Capital Gains Taxation - Key Concepts and Provisions

Income tax Unit: Taxation of Capital Gains Date:20-12-2022 P P SINGH LLB, FCA, CS, B.Sc.(H) 97115210609871229590

CA PP SINGH. LLB , FCA, CS, B.SC (H) Contact No. +91-9711521060, 9871229590 cappsingh@gmail.com Post-qualification experience of around 23 years in the field of direct & indirect tax particularly income tax, service tax and VAT ,sales tax and GST. Experience of handling the litigation matters and advisory matters of Direct taxes particularly income tax and indirect tax like GST, service tax, DVAT, CST, Central Excise and other related matters. Authored the book DNA of GST Audit and Annual return, The DNA of TDS&TCS (including withholding tax, advance tax and equalisation levy) ,Background material on GST for students ICAI, New Delhi empowerment of girl Guest faculty for certification course on GST & Certification course on appeal and representation ICAI , New Delhi , guest faculty national academy of custom indirect tax and narcotics (NACIN) GOVN OF INDIA Corporate trainer and Faridabad(Institute of Minister Finance), ICSI, New Delhi and other trade association. guest Faculty with Indian Institute of Management(IIM), NIFMS,

Disclaimer Contents and oral discussion are Just for educational purpose and discussion for understanding the concept and could not be considered as opinion for any decision making. Before taking any decision the proper legal expert and other Consultants should be approached. content writer could not be held responsible in any way for any action taken on the basis of explained here

Charging provisions- section 45 Meaning of capital assets Items which are not a capital assets Meaning of transfer Excluded from meaning of transfer? Type of capital assets- short term and long term Type of capital gain- short term and long term capital gain Computation of capital gain- LTCG/STCG Cost of acquisition, cost of improvement, expenses of transfer Holding period- inclusion/ exclusions Indexation and cases when indexation not permissible Exemptions from capital gain tax Special provisions for computation of capital gain Rate of tax Contents

General charging provisions- section 45(1) Any profits or gains arising from the transfer of a capital asset effected in the previous year shall, save as otherwise provided in sections 54, 54B, 54D, 54E, 54EA, 54EB, 54F, 54G and 54H, be chargeable to income-tax under the head "Capital gains", and shall be deemed to be the income of the previous year in which the transfer took place. Essential conditions for capital gains are: Capital assets Transfer of capital assets Transfer during the PY Profit or gains from transfer of such capital assets Not saved in any of the capital gain exemptions covered u/s 54 to 54H Capital gain shall deemed as income of the PY in which transfer took place

Meaning of capital assets- section 2(14) capital asset" means (a) property of any kind held by an assessee, whether or not connected with his business or profession; (b) any securities held by a (FII) which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992 ; (c)any unit linked insurance policy(ULIP) to which exemption under section 10(10D) does not apply on account of the applicability of the fourth and fifth provisos thereof, Exclusions from capital assets: stock-in-trade, consumable stores or raw materials personal effects- ,means movable property held for personal use except jewellery; archaeological collections; drawings; paintings; sculptures; or any work of art. rural agricultural land in India Gold Bonds, Gold Deposit Bonds , deposit certificates issued under the Gold Monetisation Scheme, 2015 Property systematic degrees and forms of control, use and enjoyment transfer or disposal of things by persons that are recognized protected by law. Different law has defined according to purpose of the statute. is nothing expression but a of and differently

long term capital assets: means a capital asset which is not a short-term capital asset -section 2(29AA) Type of capital assets: "long-term capital gain" means capital gain arising from the transfer of a long-term capital asset - section 2(29B) short term capital assets- section 2(42A) Short term capital assets : "short-term capital asset" means a capital asset held by an assessee for not more than 36 months immediately preceding the date of its transfer. long term capital assets section 2(29AA) Exceptions: Even lower than 36 months holding of capital assets classify it long term capital assets such as 12 months holding period only required security ( other than units) listed in recognized stock exchange, unit of equity oriented mutual fund, zero coupon bond 24 months holding period only required unlisted equity shares in india, immovable property being land or building in the case of in the case of

Deemed short term capital assets Capital assets forming part of block of assets Self generated assets or self generated goodwill money or capital asset or both were received by the specified partners/members of a firm from partnership firm/AOP/BOI on reconstitution of firm , Note: in case of stock in trade given to partner it will be business income refer section 45(4) read with section 9B person being dissolution or

Shares of a company in liquidation exclude period of holding after date of liquidation Inclusion/ exclusion from period of holding for determining long term or short term Property acquired from previous owner without consideration- e. g by way of gift/succession etc. Include period of holding of previous owner Inventory converted into capital assets and later on such capital assets transferred. Period of holding of such capital assets shall start from date of conversion Amalgamation of companies where shares of amalgamated Indian company issued for share in amalgamating company for shares of new company holding period of old company shall be included demerger -shares of resulting Indian company issued for share in demerged company for shares of resulting company holding period of demerged company shall be included capital assets Units of a business trust allotted in lieu of shares of special purpose vehicle referred u/s 47(xvii) include holding period of shares. Unit become property of assessee under consolidation scheme of units of MF referred u/s 47(xviii) include holding period of units prior to consolidation scheme.

Conversion of bond or debenture into shares- section 47(x) include holding period of bonds/debentures/deposit certificate prior to conversion Inclusion/ exclusion from period of holding for determining long term or short term Conversion of preference shares into equity shares- section 47(xb) include holding period of preference shares prior to conversion. transfer of unit held in consolidating plan to consolidated plan of scheme include holding period of units in consolidating plan of MF scheme. Right to subscribe shares /securities and assessee subscribed Holding Period from date of allotment of shares/securities Right renounced in favour of others and others have subscribe shares /securities Holding Period from date of allotment of shares/securities Period of holding for Right renounced in favour of others capital gain on renouncement of renunciation of right holding from date of offer to date of renouncement generally STCG capital assets Securities without any additional consideration- e. g bonus shares holding period from date of allotment of bonus shares and not from date of original securities. Sweat equity shares allotted or transferred free of cost/ concessional rate Holding Period from date of allotment of shares/securities shares acquired by non resident on redemption of GDR refereed u/s 115AC(1)(b) Holding period from date on which request for redemption made.

transfer", in relation to a capital asset, includes, Sale of capital assets Exchange capital assets Relinquishment capital assets extinguishment of any rights compulsory acquisition thereof under any law capital assets converted by the owner thereof into, or is treated by him as, stock-in-trade maturity or redemption of a zero coupon bond transaction involving the allowing immovable property to be performance of a contract of the nature referred to in section 53Aof the Transfer of Property Act, 1882 transfer of membership/shares of company/AOP having effect of transferring or enabling the enjoyment of, any immovable property. Meaning of transfer section 2(47) for exclusion from transfer refer section 47 the possession of any or retained taken in part a cooperative society

distribution of capital assetson the total or partial partition of a Hindu undivided family; transfer of a capital asset under a giftor will or an irrevocable trust but does not include shares /debentures /warrants allotted under ESOP transfer of a capital asset by a parent company or its nominee to its 100% subsidiary company being an Indian company , transfer of a capital asset by a 100% subsidiary company or its nominee to its parent company being an Indian company , Transfer of capital assets, in a scheme of amalgamation by the amalgamating company to the amalgamated company being Indian company. Transactions not regarded as section 47 transfer Transfer, in a scheme of amalgamation of capital assets being shares held in an Indian company, by the amalgamating foreign company to the amalgamated foreign company provided (1) at least 25% of the shareholders remain in new company & (2) such transfer does not attract tax on capital gains in the country in which amalgamating foreign company is incorporated. any transfer, in a scheme of amalgamation of a banking company with a banking institution sanctioned and brought into force by the Central Government .

any transfer, in a scheme of amalgamation, of a capital asset, being a share of a foreign company, referred to in the Explanation 5 to clause (i) of sub-section (1) of section 9, 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 provided (1) at least 25% of the shareholders remain in new company & (2) such transfer does not attract tax on capital gains in the country in which amalgamating foreign company is incorporated. Transactions not regarded as section 47 Transfer of capital asset by the demerged company to the resulting company, if the resulting company is an Indian company; transfer any transfer in a 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, provided (1) at least 75% of the shareholders in value terms remain in new company & (2) such transfer does not attract tax on capital gains in the country in which demerged foreign company is incorporated. transfer of capital assets under business reorganization by a predecessor co-operative bank to successor co-operative bank/ converted banking company. Available For cooperative bank

any transfer by a shareholder, reorganization of co-operative bank in consideration of shares in co-operative bank/ bank of successor. Available for shareholders of capital assets being shares under business Transactions not regarded as any transfer, in a demerger, of a capital asset, being a share of a foreign company, referred to in the Explanation 5 to clause (i) of sub-section (1) of section 9, 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 provided (1) at least 25% of the shareholders remain in new company & (2) such transfer does not attract tax on capital gains in the country in which amalgamating foreign company is incorporated. section 47 transfer Transfer or issue of shares by the resulting company in a scheme of demerger to the shareholders of the demerged company Transfer by a shareholder, of a capital asset being a share or shares held by him in the amalgamating company, in a scheme of amalgamation provided amalgamated company is an Indian company transfer of a capital asset, being bonds or GDR (Global Depository Receipts] referred to in section 115AC(1), made outside India by a non-resident to another non-resident;

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; Transactions not regarded as any transfer of a capital asset, being (a) bond or Global Depository Receipt referred to in sub-section (1) of section 115AC; or (b) rupee denominated bond of an Indian company; or (c) derivative; or (d) such other securities as may be notified by the Central Government section 47 transfer made by a non-resident on a recognised stock exchange located in any International Financial Services Centre and consideration for such transaction is paid or payable in foreign currency. any transfer, in a relocation, of a capital asset by the original fund to the resulting fund; any transfer by a shareholder or unit holder or interest holder, in a relocation, of a capital asset being a share or unit or interest held by him in the original fund in consideration for the share or unit or interest in the resultant fund. "relocation" means transfer of assets of the original fund, or of its wholly owned special purpose vehicle, to a resultant fund. original fund means fund established or incorporated or registered outside India, which collects funds from its members for investing it for their benefit and fulfill certain conditions.

transfer of capital asset by India Infrastructure Finance Company Limited to an institution established for financing the infrastructure and development, Transactions not regarded as transfer of capital asset, under a plan approved by the Central Government, by a public sector company to another public sector company notified 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. Redemption by individual of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015, section 47 transfer transfer of a capital asset, being any 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 notified1by the Central Government. conversion of bonds or debentures, debenture-stock or deposit certificates into shares or debentures of that company.

transfer by way of conversion of bonds referred to in clause (a) of sub-section (1) of section 115AC into shares or debentures of any company; Transactions not regarded as transfer by way of conversion of preference shares of a company into equity shares of that company transfer of a capital asset or intangible 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, provided following conditions are satisfied (1) all the assets and liabilities of the firm become the assets and liabilities of the company; (2) all the partners of the firm immediately before the succession become the shareholders in the same proportion of capital account (3) consideration or benefit, by way of allotment of shares only (4) aggregate of the shareholding in the company of the partners of the firm carry not less than 51% voting power and continued for 5 years section 47 transfer transfer of a capital asset or intangible asset by a private company or unlisted public company to LLP or transfer of shares as a result of above conversion provided (1) all the assets and liabilities of the company become the assets and liabilities of the LLP; (2) all the shareholders of the company immediately before the conversion become the partners of LLP (3) shareholders of the company do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of share in profit and capital contribution in the LLP (4) aggregate profit sharing ratio of the shareholders in the LLP at least 51% and continued for 5 years.(5) total sales /turnover/gross receipts of business during last 3 years does not exceed Rs 60 lakh.(6) total value of the assets as appearing in the books of account of the company does not exceed Rs. 5 crore in any of the three previous years preceding succession. (7) no returning or distribution of accumulated profit between partners during 3 years post succession.

sole proprietary concern is succeeded by a company liabilities of the proprietary concern become the assets and liabilities of the company; (2) aggregate of the shareholding in the company of the proprietor voting power and continued for 5 years (3) consideration or benefit, by way of allotment of shares only any transfer of a capital asset in a transaction of reverse mortgage under a scheme notified. any transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust to the transferor. provided (1) all the assets and Transactions not regarded as carry not less than 51% section 47 transfer transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating scheme of a mutual fund, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund: u/s 47(xviii) transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund. u/s 47(xix)

STCG LTCG Mode of computation of capital gain section 48 Full value of consideration Full value of consideration Less: expenses of transfer incurred wholly and exclusively Less: expenses of transfer incurred wholly and exclusively Less: cost of acquisition Less: indexed cost of acquisition if not prohibited Indexation to adjust cost inflation Less: cost of improvement Less: indexed ost of improvement if not prohibited Gross STCG Gross LTCG Exemptions u/s 54, to 54 H Exemptions u/s 54, to 54 H Taxable short term Capital gain Taxable Long term Capital gain

to a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall 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 the capital gains so computed in such foreign currency shall be reconverted into Indian currency. Also apply to every reinvestment thereafter. Section 48 first proviso]. To avoid currency fluctuations effect on capital gain. second proviso to section 48 - indexation of cost of acquisition and indexed cost of improvement in the case of long term capital gain prohibited. First proviso and second proviso to section 48 by default allowed unless

capital gains arising from the transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust referred to in section 112A- first proviso and second proviso to section 48 not allowed- third proviso to section 48. long-term capital gain arising from the transfer of a long-term capital asset, being a bond or debenture except (1) capital indexed bonds issued by the Government and (2) Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015- second proviso not allowed- fourth proviso section 48. proviso/ second proviso not Special cases where first allowed

Full value of consideration non-resident assessee, 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- fifth proviso to section 48. where shares, debentures or warrants referred to in the proviso to 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- 6th proviso to section 48. no deduction shall be allowed in computing the income chargeable under the head "Capital gains" for STT- 7thproviso to section 48. inclusion and exclusion section 48

consideration section 45 and 46 Section Type of capital gain Full value of consideration 45(1A) Money Received from insurance company against damage or distraction of capital assets Money received plus FMV of the assets receipt deemed value of full 45(2) Conversion of capital assets into stock in trade FMV on the date of conversion and 50C and 50D 45(3) Capital assets introduced as capital in the partnership firm / AOP / BOI Amount recorded in books of amount 45(4) Distribution of assets on dissolution or reconstitution of partnership / AOP / BOI FMV on date of distribution 45(5A) Transfer by individual or HUF under joint development agreement Stamp duty value on the date of completion certificate of the share in constructed building plus consideration received in cash 46(2) Liquidation of company FMV OF assets receipt plus money receipt less deemed dividend under section 2(22)(c )

consideration section 45 and 46 Section Type of capital gain Full value of consideration deemed value of full 50C Transfer of land or building for value less circle rate of stamp duty value Stamp duty value and 50C and 50D 50D Full value consideration not determinable or ascertainable FMV

COST OF ACQUISITION- SECTION 55(2) in goodwill of a business or profession, or a trade mark or brand name associated with a business or profession, or a right to manufacture, produce or process any article or thing, or right to carry on any business or profession, or tenancy carriage permits, or loom hours, (1) purchase price if purchased (2) cost to previous owner if acquired under any mode under section 49(1) (3) in any other case, shall be taken to be nil: section 55 (2)(a) relation to a capital asset, being rights, or stage Interest on money capital assets shall form part of cost of acquisition.. however interest after asset put to use can't be form part of cost of acquisition. In respect of asset acquired by way of inheritance and sum paid for discharge of mortgage created before acquisition then amount paid shall form part acquisition , borrowed for acquisition of of cost of

Cost of acquisition of original shares unchanged remain Cost of acquisition of right shares - section 55(2)(aa) Cost of acquisition of right shares shall be amount actually paid for the right shares. Cost of acquisition for renouncement of right in favour of some other person shall nil. Cost of acquisition of shares where renouncement by some other person shall be the cost for acquisition of shares renunciation in the favour. Example amount paid for renouncement in favour Rs. 10000 and amount paid for allotment of shares Rs. 1 lakh then cost of acquisition shall be Rs.1,10,000 plus amount paid for

Cost of acquisition of Bonus shares section 55(2)(ac) Allotment of shares on or after 01 4 2001 cost of acquisition shall be nil Allotment of shares prior to first of April 2001 the cost of acquisition may be taken as fair market value on first of April 2001.

Cost of acquisition of assets acquired by owner or previous owner prior to 01 04 2001 Cost to the owner or FMV on 01 04 2001 may be taken as cost of acquisition. Ex cost to owner as on date of purchase on o1 05 1995 was Rs, 40000 FMV As 01 04 2001 Rs. 130000 then option to take any of two as cost of acquisition. If owner acquired assets in any of mode under section 49(1) after this date but previous owner acquired prior to 01 04 2001, cost of acquisition shall be be taken as cost of previous owner or FMV As on 01 04 2001, In case Capital assets being land or building FMV As on 01 04 2001 shall not exceed the stamp duty value,

Deemed cost of acquisition- Cost of acquisition shall be cost to the previous owner in following cases: (1) Distribution of assets on partition of HUF. (2) Asset acquired by way of gift or will. (3) Succession or inheritance . (4) Distribution of assets on liquidation of a company (5) Revocable or irrevocable trust. (6) Transferred by wholly owned Indian subsidiary to holding company and visa versa. (7) Transfer under scheme of amalgamation of two Indian companies. (8) Transfer under demerger. (9) Transfer by firm to company on conversation. (10) transfer of unlisted to LLP. (11)Transfer on conversation sole proprietor concern to a company. (12)Conversation of self acquired property of a member of HUF to the joint family property. (13)Cost of share of amalgamated company shall be cost of acquisition of share of amalgamating company. section 49(1)

Deemed cost of acquisition- Cost of acquisition shall be cost to the previous owner in following cases: 1. Conversation of bond or debentures or debenture stock or deposit certificate into share or debenture of the same company- cost of acquisition shall be that of bond or debentures or debenture stock or deposit certificate. 2. Sweat equity share- fare market value. 3. Conversation of company into LLP- cost of acquisition of share in company. 4. Conversation of preference share into equity share cost shall be the cost of preference share. 5. Consolidation plan under mutual fund scheme- cost of acquisition shall be that of units in consolidating plans 6. Cost of share of resulted company in the case of demerger shall be = cost of acquisition of share of demerged company X Net book value of assets transfer to resulting company / net worth of demerged company. 7. Cost of acquisition of original share of demerged company shall be = original cost of acquisition cost of acquisition of share in resulting company. 8. Acquisition of property without consideration or inadequate consideration- value taken for computation of income under section 56(2) (x). 9. Conversation of inventory into capital assets- FMV section 49(1)

Capital gain in the case of conversion of capital assets into stock in trade-45(2) Conversion of capital assets into stock in trade is with in meaning of transfer under section 2(47). Transfer in the year in which capital assets converted into stock in trade. Taxable in the year In which stock in trade is sold other wise transferred. Fair market value on the date of conversion shall be deemed to be the full value of consideration. Sale consideration fair market value shall be the business income. Indexation till the year of conversion. Section 45(1) has general provision for taxation of capital gain and special provision are in other sub-section

Capital gain on transfer of capital assets by a partner of firm to the firm or by member to AOP/BOI section 45(3) Applicable in the case of capital contribution in kind in the form of capital assets by a partner or member. full value of consideration shall be the amount recorded in the books of amount of the firm AOP/BOI. Tax liability that of partner / member.

In any transfer of capital assets or stock in trade at the time of dissolution or reconstitution of partnership firm or AOP to the partner shall be deemed to be income- section 9B. In the case of stock in trade transfer there will be a business income and in the case of capital assets there will be capital gain. FMV of the capital assets or stock in trade on the date of receipt by partner / member shall be the full value of consideration. Such capital gain or business income shall be taxable in the hand of partnership firm /AOP / BOI. Reconstitution means introduction of one or more new partners or termination of one or more partner / members.- section 9B. Nature of capital gain shall be LTCG expt shell generated goodwill or assets / assets belonging to block of assets / based on holding period it is STCG Capital gain at the time of dissolution or re constitution of firm / AOP/BOI section 45(4) rule 8AA, 8AB plus section Circular no. 14/2021 dated 02.07.2021 plus 9B

Taxation of capital gain section 45(4) In any money or capital assets received by the partners / members from the firm / AOP / BOI in connection with reconstitution shall be chargeable to capital gain of the partnership firm / AOP / BOI in the previous year in which the money or capital assets or both received by the partner / member. Capital gain shall be taxable as per following formula A(capital received)+C(FMV of capital assets received)- D(balance in capital a/c as per books of a/c). Balance of capital account without taking into a/c in any increase in the capital a/c due to revaluation or any self generated goodwill / self generated other assets. Negative figure as per above formula shall ne ignore. gain) =B(money

Attribution of tax to the remaining capital assets ruled 8AB form 5C before due date of return filling.

Capital gain shall be taxable of the previous year in which compensation compensation / consideration 1streceived. In the case of enhanced compensation by the court or tribunal shall be capital gain of the previous year in which amount received. In the case of interim compensation capital gain in the previous year in which final order made. In the case of initial compensation capital gain shall be computed considering compensation full value of consideration and enhanced compensation shall be taxable in full and have the same nature of capital gain as the initial compensation has. In the case reduction in the compensation / consideration subsequently by the court or tribunal the capital gain already assessed shall ne recomputed considering the order. The enhanced compensation shall be taxable in the hand of successor in the case of death. Compulsory acquisition of assets under law section 45(5) or part of the initial

If the individual HUF transfer land or building under agreement to allow another person to develop a real estate project on such land or building under an understanding that he will get share in developed land or building in such project with or without part payment of consideration in cash there will be capital gain. Such capital gain shall be taxable in the previous year in which complication certificate of the project / part of project issued by complimented authority. For the computation of capital consideration shall be the stamp duty value on the date of certificate issued plus consideration in cash. In the case of transfer of share in the project or on before the date of complication certificate, capital gain shall income of the previous year and provision of this sub- section shall not applied for determine full value of consideration. Capital gain in the case joint development agreement section 54(5A) gain full value of

always Short term capital gain if assets forming part of block of assets in respect of which depreciation has been allowed capital gain or loss, if all the assets of the block of assets are sold / disposed off cost of acquisition and cost of improvement for the computation of capital gain shall be WDV at the year end. if entire block of assets transferred, capital gain = full value of consideration - expenditure for transfer - (WDV of the block of assets at the beginning of PY + actual cost of assets acquired during the year) section 50(1). if part of the block of assets transferred : case-1 full value of consideration is more than opening WDV plus cost of acquisition of new capital assets of the block, capital gain shall be full value of consideration - (opening WDV + cost of acquisition). case-2 if part of the block transferred but full value of consideration is less than opening WDV plus cost of acquisition of new capital assets of the block, there shall be no capital gain, on the balance WDV (opening WDV + cost of acquisition- full value of consideration) ,the depreciation shall be charged. in the case of assessee being power undertaking claiming depreciation on SLM basis, for the computation of capital gain the cost of acquisition shall be the actual cost however actual cost - WDV shall be taxable as business income under section 41(2) and the nature of capital gain depending upon holding period. Section 50A. Capital gain on depreciable section 50 assets

Slump sale means the transfer of one or more undertaking, by any means,] for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfer- section 2(42C). Type of capital gain- STCG / LTCG holding period 36 month of the under taking. Any profit or gains from slump sale shall be subject to capital gain. For Computation of capital gain net worth of the under taking shall be the cost of acquisition and cost of improvement and 1st and 2nd proviso shall not be applicable . Full value of consideration shall be the FMV of the capital assets on the date transfer. Net worth of the under taking = WDV of the depreciable assets + self generated goodwill Nil scientific research capital assets on which deduction allowed under section 356AD Nil, other assets book value of such assets. FMV as per valuation rule 11UAE and Certificate of CA in form 3CEA Tax Effect in Slump Sale Section 50B Section 180 of the Act company

Transfer of land or building Full value of consideration can not be less than value adopted for stamp duty except permissible variation of 10 % of the actual consideration shall be allowed. If there is any change in the stamp duty rate, the stamp duty rate on the date of agreement may be taken the full value of consideration if actual consideration is less than the circle rate Valuation may be referred by AO to the valuation officer under section 55A if Assesse claimed that Value adopted for stamp duty exceeds the FMV on the date of transfer and Value for stamp duty purpose not challenged in any appeal or any authority or court AO may take FMV as determined by valuation officer if less than the stamp duty value as full value of consideration. If stamp duty value is subject to dispute, the AO may rectified the capital gain under section 154 after settlement of dispute. 50C

Transfer of unquoted shares- 50CA If the consideration is less than FMV of such shares, FMV shall be taken as full value of consideration. FMV shall be determined as per prescribed rule. Provision shall not be applicable where transfer by prescribed class of person under rule 11UAD

Advance received for transfer of capital assets forfeited- section 51 Taxable as income for other sources. Earlier it was reduced cost of acquisition

Indexed cost of acquisition section 48 explanation (iii) indexed amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, [2001], whichever is later; cost of acquisition" means an

Cost of improvement section 55(1)(b) Cost purchased goodwill shall be taken as nil. Cost of improvement pertaining to the period prior to first of April 2001 shall be ignored if the fair market value of first of April 2001 taken as cost of acquisition. Post 01 st April 2001 improvement cost shall be reduced from full value of consideration. capital expenditure shall be considered for cost of improvement. of improvement of self generated or Only

Indexed cost of improvement 48 explanation (iv) indexed cost of any improvement" means an amount which bears to the cost of improvement the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place;

Profit on sale of property used for residence may be Exempted- Section 54 Transfer of residential house being a long term capital assets whose income chargeable under head house property. Assets transfer by individual or HUF. Purchase of residential house within two years or construction within three years of transfer or purchased within one year prior to transfer. Capital gain exempt to the instant invested. Two house may be purchased for a maximum capital gain of Rs 2 crore. If not purchased during the year- amount to be deposited under capital gain scheme. New house not to be transferred within three years. If transferred short term capital gain of new house if transferred with in two years, if transferred after two years but before three years of date of acquisition acquisition of new house = cost of acquisition capital gain exempt earlier net cost of

Transfer of urban agriculture land may be Exempted- Section 54B Transfer of urban agriculture land Assets transfer by individual or HUF. Agriculture land used for agriculture purpose for at least two years prior to date of transfer . Capital gain exempt to the extant invested in another agriculture land within two years of transfer . If not purchased during the year- amount to be deposited under capital gain scheme. New agriculture land not to be transferred within three years of its purchased . If transferred short term capital gain of new transferred after two years but before three years of date of acquisition acquisition of land = cost of acquisition capital gain exempt earlier under section 54B. land if transferred with in two years, if net cost of

Capital gain on compulsory acquisition of lands and buildings- section 54D Land of building forming part of industrial undertaking. Transfer by of compulsory acquisition. Such land or building used for business of the industrial undertaking for at least two years prior to transfer. Land transfer -long term. The nature of capita gain for building shall be short term short. For claiming exemption purchase or construction of land and building within 3 years from date of transfer for the purpose of shifting or re-establishing of the said industrial under taking or setting up of another industrial undertaking The amount of capital gain shall be exempt to the extent of investment in new assets . If not purchased during the year- amount to be deposited under capital gain scheme and to be utilised within 3 years and if not utilised fully or partially, the amount of capital gain exempt or proportionate amount shall become taxable as capital gain and after payment of tax amount could be withdrawn. New assets not be transferred within 3 years of purchased or construction. If new assets transferred within 3 years the cost of acquisition of new assets shall be reduced by the amount of capital gain exempt earlier.

investment in certain bonds- section 54EC Long term capital gain from transfer of land or building shall be exempt if amount invested in long term specified assets within 6 month from date of transferred. The amount od exemption depends upon the investment of the amount of capital gain. In other words if full capital gain invested exemption of full amount of capital gain, if part amount is invested the exemption of proportionate capital gain. Limit of investments 50 lakhs during the financial years and subsequent financial year. Long term Specified assets are bond, redeemable after 5 years and issued on or after the 1st day of April, 2018, by the National Highways Authority of India, or by the Rural Electrification Corporation Limited or any other notified bond. Assets specified acquired not to be transferred or converted into money (such as taking loan or advance on the security of such assets) within a period of 3 years from the date of its acquisition. If so done the amount of capital gain earlier shall be deemed to be long to be capital gain

investment in units of specified fund section 54EE Long term capital gain from transfer of capital assets shall be exempt if amount invested in long term specified assets within 6 month from date of transferred. The amount of exemption depends upon the investment of the amount of capital gain. In other words if full capital gain invested exemption of full amount of capital gain, if part amount is invested the exemption of proportionate capital gain. Limit of investments 50 lakhs during the financial years and subsequent financial year. Long term Specified assets are units issued before 1st April 2019 of notified funds. Assets specified acquired not to be transferred or assesse not to take any loan or advance on the security of such assets within a period of 3 years from the date of its acquisition. If so done the amount of capital gain exempt earlier shall be deemed to be long to be capital gain.