Capital Gain Tax
1. Capital Gain as defined u/s 45
2. Taxation in special cases as under
Company liquidation – Sec. 46 –
Company purchasing its own shares -Sec. 46A-
*Purchase of its own shares by company , taxed in the hands of the shareholders
3. Transactions not transfer- Sec 47
4. Conditions of the above exemptions – Sec 47A
5. Mode of Computation – Sec 48
From full value of consideration received/ accruing- deduction of –
– Exp. Wholly & exclusive for such transfer.
– Cost of acquisition/ any improvement
Provision 1.- Calculation of Capital gain for non-resident -conversion of transaction value into foreign currency & then conversion of capital gain in foreign currency into Indian
Provision 2.- Capital gain other than non resident- indexed cost of acquisition and indexed of Any improvement will be adopted , Except bond or debenture (other than indexed bond by govt.)
Provision3. In case of transfer share/debenture/warrants under ESOP, market value at the time of transfer to be considered
Provision 4 . No deduction for STT.
Expl. – Cost of acquisition- index of the year of first year of assets hold or year beginning April 1981 whichever is later.
Index cost of acquisition/improvement same proportion as it bears to the index of the year of sale and first year of assets held.
6. cost of certain acquisition – Sec 49
(1)Assets acquired due to
– HUF partition
-Succession , inheritance devolution
-Any distribution on liquidation of company
– Any transfer under trust
-Any other transferred under various clause of sec. 47.
-Individual property transferred to HUF
The cost of acquisition/ improvement will be with reference to the previous owner.
-Expl. Previous Owner – Means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred above .
(2)Cost of amalgamating company in case of amalgamation .
(2A). in case of conversion into share or debenture cost of acquisition with reference to original shares/debentures.
(2AA). Conversion to LLP, the cost of original security.
(2AB). In case of ESOP , market value at the time of issue.
(2C/2D/2E). In case of merger, book value of the demerged company as reduced by cost of original shares ,also to apply for Co- operative banks.
(3)In case of holding & subsidiary company transactions – cost of original acquisition.
(4) Any fair market value consider u/s 56, the same will be the cost of acquisition
Depreciable Assets –Sec.50
(i)Any excess of full consideration over WDV of block of assets plus value of any assets acquired during the year, to be consider capital gain.
(ii)If WDV value of block is nil due to transfer of all block assets, WDV at the beginning of the year will be considered.Online GST Certification Course by TaxGuru & MSME- Click here to Join
In case of depreciable assets -WDV will be the cost of acquisition. – Sec. 50A –
– Slump sale– Sec. 50B
– Sale to be considered as long capital assets
-Net worth will be taken as a cost of acquisition
-Net worth to be certified
Stamp Valuation -Sec. 50C-
(1)- In case of land and /or building , stamp valuation adopted or assessed or assessable deemed to be full value of consideration.
(2)-where assessee claims stamp value exceeds FMV and such value not disputed in any appeal the assessing officer may refer valuation to the valuation officer.
(3)- if valuation officer value higher, then stamp duty valuation shall be taken as a full value
– If consideration not ascertainable FMV shall be taken as full value. Sec. 50D
– Advance money received on any previous occasion to be deducted from the computation of cost of acquisition. – Sec. 51
Capital Gain Tax -EXEMPTIONS
Profit on sale of property used for residence – Sec.54 (1)
-Transfer of long term building or lands appurtenant thereto and being residential house and income chargeable under the head income from house property & assesse being individual or HUF has purchased within the a period of one year before or two year after the date of transfer or constructed within a period of 3 year one residential house in India , then Charge excess of capital gain over the cost of purchase / construction and for sale of new assets within 3 years, cost will be taken nil.
-No tax if capital gain equal or less than cost of purchase / constructed & cost of new assets to be reduced by capital gain for sale within 3 years for calculation of capital gain.
(2) -the amount of capital gain not appropriated for purchase before one year or not utilized Before filling the return the amount shall be deposited in accounts with such banks as specified before due date of filing return and utilized as per scheme.
-The amount so deposited will be considered a cost of new assets together with other cost of purchase / consideration if utilized.
– If amount so deposited not utilized within the period specified (2/3 yrs) amount not utilized will be taxable after expiring of 3yrs. and amount can be withdrawn the amount so deposited
Land used for agriculture purpose – Sec. 54B –
Compulsory acquisition of land and building.- Sec. 54D-
-Transfer under compulsory acquisition of land or building or any right in L&B forming part of any industrial undertaking and was being used for such undertaking in two years immediately preceding and within 3 yrs purchased / constructed any other L&B for shifting or setting up another industrial undertaking capital gain to be taxed as provided u/s 54.
Capital gain invested in certain bonds – Sec. 54EC-
Capital gain invested in residential house.- Sec. 54F –
(1) (a)Any capital gain on long term assets not being residential house of individual/HUF and purchased before one year or after two year or constructed within 3 years one residential house in India ,the capital gain will be taxed as under.
-If the cost of new assets is more than the net consideration of original assets –no tax
-If the cost of new assets is less than the net consideration than tax same proportion of capital gain as the cost of new assets bear to the net consideration of original assets.
(b) Income from such residential house (other than one owned on the date of transfer of original assets) is chargeable under head income from house property.
(2) if assesee purchase within 2 years or constructed within 3 years of original transfer a residential house other than new assets whose income chargeable under income from house property, exempt capital gain to be taxed in the year of purchased or construction.
(3) if new asset transferred within 3 years of it purchases/constructed capital gain exempted to be
(4) procedure of bank deposited apply for net consideration.
Shifting of industrial undertaking from urban area – Sec. 54G-
– If capital gain in excess of the above cost, difference will be treated as capital gain.
-If capital gain is equal or less than the above cost capital gain nil.
-The lock in period of 3 years to be considered for capital gain on transfer of new assets.
-Procedure of bank deposit of capital gain not utilized before filling of return apply in this case also Shifting industrial undertaking from urban area to any special economic zone Sec. 54 GA-(provision similar to 54G)
Sec. 54GB – Capital gain of long term residential property include land & building by individual /HUF and utilises net consideration in equity share of the eligible company before due date of Filing return u/s 139(1) AND The company utilises this amount for new asset within one year of subscription then Tax on capital gain will be proportionate if cost of new assets is lower than net consideration or nil if cost of new assets is equal or higher than net consideration.
*Company may follow the procedure of bank deposit if not purchases new assets before due date of filing the return.
– In case of transfer by compulsory acquisition under any law, period of investment to be reckoned from the date of the receipt of compensation. Sec. 54H
Cost of improvement:- Sec . 55 (1)
(2) Cost of acquisition
In other case – NIL
(aa) – In case of addition of securities
Issued with cost – actual cost
In case renouncement
with nil price -NIL
With cost -Actual cost price
(b) Any other capital assets
April 1981 at the option of assessee
In case of share conversion etc. cost with reference to the cost of original shares.
where cost of previous owner can not be ascertained FMV.
For ascertaining FMV , A.O. may refer to valuation officer if- Sec. 55A-
Capital Assets Sec. 2(14)
Property of any kind held by assessee but does not include
– Stock in trade, consumable stores or raw material held for business.
– Personal effects I e movable property include wearing apparels and furniture held for personal use but exclude jewellery ,drawings, art work etc.
– Agriculture land not situated within municipal area with population not less than 10,000 as per preceding census and area within such distance not more than 2/6/8 K.M. from local limit of with population more than 10,000/one lakh/ten lakhs
– Gold bond(1977)/defence bond(1980)
– Special deposit bond 1991 Gold deposit bond 1999
Short term capital assets – Sec. 2(42A)-
Applicable Tax: Sec. 111A –
Tax on LTCG – Sec. 112 –
– unlisted security @ 10% without index benefit.
– Other assets ,tax @ 20% of capital gain with index benefit.
*Deduction of chapter VI-A and rebate u/s 88 from income excluding LTCG
– LTCG on equity share in a company or unit of equity oriented funds and such transaction subject to STT, fully exempted – Sec. 10(38)
-Such gain to be considered for MAT (115JB).