
(referred to in the Explanation 5 of sec.9(1)(i)), which derives, directly or indirectly, its value substantially
from the share or shares of an Indian company, held by the amalgamating foreign company to the
amalgamated foreign company, if: a. at least 25% of the shareholders of the amalgamating foreign company
continue to remain shareholders of the amalgamated foreign company; and b. such transfer does not attract
tax on capital gains in the country in which the amalgamating company is incorporated.
47(vib) Any transfer, in a scheme of demerger, of capital asset by the demerged company to the resulting
company, if the resulting company is an Indian company.
47(vic) Any transfer, in a scheme of demerger, of a capital asset, being a share or shares held in an Indian
company, by the demerged foreign company to the resulting foreign company, if –
a. The shareholders holding not less than three-fourths in value of the shares of the de-merged foreign
company continue to remain shareholders of the resulting foreign company; and
b. Such transfer does not attract tax on capital gain in the country, in which the de-merged foreign
company is incorporated:
Such transfer is in a scheme of demerger by the demerged foreign company to the resulting foreign
company. Transferred asset must be a capital asset being a share or shares held in an Indian company.
Shareholders holding not less than 75% in value of the shares of the demerged foreign company continue to
remain shareholders of the resulting foreign company
Such transfer does not attract tax on capital gains in the country, in which the de-merged foreign company
is incorporated
47(vica) any transfer in a business re-organisation, of a capital asset by the predecessor co-operative bank to
the successor co-operative bank

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

47(vicb) Any transfer by a shareholder, in a business reorganisation, of a capital asset being a share or shares held
by him in the predecessor co-operative bank if the transfer is made in consideration of the allotment to him
of any share or shares in the successor co-operative bank
47(vicc) Any transfer in a demerger, of a capital asset, being a share of a foreign company (referred to in the
Explanation 5 of sec. 9(1)(i)), which derives, directly or indirectly, its value substantially from the share or
shares of an Indian company, held by the demerged foreign company to the resulting foreign company, if: a.
the shareholders, holding not less than 3/4th in value of the shares of the demerged foreign company,
continue to remain shareholders of the resulting foreign company; and b. such transfer does not attract tax
on capital gains in the country in which the demerged foreign company is incorporated. Provided that the
provisions of sections 391 to 394 of the Companies Act, 1956 shall not apply in case of demergers referred
above.
47(vid) Any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders
of the demerged company if the transfer or issue is made in consideration of demerger of the undertaking.
47(vii) Any transfer by a shareholder, in a scheme of amalgamation, of share(s) held by him in the amalgamating
company, if –
(a) The transfer is made in consideration of the allotment to him of any share or shares in the amalgamated
company except where the shareholder itself is the amalgamated company, and
(b) The amalgamated company is an Indian company.
47(viia) Any transfer of a capital asset, being foreign currency convertible bonds or Global Depository
Receipts referred to in sec. 115AC(1), made outside India by a non-resident to another non-resident.
Transferred asset must be either ‘foreign currency convertible bonds’ or ‘Global Depository Receipts’.
Transfer has been made by a non-resident to another non-resident.
Transfer has been made outside India
47(viiaa) Any transfer, made outside India, of a capital asset being rupee denominated bond of an Indian
company issued outside India, by a non-resident to another non-resident.
In case of non-resident, any gains arising on account of appreciation of rupee against a foreign currency at
the time of redemption of rupee denominated bond of an Indian company held by him, shall be ignored for the
purposes of computation of full value of consideration under this section
47(viiab) Any transfer of a capital asset, being— a. bond or Global Depository Receipt referred to in sec.
115AC(1); or b. rupee denominated bond of an Indian company; or c. derivative, made by a non-resident on a
recognised stock exchange located in any International Financial Services Centre provided the consideration
for such transaction is paid or payable in foreign currency
47(viib) Any transfer of a capital asset, being a Government Security carrying a periodic payment of interest, made
outside India through an intermediary dealing in settlement of securities, by a non-resident to another non-
resident
47(viic) Any transfer of Sovereign Gold Bond issued by the RBI under the Sovereign Gold Bond Scheme, 2015,
by way of redemption, by an assessee being an individual
47(ix) Any transfer of a capital asset being a work of art, archaeological, scientific or art collection, book,
manuscript, drawing, painting, photograph or print, to the Government or a University or the National
Museum, National Art Gallery, National Archives or any such other public museum or institution as may
be notified by the Central Government in the Official Gazette to be of national importance or to be of
renown throughout any State or States.
47(x) Any transfer by way of conversion of bonds or debentures, debenture-stock or deposit certificates in any
form of a company into shares or debentures of that company.
47(xa) Any transfer by way of conversion of bonds referred to in sec. 115AC(1)(a) into shares or debentures of
any company.
47(xb) Any transfer by way of conversion of preference shares of a company into equity shares of that company
47(xii) Any transfer of a land of a sick industrial company, made under a scheme prepared and sanctioned u/s 18
of the Sick Industrial Companies (Special Provisions) Act, 1985 where such sick industrial company is being
managed by its workers' co-operative. Such transfer must have been made during the period commencing
from the previous year in which the said company has become a sick industrial company and ending with the
CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

previous year during which the entire net worth of such company becomes equal to or exceeds the
accumulated losses.
47(xiii) Any transfer of a capital asset by a firm to a company as a result of succession of the firm by a company
in the business carried on by the firm subject to following conditions:
(a) All assets and liabilities of the firm relating to the business immediately before the succession become
the assets and liabilities of the company.
(b) All the partners of the firm immediately before the succession become the share-holders of the
company in the same proportion in which their capital accounts stood in the books of the firm on the date of
succession
(c) The partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form
or manner, other than by way of allotment of shares in the company; and
(d) The aggregate of the shareholding in the company of the partners of the firm is not less than 50% of
the total voting power in the company and their shareholding continues to be as such for a period of 5 years
from the date of succession.
Transfer must have taken place as a result of succession of the firm to a company.
All assets and liabilities related to the business must have been transferred.
All the partners become the shareholders of the company in their capital ratio (as on the date of the
succession)
The whole consideration shall be paid by allotment of shares in the company
Partners (altogether) must hold atleast 50% of the total voting power of the company
Lock in period for above share is 5 years from the date of succession. Any transfer of a capital asset to a
company in the course of demutualisation or corporatisation of a recognized stock exchange in India as a
result of which an association of persons or body of individuals is succeeded by such company, subject to the
following conditions – a. All assets and liabilities of the AOP or BOI relating to the business immediately be-
fore the succession become the assets and liabilities of the company; b. The demutualisation or
corporatisation of a recognized stock exchange in India is carried out in accordance with a scheme for
demutualisation or corporatisation which is approved by the SEBI
47(xiiia) Any transfer of a membership right of a recognized stock exchange in India for acquisition of
shares and trading or clearing rights in that recognized stock exchange in accordance with a scheme
for demutualisation or corporatisation which is approved by SEBI
47(xiiib) Any transfer of –
a. a capital asset or intangible asset by a private company or unlisted public company (hereafter referred to
as the company) to a limited liability partnership (LLP); or
b. a share(s) held in the company by a shareholder as a result of conversion of the company into a limited
liability partnership (LLP) shall not regarded as a transfer, if following conditions are satisfied:
i. All the assets and liabilities of the company immediately before the conversion be-come the assets and
liabilities of the LLP;
ii. All the shareholders of the company immediately before the conversion become the partners of the LLP
and their capital contribution and profit sharing ratio in the LLP are in the same proportion as their
shareholding in the company on the date of conversion;
iii. The shareholders of the company do not receive any consideration or benefit other than by way of share
in profit and capital contribution in the LLP;
iv. The aggregate of the profit sharing ratio of the shareholders of the company in the LLP shall not be less
than 50% at any time during the period of 5 years from the date of conversion;
v. The total sales, turnover or gross receipts in business of the company in any of the 3 previous years
preceding the previous year in which the conversion takes place does not exceed ` 60 lakh;
vi. The total value of the assets as appearing in the books of account of the company in any of the 3
previous years preceding the previous year in which the conversion takes place does not exceed ` 5 crore;
and
vii. No amount is paid (directly or indirectly) to any partner out of balance of accumulated profit standing in
the accounts of the company on the date of conversion for a period of 3 years from the date of conversion.
CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

47(xiv) Where a sole proprietary concern is succeeded by a company in the business carried on by it as a
result of which the sole proprietary concern sells or otherwise transfers any capital asset to the
company, subject to following conditions –
(a) All assets and liabilities of the sole proprietary concern relating to the business im-mediately before the
succession become the assets and liabilities of the company;
(b) Proprietor holds not less than 50% of the total voting power in the company and his shareholding
continues to remain as such for a period of 5 years from the date of succession; and
(c) The sole proprietor does not receive any consideration or benefit, directly or indirecly, in any form or
manner, other than by way of allotment of shares in the company.
Transfer must have taken place as a result of succession of the proprietorship concern to a company.  All
assets and liabilities related to the business must have been transferred.
The whole consideration shall be paid by allotment of shares in the company.
Proprietor must hold at least 50% of the total voting power of the company.
Lock in period for above share is 5 years from the date of succession Note: Sec. 47(xiii) & (xiv) exempts
the capital gain on transfer of capital asset and not stock in trade. Therefore, if stock is transferred at
profits, it will be taxable as business income.
47(xv) Any transfer in a scheme for lending of any securities under an agreement or arrangement, which the
assessee has entered into with the borrower of such securities and which is subject to the guidelines
issued by the SEBI or the RBI.
47(xvi) Any transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by
the Central Government
47(xvii) Any transfer of a capital asset, being share of a special purpose vehicle (referred to in sec. 10(23FC)) to a
business trust in exchange of units allotted by that trust to the transferor.

Section 48 MODE OF COMPUTATION OF CAPITAL GAINS

Computation of Short-Term Capital Gains

Computation of Short-Term Capital Gains
Full Value of Consideration (FVC) XXXX
Less: Expenditure incurred wholly and exclusively in connection with transfer (like (XXXX)
advertisement expenses, brokerage, legal expenses, selling commission, etc)
Net Value of Consideration XXXX
Less: Cost of Acquisition (COA) (XXXX)
Less: Cost of Improvement (COI) (XXXX)
Gross Short Term Capital Gains XXXX
Less: Exemption u/s 5413/54b (54/546EG/54EE/54F) (XXXX)
Taxable short term capital gain (STCG) XXXX

Fifth Provision to Section 48 - STT Not Allowed As Deduction:

Securities Transaction Tax ('STT) paid on sale of shares/units shall not be reduced from the sale proceeds and
STT paid on purchase of shares/units shall not be added to the cost of acquisition of shares/units held as capital
assets.

Computation of Long-Term Capital Gains

Computation of Long-Term Capital Gains
Full Value of Consideration (FVC) XXXX
Less: Expenditure incurred wholly and exclusively in connection with transfer (like (XXXX)
advertisement expenses, brokerage, legal expenses, selling commission, etc)
Net Value of Consideration XXXX
Less: Indexed Cost of Acquisition (Indexed COA) (XXXX)

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

Less: Indexed Cost of Improvement (Indexed COI) (XXXX)

Gross Long Term Capital Gains XXXX
Less: Exemption u/s 5413/54b (54/546EG/54EE/54F) (XXXX)
Taxable Long term capital gain(STCG) XXXX

Fifth Provision to Section 48 - STT Not Allowed As Deduction:

Securities Transaction Tax ('STT) paid on sale of shares/units shall not be reduced from the sale proceeds and
STT paid on purchase of shares/units shall not be added to the cost of acquisition of shares/units held as capital
assets.

Provision to Section 48 -- INDEXATION

While computing long-term capital gains, 'indexed cost of acquisition shall be taken instead of 'cost of acquisition'
and 'indexed cost of improvement' shall be taken instead of 'cost of improvement'.
Cost Inflation Index For The Year In Which The Asset Is Transferred
Indexed Cost of Acquisition = Cost of Acquisition X Cost inflation Index for The Year In Which The Asset Was
Held By The Assessee.OR
for The Year Beginning On 01.04.2001,Whichever Is Later

Cost Inflation Index For The Year In Which The Asset Is Transferred
Indexed Cost of Improvement = Cost of Improvement X 𝐶𝑜𝑠𝑡 𝑖𝑛𝑓𝑙𝑎𝑡𝑖𝑜𝑛 𝐼𝑛𝑑𝑒𝑥 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑦𝑒𝑎𝑟 𝑖𝑛 𝑤ℎ𝑖𝑐ℎ 𝑡ℎ𝑒 𝑖𝑚𝑝𝑟𝑜𝑣𝑒𝑚𝑒𝑛𝑡
𝑡𝑜 𝑡ℎ𝑒 𝑎𝑠𝑠𝑒𝑡 𝑡𝑜𝑜𝑘 𝑝𝑙𝑎𝑐𝑒

IMPORTAN POINT: As a general rule, benefit of indexation is not allowed in case of LTCG arising, from transfer
of bonds or debentures issued by any company. However. there are two exceptions to this general rule. In case of
LTCG arising from transfer of sovereign gold bonds and capital indexed bonds issued by government benefit of
indexation is available,

INDEXATION TABLE
Financial Year CII Factor Financial Year CII Factor CII Factor CII Factor
2001-02 100 2007-08 129 2013-14 220
2002-03 105 2008-09 137 2014-15 240
2003-04 109 2009-10 148 2015-16 254
2004-05 113 2010-11 167 2016-17 264
2005-06 117 2011-12 184 2017-18 272
2006-07 122 2012-13 200 2018-19 280
2019-20 289 2020-21 301 2021-22 317
2022-23 = 331 2023-24 = 348

Section 55 - COST OF ACQUISITION (‘COA')

General Provision
• Case (a): Capital Asset Has Been Purchased:

Date of Purchase Before 01.04.2001 On or After 01.04.2001

Cost of Acquisition Higher of the following two: Cost incurred by the assessee
> Cost incurred by the assessee on the purchase of on the purchase of capital asset
capital asset; or
> FMV as on 01.04.2001

• Case (b): Capital Asset Has Been Self-Generated:

As per the decision of the Supreme Court in the case of B.C.Srinivasa Setty, cost of acquisition of any self-
generated capital asset other than those given under Category 2 below shall be INDETERMINATE.
Therefore, no 'capital gains would arise in such cases.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

Special Cases
• CATEGORY 1: Shares/Securities:
Option to take FMV as on 01.04 2001 is available in respect of these capital assets.
Capital Asset Cost of Acquisition Period of Holding
Original Shares/ Securities Purchase price Starts from the date of purchase
allotment of shares/securities
Bonus Shares/ Securities ➢ If allotted before 01.04.2001: FMV Starts from the date of allotment of
➢ Otherwise – NIL bonus shares/securities
Renouncement of Right to NIL Short-term (Always)
Subscribe
Shares/Securities
Right Shares/ Securities - Price actually paid under the right issue Period of holding to start from the date
Purchased by the person to of allotment of right shares/securities
whom right is issued –
Purchased by the person to
whom right is renounced
Price paid to the person who renounced Period of holding to start from the date
the right and the amount paid to the of allotment of right shares/securities
company under the right issue

• CATEGORY 2: Specified Capital Assets:

Option to take FMV as on 01.04.2001 is not available in respect of these capital assets even if the are a wired
before 01.04.2001.

Capital Asset Cost of Acquisition

Acquired Asset Self-Generated Asset
Goodwill of Business (Profession) Purchase Price NIL
Trademark/Brand Name associated with Business Purchase Price NIL
Tenancy Rights Purchase Price NIL
Stage Carriage Permit (Route Permits) Purchase Price NIL
Loom Hours Purchase Price NIL
Right to Carry on any Business/Profession Purchase Price NIL
Right to Manufacture: Produce or Process any Article or Thing Purchase Price NIL

Section 55 - COST OF IMPROVEMENT

• CATEGORY 1: Specified Capital Assets:

The cost of improvement of the following capital assets shall be taken to be NIL:
❑ Goodwill of business;
❑ Right to manufacture, produce or process any article or thing; and
❑ Right to carry on any business/profession.
• CATEGORY 2: Other Capital Assets:
Cost of improvement shall be the actual capital expenditure incurred by the assessee on the improvement of
the capital asset. However, cost of improvement incurred before 01.04.2001 shall be ignored in all cases.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

QUESTION:
On 23rd December, 2023, Rajat sold 500 grams of gold, the sale consideration of which was ₹ 14,00,000. He had
acquired this gold on 20th August, 2000 for ₹ 4,00,000. Fair market value of 500 grams of gold on 1st April, 2001
was ₹ 3,60,000. Find out the amount of capital gain chargeable to tax for the assessment year 2024-25.

QUESTION:
Mr. Anand has purchased a house property as on 17/08/2002 for ₹ 5,00,000. On 1/05/2004, he constructed a new
floor on the same house at a cost of ₹ 2,50,000. On 1/10/2023, he sold such house for ₹ 18,00,000 and incurred
brokerage @ 2% for arranging customer. Compute capital gain.

QUESTION:
Mrs. Parminder has jewellery, being gifted on 1/04/2005 by her brother Jitendar. Jitendar acquired such asset
for ₹ 60,000 as on 1/07/1995. On 1/07/2002, Jitendar has sewn a diamond worth ₹ 25,000 in such jewellery. On
1/04/2009, Mrs. Parminder incurred polish expenditure on such jewellery costing ₹ 5,000. As on 1/04/2023, Mrs.
Parminder sold such jewellery for ₹ 12,00,000. Brokerage @ 1% of sale value was paid by her. The fair market value
of the jewellery as on –
1/04/2001 is ₹ 2,00,000; 1/04/2005 is ₹ 5,00,000; and 1/04/2023 is ₹ 7,50,000.
Compute capital gain in hands of Mrs. Parminder for the A.Y. 2024-25.

CASES WHERE INDEXATION BENEFIT IS NOT AVAILABLE EVEN ON TRANSFER OF LONG TERM
CAPITAL ASSET

🖸 Debenture or Bonds: In case of transfer of bonds and debentures other than capital indexed bonds issued by
the Government or Sovereign Gold Bond issued by the RBI under the Sovereign Gold Bond Scheme, 2015 [Sec. 48].

🖸 Slump Sale: Transfer of an undertaking or division in a slump sale [Sec. 50B].

🖸 Virtual Digital Asset: Transfer of crypto currency [Sec. 115BBH].

🖸 Equity shares and equity oriented fund referred to in sec. 112A.

🖸 In case of depreciable assets, unit of a specified mutual fund and marked linked debenture. there will be no
indexation and the capital gains will always be short-term capital gains.

🖸 Certain transactions by a non-resident: In case of a non-resident, capital gain arising on the transfer of shares
in or debentures of an Indian company acquired in foreign currency. It will be computed as per First Proviso to sec.
48 (discussed later in this chapter). Further, in case of transaction u/s 115AB, 115AC, etc. index benefit is not
available.

🖸 Transfer of Global Depository Receipt: Transfer of Global Depository Receipt purchased in foreign currency
by a resident individual being employee of an Indian Company [Sec. 115ACA]

QUESTION:
Miss Isha has 1,000 10% Debentures of X Ltd. acquired on 17/04/2009 for ₹ 120 each. As on 1/02/2024, she sold
such asset for ₹ 1,45,000. Brokerage @ ½ % of sale value was paid by her. Compute capital gain.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

COMPUTATION OF CAPITAL GAINS — SPECIAL CASES

Section 45(1A)
TAXABILITY OF INSURANCE COMPENSATION IN RESEPCT OF CAPITAL ASSETS,
Applicability of Section 45(1A)
Section 45(1A) applies if both the conditions listed below are fulfilled:
• Capital asset has been destroyed, damaged, etc on account of the following reasons:
➢ Flood, typhoon, hurricane, cyclone, earthquake, etc; or
➢ Riot or civil disturbance; or
➢ Accidental fire or explosion; or
➢ Action by on enemy or action taken in combating an enemy (whether with or without declaration of
war).
• Money or any other asset has been received from an insurance company as compensation under an
insurance policy.
Full Value of Consideration
The value of money/Fair Market Value of any other asset received shall be deemed to be the full value of
consideration and capital gains shall be computed accordingly.
Year of Taxability of Capital Gains
Capital gains shall be computed in the year in which the asset has been destroyed, damaged, etc but they
shall be taxable in the year in which money or any other asset has been received from the insurance company.

QUESTION;
Lucky has a house property acquired on 18/08/2009 for ₹ 6,00,000. He used the house for his own residential
purpose. On 18/08/2012 he incurred capital expenditure on re-construction of house ₹ 3,00,000. On 15/05/2023,
he brought office goods (inflammable) worth ₹ 1,00,000 at home to be delivered to a party staying near to his
home. At the night of that day accidental fire took place and damaged the whole house property, furniture worth ₹
5,00,000 and business stock.
Insurance claim received on 18/08/2023 –
1. for the house ₹ 1,00,000 in cash & a new house allotted to him (fair market value of which is ₹ 44,00,000 on
18/08/2023);
2. for house-hold furniture ₹ 2,00,000; and
3. for stock ₹ 80,000.
State Tax-treatment under the head Capital gains.

Capital gain on ULIP [Sec. 45(1B)]

Situation

Any person receives at any time during any previous year any amount under a unit linked insurance policy, to which
exemption u/s 10(10D) does not apply on account of the applicability of the fourth and fifth provisos thereof (i.e.
excess premium paid then prescribed limit), including the amount allocated by way of bonus on such policy

Treatment

Any profits or gains arising from receipt of such amount by such person shall be chargeable to income-tax under
the head “Capital gains” and shall be deemed to be the income of such person of the previous year in which such
amount was received and the income taxable shall be calculated in such manner as may be prescribed.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

Section 45(2) CONVERSION OF CAPITAL ASSETS INTO STOCK-IN-TRADE

Applicability of Sec 45(2)
Section 45(2) applies where an assessee converts his capital asset into stock-in-trade to be used by him for
his business purposes.
Full Value of Consideration
The Fair Market Value of the asset as on the date of conversion shall be deemed to be the full value of
consideration and capital gains shall be computed accordingly.
Year of Taxability of Capital Gains
• Capital gains shall be computed in the year in which the capital asset has been converted into stock-in-
trade but they shall be taxable in the year in which such stock-in-trade has been sold by the assessee.
• The income arising from sale of stock-in-trade shall be taxable u/h PGBP.
Business Income = Sale Price (-) FMV of Asset on the Date of Conversion

QUESTION;
Ali has 10,000 shares of X (P) Ltd. acquired on 15/05/1981 for ₹ 12 each. On 15/07/1983 he converted
6,000 of such shares into stock in trade. On that date, market value of such share was ₹ 15 each. On
1/05/2007, he further converted 2,000 of such shares into stock in trade. On such date, market value of
the share was ₹ 30 each. On 17/02/2024, he sold all shares for ₹ 225 each. Brokerage incurred 2%. State
tax treatment. Fair market value of such shares as on 01-04-2001 was ₹ 16/-.

Section 45(2A) TAXABILITY OF SECURITIES HELD IN DEMAT FORM

An assessee may have security in form of a physical script or in dematerialized form. The securities held in
dematerialized form shall be dealt as per sec. 45(2A) and for computation of capital gain, various terms to be
interpreted are as under;

Cost of acquisition Cost of acquisition and the period of holding of any securities shall be
Period of holding determined on the basis of the first-in-first-out method (FIFO)#.
Sale consideration
Benefit of indexation As usual
Expenditure on transfer
#
In this connection, CBDT vide Circular No. 768, dated 24/6/1998 has clarified that:
• In case of assessee who has securities partly in physical form and partly in dematerialized form, FIFO method
will be applied only in respect of the dematerialized holding. This is because in case of sale of dematerialized
securities, the securities held in physical form are not considered as they continue to remain in the possession
of the investor and are identifiable separately.
• An assessee may have more than one account in case of depository system and in such case FIFO technique
shall be applied for each account separately.
• For deciding FIFO technique the date of entry in ‘De-Mat Account’ is significant and the date of purchase of
security is irrelevant.

Section 45(3) TRANSFER OF CAPITAL ASSET BY PARTNER/MEMBER TO FIRM/AOP/BOI

Applicability of Sec 45(3)
• Section 45(3) applies where a partner/member transfers any capital asset to a firm/AOP/BOI as his
capital contribution or otherwise. (Such partner/member can be existing or new).
• Capital 'gains shall be computed in the hands of the partner/member transferring the capital asset.
Full Value of Consideration

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

The amount recorded in the books of accounts of the firm/AOP/BOI shall be deemed to be the full value of
consideration and capital gains shall be computed accordingly. (FMV)
Year of Taxability
Capital gains shall be taxable in the year in which the capital asset is transferred by the partner/member to
the firm/A0P/BOI.

QUESTION;
ABC & Co. has three partners A, B and C sharing profit or loss in the ratio 5:3:2. They admitted D as a new partner
on 31/03/2023 for 1/5th share and D is to bring ₹ 2,00,000 as his capital which he brought in form of furniture
(earlier used in his home) ₹ 50,000 immediately & further brought jewellery of which fair market value is ₹
2,00,000 on 2/04/2023 (however such assets was recorded in the books at ₹ 1,60,000). D had acquired such
jewellery for ₹ 45,000 on 7/07/2001. Compute capital gain in the hands of Mr. D.
Solution :
In the given case, Mr. D brought two assets:
a. Furniture, being a personal effect, is not a capital asset and hence, not liable to capital gain.
b. Jewellery being a capital asset, hence liable to capital gain as under –
COMPUTATION OF CAPITAL GAIN IN THE HANDS OF MR. D FOR THE A.Y. 2024-25
Particulars Working Details Amount
Sale consideration 1,60,000
Less: Expenses on transfer Nil
Net sale consideration 1,60,000
Less: i) Indexed cost of acquisition ₹ 45,000 * 348/100 1,56,600
ii) Indexed cost of improvement Nil 1,56,600
Long Term Capital Gain 3,400
Sale consideration shall be the amount recorded in books of account of the firm and market value of such asset is
irrelevant.

Section 45(4) -- TRANSFER OF CAPITAL ASSETS BY FIRM/AOP/BOI

TO PARTNER/MEMBER BY WAY OF DISTRIBUTION ON DISSOLUTION
Applicability of Sec 45(4)
• Section 45(4) applies in case of transfer of capital asset by a firm/AOP/BOI to its partner/member at the
time of dissolution or otherwise.
• Capital gains shall be computed in the hands of the firm/A0P/BOI transferring the capital asset to its
partner/member.
Note: Provisions relating to capital gains do not apply where the firm/AOP/BOI transfers any stock-in-trade
to its partner/member on dissolution or otherwise.
Full Value of Consideration
The Fair Market Value of the capital asset as on the date of transfer shall be deemed to be the full value of
consideration and capital gains shall be computed accordingly.
Year of Taxability
Capital gains shall be taxable in the year in which the capital asset is transferred by the Taxability firm/
AOP/BOI to the partner/member.
Section 45(5) TRANSFER OF CAPITAL ASSET BY WAY OF COMPULSORY ACQUSITION
Applicability of Sec 45(5)
Section 45(5) applies in the following two situations:
• Capital asset has been compulsorily acquired by the Government or any other similar agency under any
law; OR

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

• Transfer of capital asset has taken place and consideration for such transfer is to be determined or
approved by the Central Government or RBI.

QUESTION;
Sunil has a house property acquired on 7/07/1995 for ₹ 3,00,000. He incurred improvement expenditure on
such property ₹ 70,000 on 16/08/2000 and ₹ 50,000 on 17/07/2010. Market value of such property as on
1/04/2001 is
₹ 4,50,000. On 16/08/2013, such property is compulsorily acquired by the Government and compensation
decided at ₹ 11,50,000. 20% of the compensation received on 31/03/2024 and balance on 2/06/2024.
On further appeal, on 16/08/2024 enhanced compensation is declared by the Government ₹ 2,00,000.
Expenditure incurred to get enhanced compensation is ₹ 11,000. Such compensation received on 18/08/2025.
Compute income under the head Capital Gains of Sunil for the assessment year 2024-25, 2025-26 and 2026-
27.
SOLUTION:
Particulars Working Details Amount
Sale consideration 11,50,000
Less: Expenses on transfer Nil
Net sale consideration 11,50,000
Less: i) Indexed cost of acquisition ₹ 4,50,000 * 220/100 9,90,000
ii) Indexed cost of improvement ₹ 50,000 * 220/167 65,868 10,55,868
Long Term Capital Gain 94,132
1. The initial compensation (i.e. ₹ 11,50,000) decided by the Government shall be treated as sale
consideration.
2. Cost of acquisition is the original cost of acquisition (i.e. ₹ 3,00,000) or Fair market value as on 1/04/2001
(i.e.
₹ 4,50,000) whichever is higher.
3. Cost of improvement incurred before 1/04/2001 is to be completely ignored.
4. Though the property was compulsorily acquired by the Government in the P.Y 2013-14 but the
compensation was received in the P.Y.2023-24, therefore the amount shall be taxable in the P.Y. 2023-24,
however indexation benefit shall be available till the previous year 2013-14.

Section 45(5A) TRANSFER OF CAPITAL ASSET UNDER JOINT DEVELOPMENT AGREEMENT

Applicability of Sec 45(5A)
• Section 45(5A) applies whereon individual/HUF owning land/building/both enters into a registered
agreement with a developer allowing the developer to develop a real estate project on such
land/building/both.
• As a consideration for receiving the right to develop the real estate project, the developer shares a
portion of land/building/both in the project with the individual/HUF. In some cases, the developer might
also pay some additional consideration in cash over and above the share in project.
Year of Taxability of Capital Gains
• Capital gains shall be computed in the hands of individual/HUF in the year in which the possession of
immovable property is handed over to the developer for development of a project.
• Capital gains so computed shall be considered as income of the previous year in which the certificate of
completion for the whole or part of the project is issued by the competent authority.
Full Value of Consideration
SDV of land/building/both in the project handed over by the developer to individual/HUF as his share as on
the date of issue of the aforementioned completion certificate
(+)

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

Cash received by the individual/HUF from the developer, if any

Note: The full value of consideration adopted for calculating capital gains u/s 45(5A) shall be deemed as the
cost of acquisition of the share in the hands of individual/HUF. (DEVELOPER)
IMPORTANT NOTE: The beneficial provisions stated u/s 45(5A) shall not apply where transfers his share in the
project to any other parson on or before the date of issue of aforementioned completion certificate. In such
cases, capital gains would be taxable in the year in which possession of immovable property is herded over to the
developer for development of project.

SPECIAL PROVISIONS RELATING TO COMPANIES

Section 46 Capital Gains On Distribution Of Assets By Companies In Liquidation

Section 46 applies in case of distribution of assets by a company to its shareholders in the event of its liquidation.
The tax treatment of this transaction have been explained below:
• IN THE HANDS OF THE COMPANY:
Distribution of assets by a company to its shareholders in the event of its liquidation is not regarded as
transfer and thus no capital gain arises in the hands of the company.
• IN THE HANDS OF THE SHAREHOLDERS:
determining the period of holding, the period subsequent to the date on which the company goes into liquidation
shall not be considered.
PARTICULARS AMOUNT (RS)
Sum of Money (+) FMV of Assets Received as on the Date of Distribution XXXX
Less: Deemed Dividend u/s 2(22)(c) (XXXX)
Full Value of Consideration for Calculating Capital Gains XXXX
Less: Selling Expenses (if any) (XXXX)
Less: Cost of Acquisition/Indexed Cost of Acquisition (as the case may be) (XXXX)
Capital Gains (ST/LT) XXXX
Note: If an asset received by a shareholder from a company in the event of its liquidation is subsequently sold by
him, the FMV of the asset as on the date of distribution shall be taken as its cost of acquisition.

Additional information
Company went into liquidation on the balance sheet date and all current assets and building realized at book value.
The realized money was applied in payment of outside liabilities and preference shareholder. Utkarsh is a holder of
10% equity share and 20% preference share of the company. Equity shares were originally acquired by him on
16/08/2002 at face value. However, he subscribed to preference share on 1-04-2021, which was issued at par. He
received a part of land (MV ₹ 5,00,000) and cash (for preference share) ₹ 20,000. Compute capital gain in hands of
company & Utkarsh.

Section 46A Capital Gains In Case Of Buy-Back Of Shares, etc

Taxability in the hands BUYBACK OF SHARES BUYBACK OF SHARES BUYBACK OF SPECIFIED

of the BY DOMESTIC BY A COMPANY OTHER SECURITIES BY ANY
COMPANY THAN A DOMESTIC COMPANY
COMAPNY
Company Subject to additional Not subject to tax in the Not subject to tax in the
income-tax @ 23.296% in hands of the company hands of the company
the hands of the company
Shareholders Income arising to Income arising to Income arising to
shareholders exempt u/s shareholders taxable as shareholders taxable as

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

I0(34A) capital gains u/s 46A capital gains u/s 46A

Section 49
ASCERTAINMENT OF COST OF ACQUSITION IN SPECIFIED CIRCUMSTANCES
Nature of Transaction Cost of Acquisition to the Assessee Period of Holding (For Determining
Whether Capital Assets is ST/LT)
Allotment of Shares in the Cost of acquisition of shares of the Period of holding would also include
Amalgamated company in a amalgamating company shall be treated as the time period for which the
scheme of Amalgamation the cost of acquisition of shares of the shares were held in the
amalgamated company amalgamating company
Conversion of Debentures into Cost of acquisition of debentures shall be Period of holding would include the
Shares treated as the cost of acquisition of time period for which debentures
shares were held by the assessee
Conversion of Preference Cost of acquisition of preference shares Period of holding would include the
Shares into Equity Shares shall be treated as the cost of acquisition time period for which preference
of equity shares shares were held by the assessee
Gift Transactions Pure Gift/Inadequate to Consideration Other Transactions Covered u/s 47
• Property Gifted is Taxable in SDV/FMV of the property considered for Period of holding would not include
the hands of Recipient u/s determining the taxable amount of gift u/s the period of holding of the
56(2)(vii)/56(2)x) 56(2)(vii)/56(2)(x) shall be taken as cost previous owner
of acquisition in the hands of the new
owner
• Other Transactions Covered Cost of acquisition of previous owner shall Period of holding would also include
u/s 47 be taken as cost of acquisition in the hands the period of holding of the
of the new owner previous owner

Note 1: Previous owner means the last previous owner of the capital asset, who acquired it through a mode of
acquisition other than those covered u/s 47. In other words, previous owner means the last previous owner who
actually paid for the asset.
Note 2: Where the capital asset has been acquired by the previous owner before 01.04.2001, option to take FMV
of the capital asset as on 01.04.2001 shall be available.
Note 3: Cost of improvement incurred by the previous owner on or after 01.04.2001 shall also be taken into
consideration at the time of computation of capital gains in the hands of the new owner.
Note 4: Indexation in case of transactions covered u/s 47:
• Cost of Improvement:
Provison to Section 48 states that indexation in respect of cost of improvement shall apply from the year in
which improvement to the asset took place. Therefore, cost of improvement shall be indexed from the year in
which the expenditure was actually incurred by the previous owner or the new owner.
• Cost of Acquisition:
❑ Proviso to Section 48 states that indexation in respect of cost of acquisition shall apply from the year in
which the asset was first held by the assessee.
❑ However, in a recent decision given by the Bombay High Court in the case of CIT v Martjula Shah, it was
held that indexation in respect of cost of acquisition shall apply from the year in which the capital asset
was acquired by the previous owner as opposed to taking indexation from the year in which the current
owner acquires it.
❑ ICAI's study material has solved the answer using both the approaches. For examination purposes, we
shall follow the judgement given by the Bombay High Court and justify our approach with the help of a
note to this effect.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

Section 50 CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS

• Capital gains arising on sale of depreciable assets shall always be deemed to be short-term capital asset
irrespective of their period of holding (ie indexation benefit would not be available even if the period of
holding of such assets is more than 36 months).
• The manner of computation of capital gains in case of sale of depreciable assets has already been discussed
u/h PGBP. (To arrive at taxable capital gains, WIN of the block and expenses on transfer shall be deducted
from full value of consideration)

Section 50A (Already Discussed u/h PGBP)

CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS OF ELECTRICITY COMPANIES
• Section 50A applies to assessees engaged in the generation or generation 6c distribution of power if
they have opted to charge depreciation as per SLM method.
• The excess of sale price over the actual cost of the asset shall be treated as capital gains as per
Section 50A.

Section 50B - CAPITAL GAINS IN CASE OF SLUMP SALE

Meaning of Slump Sale
Slump sale refers to sale of entire business of an undertaking as a whole for a lumpsum consideration. In case of
slump sale, the purchase consideration should be arrived at without assigning individual values to individual assets
and individual liabilities.
Note: If the values of assets and liabilities have been determined individually only for the purpose of payment of
stamp duty, registration fees or other similar taxes, such transaction would still be covered under the scope of
'slump sale'.
Computation of Capital Gains
• Capital gains shall be taxable in the year in which the undertaking has been sold. The amount of capital gains
shall be computed as follows:
PARTICULARS RS.
Price at which Undertaking has been sold XXXX
Less: Expenses in connection with sale of Undertaking (XXXX)
Less: Net-Worth of the Undertaking (XXXX)
Capital Gains (ST/LT) XXXX
• Short-term capital gains would arise if the undertaking was owned by the assessee for a period of 36 months
or less.
• Long-term capital gains would arise if the undertaking was owned by the assessee for a period exceeding 36
months. Benefit of indexation would not be available in such cases.
How to Calculate Net-Worth of the Undertaking
Net Worth = Total Assets (-) Total Liabilities
• In case of depreciable assets, their WDV shall be taken into consideration whereas for other non-depreciable
assets, their book values shall be taken into consideration.
• Revaluation of assets shall be completely ignored.
• Where the full cost of an asset has been allowed as deduction u/s 35AD, its value shall be taken as NIL at the
time of computation of net worth.
CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

• All the liabilities payable shall be taken into consideration.

Section 50C FULL VALUE OF CONSIDERATION IN CASE OF REAL ESTATE TRANSACTIONS

FVC IN CASE OF TRANSFER OF LAND & BUILDING HELD AS CAPITAL ASSET

Circumstances Full value of consideration

A. If Actual Sale Consideration > Stamp Duty value Actual Sale Consideration
B. If Actual Sale Consideration < Stamp Duty value Stamp Duty value
But, If SDV ≤ 110% of Actual sale consideration → FVC = Actual Sale Consideration.

SDV WHEN DATE OF AGREEMENT (DoA) & DATE OF REGISTRATION (DoR) ARE NOT SAME:
(a) If Payment (Full/Part) has been received by A/c payee cheque/draft/Netbanking on/before DoA →
FVC = SDV on Date of Agreement.
(b) If NO Payment is received by A/c payee cheque/draft/Netbanking on/before DoA → FVC = SDV
on Date of Registration.
Example:
Transfer SC SDV on DOA SDV on DOR FVC
1.5.2022 100 Lacs (10 Lac received by cheque on 120 (1.9.21) 210 (1.5.22) 120
1.9.2021)
1.5.2022 100 Lacs (10 Lacs received by cash on 1.9.2021) 120 (1.9.21) 210 (1.5.22) 210
31.3.2023 100 Lacs (Full amount received on DOR) 120 (1.5.22) 210 (31.3.23) 210

VALUATION BY VALUATION OFFICER

Circumstances Full value of consideration
(I) Value by VO > SDV Stamp Duty Value
(II) Value by VO > Actual Sale Consideration but < SDV Value by Valuation officer
Example:
S Actual SDV Value by Full Value of
N SC VO Consideration
1 50 45 - 50
2 50 75 - 75
3 50 75 85 75
4 50 75 55 55
5 50 75 45 50

Section 50CA (Introduced Vide the finance Act, 2017)

FULL VALUE OF CONSIDERATION IN CASE OF UNQUOTED SHARES
• Section 50CA has been made applicable with effect from PY 2017-18 in case of transfer of unquoted
shares (ie unlisted shares). Section 50CA is not applicable in case of transfer of listed shares.
• Section 50CA provides that where the consideration received for transfer 'of unlisted shares is less
than their Fair Market Value ('FMV'), the FMV of such unlisted shares shall be deemed as the full value
of consideration for the purposes of computation of capital gains. The FMV of unlisted shares shall be
calculated in such manner as may be prescribed.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

COMPOSITE TRANSFER OF LAND & BUILDING:

• Land and building are treated as two-separate assets under the Income Tax Act, however there might be
a case of composite transfer where both the assets are transferred simultaneously. In such situations, it
may be possible that the period of holding of land is more than the period of holding of building.
• Transferor doesn't carry any business/profession:
Both land and building would be treated as long-term capital assets if their holding period is more than 24
months. If their holding period doesn't exceed 24 months, they would be treated as short-term capital
assets.
• Transferor carries on business/profession:
➢ If depreciation is claimed on building, the building would always qualify as a short-term capital asset
irrespective of the period of its holding.
➢ Depreciation is not available in respect of land. Land would be treated as a long-term capital asset if
its holding period is more than 24 months. If its holding period doesn't exceed 24 months, it would be
treated as a short-term capital asset.
• How to 'attempt practical questions?
➢ If both land and building qualifies as long-term capital assets, capital gains can be computed
combinedly where the cost of land can be taken as cost of acquisition and the cost of building can be
taken as cost of improvement. Same position can be adopted if both the assets qualify as short-term
capital assets.
➢ If land qualifies as long-term capital asset and building qualifies as short-term capital asset, capital
gains in respect of land and capital gains in respect of building should be computed separately as per
the decision of the Karnataka High Court in the case of CIT v. C.R.Subramanian ((1999) 242 ITR
342}].
ADOPTION OF SDV-IN CASE OF AGREEMENT TO SELL LAND/BUILDING/BOTH:
Section 43CA: SDV on-the date of agreement can be adopted if the advance ,
Transfer of amount has been received by any mode other than cash
Land/Building/Both as Stock-
in-Trade
Section 50C: SDV on the date of agreement can 'be adopted if the advance
Transfer of amount has been received by account payee cheque` or account
Land/Building/Both as Capital payee draft or EC through a bank account
Asset

Q29: SDV on the date of agreement = Rs 80 lakhs; and SDV on the date of registration = Rs 90 lakhs.
Case Mode of Receipt of Advance SDV To Be Adopted u/s 43CA SDV to Be Adopted u/s
50C
Case 1 Booking amount has been received
in cash
Case 2 Booking amount has been received
by a bearer/crossed cheque
Case 3 Booking amount has been received
by an account payee cheque
Section 56(2)(x) : Where a person receives land or building or both from any non-related person without
consideration (ie pure gift) or for inadequate consideration, provisions relating to taxation of gifts as given
u/s,56(2)(x) would apply. Section 56(2)(vii) has been intorduced with effect from PY 2017-18. Till PY 2016-
17, taxation of gifts was governed by Section 56(2)(vii) which was applicable only in case of individual/HUF.

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PROF.VINIT KUMAR TAXATION 9873126173

MISCELLANEOUS TOPICS

Section 51 {Read Along With Section 56}: Forfeiture Of Advance Money

• General Meaning: A person initially enters into an agreement for sale of any capital asset and receives
the advance money from the proposed buyer but subsequently the proposed buyer refuses to purchase
the said capital asset and the proposed seller forfeits the advance money received.
• Treatment:
❑ Advance Money Received and Forfeited by the Assessee on or after 01.04.2014:
As per Section 56, the advance money so forfeited by the assessee is treated as the income of the
assessee u/h 'income from other sources'.
❑ Advance Money Received and Forfeited by the Assessee upto 31.03.2014:
Advance money so forfeited shall be reduced from the cost of acquisition of the capital asset while
computing gains when the capital asset is finally transferred or sold. In case of long-term capital
gains, indexation would be calculated on the cost so reduced.
Example: Mr A, a recently married individual, buys a house for Rs 10 lakhs on 01.07.2012. His wife
runs away with his neighbour shortly after moving into this house. He agrees to sell his house to Mr
B and an advance money of Rs 2 lacs has been received by Mr A from Mr B on 01.10.2012. After
coming to know about the tragedy which happened with Mr A, Mr B cancels this deal and the advance
money is forfeited. Mr A ultimately sells the house to Mr C for Rs 13 lakhs on 01.06.2013. In this
case, cost of acquisition shall be taken to be Rs 8 lakhs (Rs 10 lakhs - Rs 2 lakhs) and STCG of Ps 5
lakhs would arise to Mr A.
❑ Advance Money Received and Forfeited by the Previous Owner is Ignored.

Q30:- Advance money - Forfeited: Mr. Paresh purchased a house property on 14" Nov., 2015 for ₹ 10,00,000 He
entered into an agreement with Mr. B for the sale of house on 15 September, 2022 and received an advance of ₹
25,000. However, since Mr. B did not remit the balance amount, Mr. Paresh forfeited the advance. Finally, the
house was sold by Mr. Paresh to Mr. Sanjay on 15-03-2023 for a consideration of ₹ 21,00,000. Discuss tax
implications of such transaction in hands of Paresh.

Q31:- Advance money received-forfeited by the assessee : Mr. Rakesh purchased a house property on 14"
April, 1999 for ₹ 9,05,000 He entered into an agreement with Mr. B for the sale of house on 15 th
sept,2002 and received an advance of ₹ 25,000. However, since Mr. B did not remit the balance amount,
Mr. rakesh forfeited the advance. Later on, he gifted the house property to his brother Mr. A on 15 th June
2006.
Following renovations were carried out by Mr. Rakesh and Mr. A to the house property:-
Particulars
Amounts(₹)
By Mr. Rakesh during FY 1999-2000 10,000
By Mr. Rakesh during FY 2003-04 50,000
By Mr. A during FY 2007-08 1,90,000
The fair market value of the property as on 01-01-2001 is ₹ 11,00,000
Mr. A entered into an agreement with Mr. C for sale of the house on 1 June, 2012 and received an advance
of ₹ 80,000.
The said amount was forfeited by Mr. A, since Mr. C could not fulfil the terms of the agreement. Finally,
the house was
sold by Mr. A to Mr. Sanjay on 20 January, 2023 for a consideration of ₹ 42,00,000.
Compute the capital gains chargeable to tax in the hands of Mr. A for the assessment year 2023-24
Cost inflation indices are as under:
Financial Year Cost inflation index
2001-02 100

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PROF.VINIT KUMAR TAXATION 9873126173

2003-04 109
2006-07 122
2007-08 129
2022-23 331

EXEMPTION FROM CAPITAL GAINS

CAPITAL GAINS ON TRANSFER OF RESIDENTIAL HOUSE PROPERTY (SEC 54)

Eligible Assessee Individual or HUF

Which Asset must Residential House Property (LTCA)

be transferred Income from such house should be chargeable u/h “Income from HP”.

Which asset must If Capital gains > Rs. 2 crores → ONE If Capital gains ≤ Rs. 2 crores →
be acquired Residential House in India TWO Residential House in India
Note: If in any AY, assessee has exercised the option to purchase or construct 2 residential houses in India,
he shall not be subsequently entitled to exercise the option for same AY or any other AY.
Ex:

Time limit for Purchase → Within 1 yr before transfer or within 2 years after transfer.
acquiring new asset Construct → Within 3 years after the date of transfer.

Quantum of (a) Investment in New House or Houses or

Exemption (b) Capital Gain (whichever is lower)

Consequences of Exemption granted will be taken back.

transfer of Newly For computing STCG on transfer of new asset:
acquired asset Cost of New House = (Cost of acquisition- Capital gains exempted earlier).
within 3 years.
Example 1. CG = Rs. 7 lacs & Cost of New house= Rs. 9 lacs; Exemption = Rs. 7 lacs.

2. CG = Rs. 7 lacs & Cost of New house=Rs. 5 lacs; Exemption = Rs. 5 lacs.

Continuing Ex, if the new house was sold after 2 years for Rs. 12 lacs, then STCG =

Particulars Rs. Rs
Net Consideration 1200000
Cost of acquisition 9,00,000
Less: CG exempt earlier u/s 54 (7,00,000) (200000)
Taxable STCG 1000000

Points to Remember:
• Date of completion of construction is relevant. Date of commencement of construction is irrelevant.
Construction may be commenced even before the transfer of house.
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PROF.VINIT KUMAR TAXATION 9873126173

• Allotment of Flat under Self-financing scheme is treated as construction of house for Section 54.
• Holding of Legal Title → Not Necessary. If the taxpayer pays whole/part of consideration & gets the
possession of new house, exemption available u/s 54 is available.
• Investment → Includes Cost of Purchase of House + Cost incurred to make habitable.
• A person may Sell 2 Houses & Purchase 1 House for the purpose of availing exemption u/s 54.

Q33. Mr. Cee purchased a residential house on July 20, 2020 for Rs. 10,00,000 & made some additions to
the house incurring Rs. 2,00,000 in August 2021. He sold the house property in NOV’ 2022 for Rs. 27,00,000.
Out of the sale proceeds, he spent Rs. 5,00,000 to purchase another house property in DEC’ 2022. Find the
amount of capital gains taxable in the hands of Mr. Cee for PY 2023-24?

Q33A. Mr. VIRAT has a residential house property taxable u/s 22. Such property is acquired on 12/08/2005 for ₹
2,00,000. The property is sold on 1/03/2023 for ₹ 25,00,000. He acquired another residential house on
31/03/2023 for ₹ 17,00,000 for self-occupation. On 1/03/2024, he sold such new residential house for ₹
30,00,000. Compute his capital gain for the A.Y. 2023-24 and 2024-25.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

CAPITAL GAIN ON TRANSFER OF AGRICULTURAL LAND [SEC 54B]

Eligible Assessee Individual or HUF

Which asset shall be Urban Agricultural land (LT/ST).

transferred Such land must have been used by Assessee or his parents/HUF for agricultural
purposes for 2 yrs immediately preceding date of transfer.

Which asset is acquired Agricultural Land (Rural/Urban)

Time limit for Within 2 years from the date of transfer.

acquiring new asset

Quantum of Exemption Same as Section 54.

Consequences of Same as Section 54. However, if new agricultural land is a rural agricultural land,
transfer within 3 years there would be no CG on transfer of such land.

Capital gains accounts Same provisions as in section 54.

scheme, 1988

CAPITAL GAIN ON COMPULSORY ACQUISITION OF INDUSTRIAL L & B [SEC 54D]

Eligible Assessee Any Assessee.

Which asset shall be Industrial Land or Building (STCA/LTCA)

transferred Such Land/building should have been used by assessee for Industrial undertaking
for 2 years immediately preceding the date of transfer.

Which asset is Land or Building for Industrial purpose

acquired

Time limit for Within 3 years from the date of Receipt of compensation.
acquiring new asset

Quantum of Same as Section 54.

Exemption

Consequences of Same as Section 54

transfer within 3 years

Capital gains accounts Same provisions as in section 54.

scheme, 1988

QUE.:-X Ltd. has a building acquired on 17/08/2021 for ₹ 5,00,000. The assessee, as a tenant, earlier
used the building, for industrial purpose since last 7 years and even after purchase it is continuously used
for industrial purpose. Such building is compulsorily acquired by Government at an agreed value of ₹
12,00,000 as on 15/07/2022. The compensation was received on 1/03/2023. The written down value of
the block (consist of 3 buildings) as on 1/04/2022 is ₹ 7,50,000.
The company acquired a new building for industrial purpose for ₹ 2,00,000 as on –
Case A) 31/03/2023; Case B) 2/04/2023. Determine his taxable capital gain.

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

CAPITAL GAIN ON TRANSFER OF ANY LONG-TERM CAPITAL ASSET ON THE

BASIS OF INVESTMENT IN CERTAIN BONDS [SECTION 54EC]
Eligible Assessee Any Assessee

Which asset shall be Long-term Capital Asset being Land or Building or both
transferred (Even a depreciable asset held for more than 36 months is a LTCA even if they are
always regarded as STCA under other sections of the act)
Which asset is acquired Bonds of National Highways Authority of India (NHAI) & Rural Electrification
Corporation Ltd (RECL) redeemable after 5 years.
Bonds issued by Power Finance Corporation Limited on/after 15.06.17 & Bonds
issued by Indian Railway Finance Corporation Limited on/after 8.8.17 &
redeemable after 3 years.
Time limit Within 6 months from the date of transfer.

Quantum of Exemption Capital Gain or Amount Invested in Bonds (whichever is Lower).

Note: Maximum Investment that can be made in bonds of NHAI & RECL from
CG arising from the transfer of one/more LTCA during the PY of transfer & in
subsequent FY cannot exceed Rs. 50 lacs.
Lock-in-period Bonds should not be transferred for a period of 5 Years.
Assessee should not transfer/convert or avail loan on security of such bonds for
5 years from the date of acquisition of such bonds. Otherwise exemption
granted earlier shall be taken back.

Note: Receipt of money on liquidation of company is taxable in the hands of shareholders [Section
46(2)]. In such case there is no transfer of capital asset & thus exemption u/s 54EC is not available.

Q34. Capital gain of Rs. 75 lacs arising from transfer of LTCA on 1.5.2019 will be exempt from tax if
such capital gain is invested in the bonds redeemable after 5 years, issued by NHAI u/s 54EC. Comment
whether true or false.
Answer: False: The exemption u/s 54EC has been restricted by limiting the maximum investment in long
term specified assets (i.e. bonds of NHAI or RECL redeemable after 3 years) to Rs. 50 lacs whether
such investment is made during the relevant PY or subsequent PY or both. Therefore, in this case, the
exemption u/s 54EC can be availed only to the extent of Rs. 50 lacs provided the investment is made
before 1.11.2019 (i.e., within 6 months from the date of transfer).

CAPITAL GAIN ON TRANSFER OF ANY LONG-TERM CAPITAL ASSET ON THE

BASIS OF INVESTMENT IN NOTIFIED UNITS OF SPECIFIED FUND – [SEC 54EE]
Eligible Assessee Any Assessee

Which asset shall Any Long-term capital asset.

be transferred (Even a depreciable asset held for more than 36 months is a LTCA even if they are
always regarded as STCA under other sections of the act)
Which asset shall be Long-term specified asset means a unit or units, issued before 01-04-2019, of such
acquired fund as may be notified by the Central Government
Time limit Within 6 months from the date of transfer.

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PROF.VINIT KUMAR TAXATION 9873126173

Quantum of Capital gains or amount invested in units (whichever is lower).

Exemption Maximum investment that can be made in specified units, out of capital gains arising
from transfer of one or more LTCA during the PY of transfer & in subsequent FY
cannot exceed Rs. 50 lacs in aggregate.
Lock-in-period Units should not be transferred for a period of 3 years.
Note: Assessee should not transfer or convert or avail loan on the security of such bonds for a period
of 3 years from the date of acquisition of such bonds. Otherwise exemption grant earlier shall be taken
back.

CAPITAL GAIN ON TRANSFER OF ANY LONG-TERM CAPITAL ASSET OTHER THAN

RESIDENTIAL HOUSE PROPERTY [SECTION 54F]
Eligible assessee Individual & HUF

Which asset Transfer of LTCA other than Residential House Property.

shall be Thus, Transfer of Vanact Plot of Land → Eligible for Exemption.
transferred Provided that assessee should not own more than 1 Residential House on the date of
transfer (except the newly acquired house property).

Which asset is ONE Residential House Property in India

acquired

Time limit for The assessee should either

acquiring New ▪ Purchase: Within 1 year before transfer or within 2 years after transfer.
asset ▪ Construct: Within 3 years from the date of transfer.

Quantum of Proportionate Exemption. Thus to get the exemption of amount of capital gains, the
Exemption whole amount of sale consideration shall be invested.
= LTCG x

Withdrawal of If the new house is transferred within 3 years from the date of acquisition.
Exemption If assessee purchases another residential house within 2 years from the date of
transfer of original asset.
If assessee completes construction of another residential house in India/ outside
India within 3 years from the date of transfer of original asset.

Q35:- Compute the taxable capital gains of Mr. D for PY 2022-23. CII are as follows: FY 2004-05: 113
Cost of jewellery [Purchased in FY 2001-2002] Rs. 5,00,000
Sale price of jewellery sold in January 2023 Rs. 15,15,000
Expenses on transfer Rs. 15,000
Residential house purchased in March 2023 Rs. 5,00,000

CAPITAL GAIN
PROF.VINIT KUMAR TAXATION 9873126173

Q36:- R submits you the following particulars:

Capital asset DOA COA FMV as on Date of Sale Price
1.4.2001 sale
Urban Agricultural land 5.6.1999 90,000 1,80,000 16.8.2022 30,00,000
Rural Agricultural land 5.5.200 1,80,000 - 17.10.2022 21,60,000
2
Listed Shares 6.8.2018 1,08,000 - 5.7.2022 1,44,000
Gold 7.9.1995 90,000 81,000 6.3.2023 12,00,000
Residential House 9.7.1984 54,000 10,80,000 1.3.2023 32,00,000
He deposited Rs. 9,20,000 on 25.6.2023 in CGAS as he intends to buy Agricultural Land later. Out of sale
proceeds of gold, he purchased residential house property of Rs. 6,00,000 on 15.5.2023. Compute capital gain
for AY 2023-24.

Q.36A:- Sonu has jewellery acquired on 17/07/2010 for ₹ 5,00,000. On 18/08/2013 Sonu incurred
improvement expenditure on such jewellery by adding diamond to it worth ₹ 3,00,000. On 18/08/2021, he
transferred such jewellery to his friend Monu for ₹ 40,00,000.
Sonu already has a self-occupied house property in Lucknow, however on 17/03/2022 he purchased
another residential house property for ₹ 30,00,000 for the purpose of letting out.
As on 5/04/2023, his friend offered him house worth ₹ 25,00,000 (Value for Stamp duty purpose is only ₹
14,00,000/-) for ₹ 15,00,000 only & Sonu purchased the same. On 7/04/2024, Sonu sold the new house acquired
from his friend for ₹ 19,00,000. Value determined for the purpose of stamp duty purposes ₹ 22,00,000 and
market value as on the date of transfer is ₹ 26,00,000. Compute capital gain in hands of Sonu for several years.

Q36B:- Mr. X has sold following assets during the year 2022-23

Items Cost of acquisition Sale consideration Year of

acquisition
Land ₹ 10 lacs ₹ 150 lacs 1998-99
Jewellery ₹ 30 lacs ₹ 120 lacs 2008-09
On 31/03/2023, he has purchased a residential house of ₹ 30,00,000 for self occupation as he had no other
house till date. Compute capital gain.

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PROF.VINIT KUMAR TAXATION 9873126173

Deduction from capital gain on transfer of capital assets in case of shifting of

industrial undertaking from urban areas [Sec. 54G]
Applicable to All assessess
Conditions 1. Assessee must have transferred a capital asset, being –

• A machinery or plant or building or land; or

• Any rights in building or land,

• used for the purposes of the business of an industrial undertaking situated in an urban
area.

2. Such transfer is effected in the course of shifting of such industrial undertaking to any
area other than an urban area.

3. Assessee has within a period of 1 year before, or 3 years after, the date of transfer —

a. purchased new machinery or plant for the purpose of business of the industrial
undertaking in the area to which the said undertaking is shifted;

b. acquired building or land or constructed building for the purposes of his business in the
said area;

c. shifted the original asset and transferred the establishment of such undertaking to
such area; and

d. incurred expenses on such other purpose as may be specified in a scheme framed

by the Central Government for the purposes of this section
Time limit Within 1 year before, or 3 years after, the date of transfer.
for acquiring CGDA also applicable.
new asset
Revocation of
If the newly acquired assets are transferred within 3 years from its date of acquisition, then the
benefit and benefit availed earlier shall be revoked. Such revoked income shall be subtracted from cost of
its acquisition of newly acquired assets.
Treatment If the amount held in Capital Gains Deposit Account Scheme (1988) is unutilized, then such amount
shall be taxable as short term or long-term capital gain (depending on the nature of gain on original
transfer) in the previous year in which the period of 3 years from the date of transfer expires.

QUE:-X Ltd. is shifting its undertaking from Jaipur to Napasar (other than urban area). In this regard it
sold its 4 machineries and 2 sets of furniture during the previous year 2022-23 as under –

Depreciation Book Depreciation Book

Machinery Sold for Furniture Sold for
Rate Value Rate value
A 15% 2,00,000 3,00,000 X 10% 1,00,000 2,00,000
B 15% 3,00,000 8,00,000 Z 10% 60,000 90,000
C 15% 5,00,000 6,00,000
D 30% 6,00,000 5,00,000
WDV of the block of asset a under–

Name of the Block Block consist of WDV as on

1/04/2022
Machinery 15% A, B & C 11,00,000

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PROF.VINIT KUMAR TAXATION 9873126173

Machinery 30% D&E 9,00,000

Furniture 10% X&Z 1,50,000
X Ltd. is seeking whether the transaction shall be taxable as slump sale or not and compute capital gain. On
7/04/2023, assessee further purchased machineries worth ₹ 3,70,000 and land of ₹ 1,00,000 for the purpose
of new industrial undertaking. Compute capital gain.

QUE:- Raj Ltd. has an industrial undertaking operating in an urban area. During the year 2022-23, it sold its two
machineries for ₹ 2,00,000 and ₹ 3,80,000 in course of shifting its industrial undertaking from urban area to
rural area. The written down value of the block (consists of 4 machineries) as on 1/04/2022 was ₹ 3,50,000.
The company incurred ₹ 20,000 expenses on other purposes as specified in a scheme framed by the Central
Government for the purposes of this section. Determine its taxable capital gain, if the company acquired new
machinery for industrial purpose for ₹ 50,000 as on –
Case A) 28/03/2023;
Case B) 12/04/2023

Deduction from capital gain on transfer of capital assets in case of shifting of

industrial undertaking from urban areas to Special Economic Zone [Sec. 54GA]
Applicable to All assessees
conditions 1. Assessee must have transferred a capital asset, being –

•A machinery or plant or building or land; or

•Any rights in building or land,

– used for the purposes of the business of an industrial undertaking situated in an

urban area.

2. Such transfer is effected in the course of shifting of such industrial undertaking to

Special Economic Zone (SEZ).
Note: The SEZ may be developed in any urban area or any other area
3. Assessee has within a period of 1 year before, or 3 years after, the date of transfer -
i. purchased new machinery or plant for the purpose of business of the industrial
undertaking in the SEZ to which the said undertaking is shifted;
ii. acquired building or land or constructed building for the purposes of his business
in the SEZ;
iii. incurred expenditure on shifting the original asset and transferred the
establishment of such undertaking to such SEZ; and
incurred expenses on such other purpose as may be specified in a scheme framed
iv.
by the Central Government for the purposes of this section.
Time limit for Within 1 year before, or 3 years after, the date of transfer.
acquiring new CGDA also applicable.
asset.
Revocation of If the newly acquired assets are transferred within 3 years from its date of acquisition, then
benefit and its the benefit availed earlier shall be revoked. Such revoked income shall be subtracted from cost of
Treatment acquisition of newly acquired assets.
If the amount held in Capital Gains Deposit Account Scheme (1988) is unutilized, then such
amount shall be taxable as short term or long-term capital gain (depending on the nature of gain
on original transfer) in the previous year in which the period of 3 years from the date of

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PROF.VINIT KUMAR TAXATION 9873126173

transfer expires.

Deduction from capital gain on transfer of residential property for investment in

eligible company [Sec. 54GB]
Applicable to Individual & HUF
Conditions 1. Assessee must have transferred a long-term capital asset being residential property (i.e., a
house or a plot of land).
2. Such transfer should take place during 01-04-2012 and 31-03-2022.
3. Assessee must subscribe in the equity shares of an eligible company within the due date of
furnishing income tax return for the relevant assessment year.
➢ Eligible company means a company which fulfils the following conditions:
a. It is an Indian company
b. The company should be incorporated during the period from the 1st day of April of
the previous year relevant to the assessment year in which the capital gain arises to
the due date of furnishing of return of income u/s 139(1) by the assessee;
E.g.: If Mr. X has transferred his residential property as on 10/08/2021, then
company should be incorporated between 01/04/2021 and due date of furnishing
return u/s 139(1) by Mr. X (i.e. 31/07/2022 1 assuming his accounts are not liable for
audit).
c. The company is engaged in the business of manufacture of an article or a thing or in
an eligible business.
 Eligible business means a business which involves innovation, development,
deployment or commercialisation of new products, processes or services driven
by technology or intellectual property.
d. It is a company in which the assessee has more than 25% share capital or more than
25% voting rights after the subscription in shares by the assessee; and
e. It is a company which qualifies to be a small or medium enterprise (i.e., SME) under
the Micro, Small and Medium Enterprises Act, 2006 or is an eligible start- up (as
referred to in sec. 80-IAC);
1. The company should be utilised this amount for purchase of new asset within prescribed
time.
➢ New asset means new plant and machinery but does not include:
a. any machinery or plant which, before its installation by the assessee, was used
either within or outside India by any other person (Second-hand machine);
b. any machinery or plant installed in any office premises or any residential
accommodation, including accommodation in the nature of a guest-house;
c. any office appliances including computers or computer software;
d. any vehicle; or
e. any machinery or plant, for which 100% deduction is allowed (whether by way of
depreciation or otherwise) in computing the income chargeable under the head
“Profits and gains of business or profession” of any previous year.
f. in case of an eligible start-up, being a technology driven start-up so certified by the
Inter-Ministerial Board of Certification notified by the Central Government, the new
asset shall include computers or computer software

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PROF.VINIT KUMAR TAXATION 9873126173

CAPITAL GAINS ACCOUNT SCHEME (CGAS)

Scheme of ▪ For Section 54, 54B, 54D, 54F, Capital Gain is exempt to the extent of Investment of
deposit “capital gains/Net Sale Consideration” (for 54F) in specified assets within specified time
limit.
▪ If such Investment is not made before DD of filing of ROI, then Capital Gain/Net sale
consideration (for 54F) has to be deposited under the CGAS to get exemption.

Time limit for ▪ Such deposit in CGAS should be made before filing ROI or before DD of filing ROI,
acquiring new whichever is earlier.
asset ▪ Proof of such deposit should be attached with the return.
▪ Deposit can be withdrawn for the specified purposes.

Consequences of ▪ If the amount deposited is not utilized for specified purpose within stipulated period,
non- utilization then unutilized amount shall be charged as capital gain of the PY in which specified
period expires. For Sec 54F, Proportionate Amount will be Taxable.
▪ If Individual dies before the stipulated period, unutilized amount is not taxable in the
hands of legal heirs of deceased individual because such unutilized amount is not income
but is a part of the estate devolving upon them.

TAXABILITY OF CAPITAL GAIN

SHORT TERM CAPITAL GAIN

1. STCG u/s 111A:
▪ STCG on transfer of Equity shares/units of EOMF on which STT is paid → Taxed @ 15%
▪ Benefit of REMAINING BEL will be available for Resident Individual/HUF.
▪ No deduction under Chapter VI-A against STCG taxable u/s 111A.
▪ STCG arising on transactions undertaken in foreign currency on RSE located in International Financial
Services Centre is taxable @ 15% even if STT is not leviable on such transactions.

2. Other STCG:
▪ STCG other than Section 111A are treated as Normal Income & will be taxed @ Slab Rate along with
Other Incomes.

LONG TERM CAPITAL GAIN

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PROF.VINIT KUMAR TAXATION 9873126173

1. LTCG u/s 112A: Taxable @ 10% on LTCG exceeding Rs. 1,00,000

▪ LTCG on transfer of Equity shares/units of EOMF on which STT is paid → Taxed @ 15%
▪ Benefit of REMAINING BEL will be available for Resident Individual/HUF.
▪ No deduction under Chapter VI-A against STCG taxable u/s 112A.
▪ Rebate u/s 87A → Not Available against LTCG taxable u/s 112A.
▪ LTCG arising on transactions undertaken in foreign currency on RSE located in International
Financial Services Centre is taxable @ 10% even if STT is not leviable on such transactions.
Note:
1. Equity share → STT is to be paid on acquisition & transfer of such capital asset.
2. Units of EOMF/Business Trust → STT is to be paid on transfer of such capital asset.
However, CG may specify the nature of acquisition of equity share on which STT is not payable on
acquisition.
2. OTHER LTCG: Taxable @ 20%
▪ No deduction under Chapter VI-A is available against LTCG.
▪ Resident Individual & HUF → 20%. Benefit of remaining BEL is available.
▪ Other Person & Domestic Company → 20%. No Benefit of remaining BEL.
▪ Foreign company/ Non-corporate Non-Resident:
LTCG on unlisted Shares/securities of a Private 10% without indexation & currency fluctuations
company under 1st proviso to sec 48.
Other assets 20%

LTCG arising from transfer of listed securities (other than units) & ZCBs
▪ Assessee will have the option to pay tax @ 10% without Indexation or 20% with Indexation.

What about Debt-oriented MF or unlisted securities?

▪ LTCG on transfer of units of debt-oriented MF & unlisted Securities are not eligible for
concessional rate of 10% (without indexation benefit). Thus taxable @ 20% with indexation.

CAPITAL GAIN