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Section 48 Mode of computation.

The income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :—

(i) expenditure incurred wholly and exclusively in connection with such transfer;

(ii) the cost of acquisition of the asset and the cost of any improvement thereto;

 (iii) in case of value of any money or capital asset received by a specified person from a specified entity referred to in section 45(4), the amount chargeable to income-tax as income of such specified entity under that sub-section which is attributable to the capital asset being transferred by the specified entity, calculated in the prescribed manner:

(Recently amended by Finance act, 2021)

For understand this amended clause, You can refer this below link


First Proviso to section 48 read with rule 115A

Provided that in the case of an assessee,

  • who is a non-resident,
  • capital gains arising from the transfer of
  • a capital asset being shares in, or debentures (include bond other than govt bonds) of, an Indian company (Whether Listed /Unlisted)
  • shall (mandatory in nature) be computed by converting
  • the cost of acquisition,
  • expenditure incurred wholly and exclusively in connection with such transfer and
  • the full value of the consideration received or accruing as a result of the transfer of the capital asset
  • into the same foreign currency as was initially utilised in the purchase of the shares or debentures, and
  • capital gains so computed in such foreign currency
  • shall be reconverted into Indian currency, so, however, that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company

Rule 115BA Method of conversion and Calculation of Capital gain Accodingly

Conversion of Rate of Conversion Date of Conversion
Cost of acquisition Average Of Telegraphic Transfer Buying Rate & Telegraphic Transfer Selling Rate (TTBR & TTSR) On the date of acquisition
Expenditure in connection with such transfer On the date of Transfer
Full value of the consideration
Capital gains reconverted into Indian currency TTBR (Benefit to Assesse)

Second Proviso to section 48 Indexation in case LTCG on transfer of LTC asset.

  • that where long-term capital gain (LTCG) arises from the transfer of a long-term capital asset,
  • other than capital gain arising to a non-resident (Second Proviso will not available to NR) from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso
  • “Indexed cost of acquisition” and “Indexed cost of any improvement” shall be consider for the purpose of Calculation of Capital Gain.

Third Proviso to section 48 first and second provisos shall not apply where section 112A apply.

Fourth Proviso to section 48

Second proviso shall not apply to the long-term capital gain arising from the transfer of a long-term capital asset, being a bond or debenture other than

(a) capital indexed bonds issued by the Government; or

(b) Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015:

Fifth Proviso to section 48

An Assessee being a non-resident, Capital Gain arise on the account of Appreciation of rupee against a foreign currency (it means value of Foreign Currency is depreciated- therefore to give benefit to non-resident, this 5th proviso came into existence, so that they do not preclude themselves in investment in the Indian Stock Market) at the time of redemption of rupee denominated bond (RDB)of an Indian company held by him, shall be ignored for the purposes of computation of full value of consideration under this section.

Sixth Proviso to section 48- MV = Sale consideration

Where shares, debentures or warrants referred to in section 47(iii) are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section.

Seventh Proviso to section 48 – No STT Allowed

No deduction shall be allowed in computing the income chargeable under the head “Capital gains” in respect of any sum paid on account of securities transaction tax

There are only Four Cases where Indexation benefit will not be available

1. First Proviso to Section 48

2. Fourth proviso to Section 48

3. Slump Sale provided u/s 50

4. Long-term Capital Gain as per Section 112A


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  1. UMAPRASAD says:

    The property acquired in 2005 and sold in 2022 .Can we take depreciation and deduct the amount to find out captal gain or noy to be deducyed the depreciation of asset.

    1. Krishna Verma says:

      if the property belongs to business then only you can claim depreciation otherwise not.
      if property belongs to business then claim depreciation and on sale of such property short-term
      capital gain will be arise.
      if you have never shown such property in business then you can claim indexation and in that case Long-term capital gain will arise.
      in simple words, property in
      Business= Depreciation+ short -term. Capital gain
      not in business= Indexation benifit+ long-term capital gain


    Whether expenditure on Repairs and Renovations of the flat would be considered as Improvement of the assets for the purpose of deductions under section 48 ?

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July 2024