INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

CAPITAL GAIN
CHARGING SECTION [SECTION 45]
Conditions:
 Capital asset
 Transfer
 Previous year
 Profit or gain/loss
 Should not be exempt
CAPITAL ASSET [SECTION 2(14)]
1. Capital asset means –
a) Property of any kind held by the assessee, whether or not connected with business or
not.
b) Any securities held by FIIs
c) Any unit linked insurance policy (ULIP) issued on or after 1/2/2021, to which
exemption u/s 10(10D) does not apply on account of –
(i) Premium payable exceeding ₹ 2,50,000 for any of the previous year during the
term of such policy; or
(ii) The aggregate amount of premium exceeding ₹ 2,50,000 in any of the
previous year during the term of any such ULIP(s), in a case where premium is
payable by a person for more than one ULIP issued on or after 01/2/2021 [
Amended by Finance Act 2021]
But does not include
a) Any stock in trade (other than above point b), consumable stores or raw material
held for the purpose of business or profession.
b) Personal effect, that is to say, movable property(including wearing apparel and
furniture) held for personal use by the assessee or any member of his family
dependent upon him, but excludes –
i. Jewellery
ii. Archaeological collection
iii. Drawing
iv. Painting
v. Sculptures
vi. Any work of art.
(matlab yeh sab capital asset hai)
c) Rural agriculture lands: urban agriculture land capital asset hai.
i. Agriculture land situated in an area where population not less than
10000.
ii. Agriculture land situated within limit:
< 2 km - 10000 < 100000
< 6km - 100000 < 1000000

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 45

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

< 8 km - 1000000 <

d) Specified gold bonds
e) Special bearer bonds, 1991
f) Gold deposit bonds (gold monetisation bond 2015)
2. Rights in or relation to an Indian company – included in property
3. Other aspects – silver utensils (in kitchen or dining room for personal use will not be
treated as capital asset), silver bars, sovereign and rupee coins used for puja, festival
etc is treated as capital asset. Gold articles are capital asset.
SHORT TERM CAPITAL ASSET [SECTION 2(42A)]
a) Securities (other than a unit) listed in a recognised stock exchange in India.
b) Units of UTI or unit of equity oriented fund (units of debt oriented fund ke liye 36
months dekhte hai)
c) Zero coupon bond
(Yeh tino ke liye 12 monnths dekhenge)
i. Shares of company (unlisted)
ii. An immovable property, being land or building or both
( yeh dono ke liye 24 months dekhte hai)
Yo short term ki conditions ko satisfy nahi hai vo long term hoga
Equity oriented fund: [ Amended by Finance Act 2021]
A fund set up under a scheme of a mutual fund or under a scheme of a insurance company
comprising ULIPs issued on or after 1/2/2021, to which exemption u/s 10(10D) does not apply
on account of –
a) Premium payable exceeding ₹ 2,50,000 for any of the previous year during the
term of such policy; or
b) The aggregate amount of premium exceeding ₹ 2,50,000 in any of the previous
year during the term of any such ULIP(s), in a case where premium is payable by a
person for more than one ULIP issued on or after 01/2/2021
And
(i) In case where the fund invested in the units of another fund which is traded on a
recognised stock exchange –
I. A minimum of 90% of the total proceeds of such fund is invested in the units
of such other fund; and
II. Such other fund also invests a minimum of 90% of its
Total proceeds in equity shares of domestic companies listed in a recognized
stock exchange; and
(ii) In any other case, a minimum of 65% of the total proceeds of such fund is invested
in the equity shares of domestic companies listed on a recognised stock exchange.
However the percentage of equity shareholding or unit held in respect of the fund ,as the
case may be, shall be computed with reference to the annual average of the monthly
averages of the opening and closing figures.
In case of a scheme of an insurance company comprising ULIPs issued on or after 1/2/2021, to
which exemption u/s 10(10D) does not apply on account of the reasons stated in (a) or (b)

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 46

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

above, the minimum requirement of 90% or 65%, as the case may be, mentioned in (i) and (ii)
above, is required to be satisfied throughout the term of such insurance policy
Zero coupon bond: A bond issued by any infrastructure capital company or infrastructure
capital fund or infrastructure debt fund or a public sector company or a scheduled bank on or
after 1st june 2005
DETERMINATION OF PERIOD OF HOLDING
CIRCUMSTANCES PERIOD OF HOLDING
1. Shares held in a company in liquidation Period subsequent to liquidation will
be excluded
2. Capital asset acquired u/s 49(1) modes Period for which asset held by
previous owner will be included.
3. Conversion of inventory into capital asset Period from date of conversion shall
be considered
4. Shares held in amalgamated company Period for which shares held in
amalgamating company will also be
considered
5. Right shares
a) Shares subscribed From the date of allotment
b) Right renounced
6. Offer of right Period from the date of offer of such
right
7. Bonus shares From the date of allotment
8. Shares held in resulting company Period from the shares held in
demerged company
9. Units of mutual fund acquired under Period jab units consolidate hone ke
consolidating scheme of mutual fund phele wale time ko bhi include
karenge
10. Equity shares acquired on conversion of Period of preference share will also
preference shares be included
11. Units of mutual fund acquired under Period for which units held in scheme
consolidating plan of mutual fund scheme before consolidating will also be
included
12. Sweat equity shares/ESOP Period from the date of allotment
13. Units in segregated portfolio: In case of a Period for which the original unit or
capital asset, being a unit or units in a units in the main portfolio were held
segregated portfolio referred u/s 49(2AG) by the assessee shall be included. [
became the property of the assesse. inserted by Finance Act, 2020 w.e.f
01-04-2020 i.e A.Y 2021-22]
Property constructed on a land purchased earlier : then land and building ka period of holding
alag alag compute karenge.

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 47

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

TRANSFER [ SECTION 2(47)]

Transfer in relation to capital asset includes –
 Sale, exchange or relinquishment of the asset,
 Compulsory acquisition under any law,
 Extinguishment of any rights therein,
 Maturity or redemption of zero coupon bond,
 Capital asset converted into stock in trade,
 Any transaction involving allowing of possession of immovable property to be taken or
retained in part performance of a contract of the nature referred under section 53A of
transfer of property act, 1882,
 Any transaction (whether by way of acquiring shares in, or by way of becoming a
member of, a cooperative society, company or other AOP or by way of any
arrangement or agreement or in any other manner) that has the effect of transferring,
or enabling the enjoyment of, any immovable property.
TRANSACTION NOT REGAREDED AS ‘TRANSFER’ [SECTION 47]
SEC. 47 TRANSACTIONS
(i) Any distribution of capital asset on the total or partial partition of HUF
(iii) Any transfer of a capital asset under a gift or will or an irrevocable trust
(iv) Any transfer of a capital asset by a company to its subsidiary co. if –
a) Parent company or nominees hold 100% of the share capital of subsidiary co.
b) Subsidiary co is an Indian company.
(v) Any transfer of a capital asset by a subsidiary company to its holding co. if –
c) Parent company hold 100% of the share capital of subsidiary co.
d) holding co. is an Indian company.
(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.
(vib) Any transfer, in a demerger, of capital asset by the demerged company to the
resulting company, if the resulting company is an Indian company.
(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.
(vii) Any transfer by a shareholder, in a scheme of amalgamation, of a capital asset
being a share or shares 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.
However, if besides share(s) in amalgamated company, the shareholder is
allotted something more, say bonds or debentures, in consideration of such
transfer; the transfer will not be exempt. Composite consideration is not covered

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 48

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

by section 47(vii). - CIT v. Gautam Sarabhai Trust [1988] 173 ITR 216 (Guj.)
(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.
(viiab) Transfer of specified capital asset by a non-resident on a recognized stock
exchange in any IFSC [Amended by Finance (No.2) Act, 2019 w.e.f. 01-04-2020 i.e.
AY 2020-21] :
Any transfer of a capital asset, being-
(a) bond or Global Depository Receipt referred to in Section 115AC(1); 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 in this
behalf,
made by a non-resident on a recognised stock exchange located in any
International Financial Services Centre (IFSC) and where the consideration for
such transaction is paid or payable in foreign currency.
(viib) Any transfer of a capital asset, being 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 nonresident.
(viic) Any transfer of Sovereign Gold Bond issued by the Reserve Bank of India under
the Sovereign Gold Bond Scheme, 2015, by way of redemption, by an assessee
being an individual.
(ix) Any 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
notified by the Central Government in the Official Gazette to be of national
importance or to be of renown throughout any State(s).
(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.
(xb) Any transfer by way of conversion of preference shares of a company into equity
shares of that company.
(xvi) Any transfer of a capital asset in a transaction of reverse mortgage under a
scheme made and notified by the Central Government.
(xviii) Any transfer by a unit holder of 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:
However, the consolidation is of two or more schemes of equity oriented fund or
of two or more schemes of a fund other than equity oriented fund. (equity se
equity chalega, debt se debt chalega but equity se debt nahi chalega)

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 49

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

(xix) Any transfer by a unit holder of 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 mutual fund.
The roll over of units of mutual funds under the fixed maturity plans will not
amount to transfer as the scheme remains the same. However capital gains will
arise at the redemption of the units or opting out of the scheme.
COMPUTATION OF CAPITAL GAINS (Section 48)
Short term capital gains
Particulars Amount
Full value of consideration -
Less: expenses in connection to transfer -
Net consideration -
Less: Cost of acquisition (COA) -
Cost of improvement (COI) - -
Short term capital gain -
Less: exemptions -
Taxable short term capital gain -
Long term capital gains
Particulars Amount
Full value of consideration -
Less: expenses in connection to transfer -
Net consideration -
Less: Indexed Cost of acquisition (COA) -
Indexed Cost of improvement (COI) - -
long term capital gain -
Less: exemptions -
Taxable long term capital gain -
Notes:
1. Computation of indexed COA or COI –
Indexed COA = COA * CII of the year of transfer
CII for [ (i) first year in which asset was held by the assessee or (ii) for
the year beginning on 1-4-2001, whichever is later ]
Indexed COI = COI * CII of the year of transfer
CII for the year in which cost of improvement took place
2. STT paid is not allowed.
3. Indexation benefits will not be available in computing LTCG of bonds or debenture
other than –
(a) Capital indexed bond of government.

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 50

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

(b) Sovereign gold bonds of RBI.

4. In case of assessee being a 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 a Indian company held by him, shall be ignored for the purpose of
computation of full value of consideration under this section.
5. CII for 20-21 is 301.
SPECIAL PROVISION FOR NON – RESIDENTS [ FIRST PROVISO TO SECTION 48 AND RULE 115A]
PARTICULARS AMOUNT
Full Value of consideration is converted into foreign currency by applying -
average exchange rate as on the date of transfer
Less: Expenses incurred wholly and exclusively on transfer is converted into -
foreign currency by applying average exchange rate as on date of transfer.
Less: Cost of acquisition is converted into foreign currency by applying average -
exchange rate as on date of acquisition. (No indexation benefit is available)
Resultant Capital Gains in foreign currency to be reconverted into Indian -
Currency by applying telegraphic transfer buying rate on date of transfer.
Note:
(1) Average exchange rate [Telegraphic transfer buying rate + Telegraphic transfer selling
rate (as per SBI)] + 2
(2) This 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/debentures of an Indian company.
SECTION 55
COA

Before 1-4-2001 After 1-4-2001

Cost FMV Cost

Whichever is Higher
In case of a capital asset, being land or building or both, the fair market value of such asset on
01-04-2001 shall not exceed the stamp duty value, whenever available, of such asset as on 01-
04-2001. [ Amended by Finance Act, 2020]
COI

Before 1-4-2001 after 1-4-2001

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 51

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

Ignore considered

COST WITH REFERNCE TO CERTAIN MODES OF ACQUISITION (SECTION 49)

Sec. Mode of acquisition Cost
49
(1) Where the capital asset became the property of the Cost of previous owner +
assessee under modes specified in Section 49(1). cost improvement of
[Note-1] previous owner (note 2)
(2) Where the share(s) of an amalgamated Indian COA amalgamating co.
company became the property of the assessee in Wali
consideration of a transfer in scheme of
amalgamation.
(2A) Where the shares or debentures of a company Jo cost bonds or debenture
became the property of the assessee by way of ki thi
conversion of bonds or debentures, debenture-stock
or deposit certificates, referred to in Section 47(x)/
(xa).
(2AA) Transfer of specified security/stock options or sweat FMV is taken
equity shares, referred to in Section 17(2)(vi).
(2AD) Where the capital asset, being a unit or units in a COA shall be the COA of
consolidated scheme of a mutual fund, became the units to him.( jitne me
assessee in consideration of a transfer property of acquire kiya unit ko)
referred to in Section 47(xviii).
(2AE) Where the capital asset, being equity share of a Jo cost preference share ki
company, became the property of the assessee in hai vahi equity ki hogi
consideration of a transfer referred to in Section 47
(xb).
(2AF) Where the capital asset, being a unit or units in a COA shall be the COA of
consolidated plan of a mutual fund scheme, became units to him.( jitne me
the property of the assessee in consideration of a acquire kiya unit ko)
transfer referred to in Section 47(xix).
(2AG) Units or units in the segregated portfolio [ Amended Cost of unit/units in
by Finance Act, 2020] segregated portfolio =
cost of acquisition of a
unit or units held by the
assessee in the total
portfolio * Net asset value
of assets transferred to
segregated portfolio / Net
asset value of the total
portfolio immediately
before the segregation of

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 52

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

portfolios.
(2AH) Original units held by the unit holder in the main Cost of acquisition of the
portfolio [ Amended by Finance Act, 2020] original units held by the
unit holder in the main
portfolio = total cost of
units before segregation –
the amount as so arrived
at under section 49(2AG)
“Main Portfolio”, “segregated portfolio” and “total portfolio” shall have the meanings
respectively assigned to them in the circular No. SEBI/HO/IMD/DF2/CIR/P/2018/160,
dated 28-12-2018, issued by the SEBI under section 11 of the SEBI act, 1992. [ Amended by
Finance Act 2020]
(2C)/( Where the share(s) of resulting company became the Cost of shares in resulting
2D) property of the assessee in scheme of demerger. company : jitne ki asset
phele thi usko
proportionate karke
batana padega dono
company main.
(4) Transfer of been a property, the value of which has Value which has been
subject to tax under section 56(2)(vii)/ (viia)/ (x) (i.e. taken under 56(2)(vii)/
taxable gifts of movable/immovable property). (viia)/ (x)
Notes:
(1) The various modes specified under section 49(1):
Where the capital asset become the property of the assessee –
(i) On any distribution of assets on the total or partial partition of a Hindu undivided
family;
(ii) Under a gift or will;
(iii) (a) by succession, inheritance or devolution, or
(b) on any distribution of assets on the liquidation of a company, or
(c) under a transfer to a revocable or an irrevocable trust, or
(d) under any such transfer as is referred to in Section

47(iv)/(v)/(vi)/(via)/(viaa)/(viab)/(vib)/(vic)/(vica)/(vicb)/(vicc)/(xiii)/(xiiib)/(xiv).
(iv) In case of HUF-assessee, by conversion of member's individual property into HUF
property.
(2) ‘Previous owner’ means the last previous owner of the asset who acquired it by a mode of
acquisition other than that referred to under section 49(1).
(3) Indexation benefits in respect of the gifted asset to apply from the year in which the asset
was first acquired by the previous owner.
Capital asset COA COI
Goodwill of business or right to If self generated – NIL NIL

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 53

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

manufacture/ produce/ process any If purchased from previous

article/ thing, or right to carry on owner – purchase price
any business or profession
Trademark /brand name associated If self generated – NIL Expenses incurred by
with business or tenancy rights or If purchased from previous assessee or previous
stage carriage permits / loom hours owner – purchase price owner after 31-3-
2001
However, in case of a capital asset, being goodwill of a business or profession, in respect of
which depreciation u/s 32(1) has been obtained by the assessee in any previous year (upto
P.Y 2020-21), the cost of acquisition of such goodwill would be the amount of the purchase
price as reduced by the total amount of depreciation (upto P.Y 2020-21) obtained by the
assessee u/s 32(1) [ Amended by Finance Act 2021]
BONUS SHARE [ SECTION 55 ]
 Allotted before 1-4-2001 – COA = cost.
 Allotted after 1-4-2001 – COA = NIL
RIGHT SHARE [ SECTION 55]
 COA – purchase price
 Rights are renounced – COA = purchase price + amount paid for renounced
 Offer for right shares – NIL
SHARES/STOCK OF COMPANY ACQUIRED ON CONSILDATION & DIVISION OF SHARES OF
LARGER OR SMALLER AMOUNT / CONVERSION OF SHARES INTO STOCK OR VICE – VERSA /
CONVERSION OF ONE KIND OF SHARES IN OR OTHER
COA = cost calculated with reference to the cost of acquisition of the shares or stock from
which such share or stock is derived.
CAPITAL GAIN IN SPECIAL CASES
CAPITAL GAINS IN CASE OF DAMAGE OR DESTRUCTION OF CAPITAL ASSET [section 45(1A)]:
Where any person receives, at any time during any previous year, any money or other assets
under an insurance from an insurer on account of damage to, or destruction of, any capital
asset, as a result of –
a) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or
b) riot or civil disturbance; or
c) accidental fire or explosion; or
d) action by an enemy or action taken in combating an enemy (whether with or without a
declaration of war),
then, any profits or gains arising from receipt of such money or other assets shall be
taxable as capital gains, where-
 Sale consideration – value of money + FMV of asset received
 Year of taxability – P.Y in which money or asset is received

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 54

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

 Other than above cases damages to asset will not be taxable.

CAPITAL GAIN ON RECEIPT OF AMOUNT UNDER UNIT LINKED INSURANCE PLAN [ SECTION
45(1B) ] [ Amended by Finance act 2021]
Where any person receives, at any time during any previous year, any amount (including the
amount allocated by way of bonus on such policy), under a ULIP issued on or after 1/2/2021
to which exemption under 10(10D) does not apply on account of –
(i) Premium payable exceeding ₹ 2,50,000 for any of the previous year during the
term of such policy; or
(ii) The aggregate amount of premium exceeding ₹ 2,50,000 in any of the previous
year during the term of any such ULIP(s), in a case where premium is payable by a
person for more than one ULIP issued on or after 01/2/2021
Then, any profit or gains arising from receipt of such amount by such person shall be
chargeable to income tax under the head “Capital Gain” and shall be deemed to be the
income of the such person for the previous year in which such amount are received. The
amount taxable shall be calculated in such manner as may be prescribed.
CAPITAL GAIN IN CASE OF CONVERSION OF A CAPITAL ASSET INTO STOCK IN TRADE [ SECTION
45(2)]
 sale consideration – FMV on the date of conversion
 year of taxability - P.Y in which stock in trade is sold
 PGBP = sale consideration – FMV of stock
 Capital gain = FMV of stock – COA/COI
CAPITAL GAIN IN CASE OF TRANSFER OF SHARES HELD BY DEPOSITORY [ SECTION 45(2A)]
COA AND PERIOD OF HOLDING shall be determined on the basis of FIFO method
CAPITAL GAINS IN CASE OF TRANSFER OF CAPITAL ASSET BY A PARTNER OR MEMBER TO A
FIRM OR AOP OR BOI [ SECTION 45(3)]
Sale consideration – amount recorded in books
Year of taxability – P.Y in which transfer took place
Taxability in the hands of – partner/member
CAPITAL GAINS IN CASE OF DISTRIBUTION OF CAPITAL ASSET BY FIRM OR AOP OR BOI TO
PARTNERS OR MEMBERS [ SECTION 45(4) ]
֎ Sale consideration – FMV on the date of transfer of asset
֎ Year of taxability – P.Y in which transfer took place
֎ Taxable in hands of – firm, association or body
COMPULSORY ACQUISITION OF ANY CAPITAL ASSET UNDER ANY LAW [ SECTION 45(5)]
Sale consideration – amt. of compensation
Year of taxability – P.Y in which compensation is first received by assessee
In case compensation is enhanced –

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 55

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

 Sale consideration - full value of consideration

 COA/COI – NIL
 Compensation received by interim order – taxable when final compensation is
received
Interest received on compensation/ enhanced compensation – 50% is taxable.
Compulsory acquisition of urban agriculture land – exempt [ section 10(37)]
 Land in urban area
 2 years before transfer used for agriculture purpose by individual / HUF
 There is compulsory acquisition by govt.
 Income arisen after 1-4-2004.
Capital gains on transfer of specified asset under land pooling scheme – exempt [
section 10(37A)]
SPECIAL PROVISIONS FOR COMPUTATION OF CAPITAL GAIN IN CASE OF JOINT DEVELOPMENT
AGREEMENT [ SECTION 45(5A)]
Individual/ HUF entering into specified
agreement for development of project

Is the individual/HUF transferring his is the individual/HUF transfering his

share in the project after the date of share in the project on or before the
issue of completion certificate..? date of issue of completion
certificate…..?

Capital gain taxability would arise in Yes

the P.Y in which certificate of Capital gain tax liability would arise in the
completion for whole or part of project P.Y in which the property is handed over to
is issued by the competent authority Thedeveloper

SDV on the date of issue of certificate of

completion (+) cash consideration = full
value of consideration as per section
45(5A)

Full value of consideration deemed to

be the cost of acquisition for
determining capital gain on subsequent
sale of share of developed property
CAPITAL GAIN ON DISTRIBUTION OF ASSET BY COMPANY IN LIQUIDATION (SECTION 46)
 Taxability:
In the hands of company: shall not be regarded as transfer
In the hands of shareholder: taxable as capital gain

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 56

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

Computation of capital gain

Particulars Amount
Money so received or market value of the other asset received on liquidation on -
the date of distribution
Less: amount assessed as deemed dividend under section 2(22)(c) to the extent -
of accumulated profits as on the date of liquidation
Full value of consideration for the purpose of section 48 -
Less: ICOA (or COA) of the shares held in that co. -
LTCG/STCG -
 Cost of acquisition of assets received on liquidation in hands of shareholders: FMV on
the date of distribution.
CAPITAL GAINS ON PURCHASE BY COMPANY OF ITS OWN SHARES OR OTHER SPECIFIED
SECURITIES [SECTION 46A]
Taxability in the Buyback of shares by Buyback of shares Buyback of
hands of domestic companies by company, other specified securities
than domestic by any company
companies
Company 23.296% [listed co. are No tax No tax
liable from 5-7-2019]
(unlisted bhi covered hai)
Shareholders Income arising to Taxable as capital Taxable as capital
shareholders of listed / gain u/s 46A gain u/s 46A
unlisted companies is
exempt under section
10(34)
CAPITAL GAIN IN CASE OF DEPRECIABLE ASSET U/S 50.(yeh apan PGBP me block ke concept
me padte hai so yaha vapis padhne ki jarurt nahi hai)
SPECIAL PROVISION FOR COMPUATION OF CAPITAL GAIN IN CASE OF SLUMP SALE [SECTION
50B]
Slump sale [ section 2(42C) ] [ Amended by Finance Act 2021 ]: it means transfer of one or
more undertakings, by any means, for a lump sum consideration without values being
assigned to the individual assets and liabilities in such sales.
Term Meaning
Undertaking It includes any part of an undertaking, or a unit or division of an undertaking
or a business activity taken as a whole, but does not include individual assets
or liabilities or any combination thereof not constituting a business activity
Transfer Transfer shall have the meaning assigned to in section 2(47).
Computation of capital gain:

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 57

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

Full value of consideration being Fair Market value of the capital assets -
as on the date of transfer, calculated in the prescribed manner -
Less: expenditure incurred -
Less: Net worth
Short term/long term capital gain -
Computation of net worth:
Aggregate value of total asset of undertaking (ignore revaluation):- -
In case of depreciable asset, the WDV of the block -
In case asset section 35AD wali hai -
In the case of capital asset being goodwill of a - -
business or profession, which has not been acquired -
by the assessee by purchase from a previous owner
In case of other asset, the book value -
Less: value of liabilities
Net worth -
 No indexation
 Certificate by chartered accountant
Computation of Fair Market Value of Capital Assets for the purposes of section 50B
[rule 11UAE] [Amended by Finance Act, 2021]
Computation of capital gain on slump sale = Full value of consideration – net worth
Full value of consideration = Fair market value of the capital asset on the date of
transfer
CBDT has prescribed that, for the purpose of section 50B(2)(ii), the fair market
value(FMV) of capital asset would be the higher of –
i. FMV 1, being the FMV of capital assets transferred by way of slump sale;
and
ii. FMV 2, being the FMV of the consideration (monetary and non-monetary)
received or accruing as a result of transfer by way of slump sale
FULL VALUE OF CONSIDERATION IN CERTAIN CASES [ SECTION 50C ]
1. Stamp duty value deemed to be full value of consideration in case it exceed actual
consideration:
 SDV > sale consideration – SDV
 SDV < sale consideration – sale consideration
Sale consideration on the date of agreement to be considered: Agar any mode other than
cash main date of agreement wale din payment kiya hai toh date of agreement wale din ki
SDV otherwise SDV date of registry ki lenge. [ (a) credit card; (b) Debit card; (c) Net banking;
(d) IMPS (immediate payment service); (e) UPI (unified payment service); (f) RTGS (real time
gross settlement); (g) NEFT (national electronic funds transfer), and (h) BHIM (bharat
interface for money) Aadhar pay have been prescribed as mode of electronic payment]

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 58

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

2. Stamp duty value not be full value of consideration: Agar sale consideration and SDV
me difference 110% se jayada ka nahi hai toh apan SDV lenge
3. Reference to valuation officer: the assessing officer may refer to valuation officer
where –
 The assessee claim SDV > FMV and
 SDV has not been disputed
4. Where the value ascertained by valuation officer exceeds the value assessed by stamp
valuation authority:
 SDV > valuation officer ki determined value - valuation officer ki determined
value lenge
 SDV < valuation officer ki determined value – SDV lenge.
5. FMV as on 01-04-2001 not to exceed SDV as on that date: in case of a capital asset,
being land or building or both, the fair market value of such asset on 01-04-2001 shall
not exceed the stamp duty value, wherever available, of such asset as on the 1-04-
2001. [ Amended by Finance Act, 2020]
SPECIAL PROVISION FOR FULL VALUE OF CONSIDERATION FOR TRANSFER OF SHARE OTHER
THAN QUOTED SHARE [ SECTION 50CA ]
Agar unquoted shares and value of consideration FMV se kam hai toh bhi value of
consideration ko deemed full value of consideration manege
However, the provision of this section shall not apply to any consideration received or
accuring as a result of transfer by such class of persons and subject to such conditions as may
be prescribed.
FAIR MARKET VALUE DEEMED TO BE FULL VALUE OF CONSIDERATION IN CERTAIN CASES [
SECTION 50D ]
Jaha pe consideration is not ascertainable or cannot be determined toh FMV will be deemed
to be full value of consideration.
ADVANCE MONEY FORFEITED [ SECTION 51 ]

If advance was received and forfeited if advance was received and

Before 1-4-2014 forfeited on or after 1-4-2014

Advance forfeited to be deducted while determining advance forfeited to be taxed as

COA for computing capital gain IOS

Taxability is postponed to the year of actual tax liability is attracted in the year
of
Transfer of capital asset forfeiture of advance
Exemption OF CAPITAL GAINS [ SECTION 54 TO 54F ]

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 59

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

S. Particulars Section 54 Section 54B Section 54D Section Section Section

n 54EC 54EE 54F
o
1. Eligible Individual Individual/ Any Any Any Individual
assessee /HUF HUF assessee assessee assessee /HUF
2. Asset Residentia Urban Land & Land or Any Any LTCA
transferred l house agriculture building building LTCA other
(LTCA) land forming or both than
part of an (LTCA) residentia
industrial l houses.
undertakin
g
3. Other Income Land should Land & - - Assessee
conditions from such be used for building should
house agriculture have been own more
should be purposes by used for than one
chargeabl assessee or business of residentia
e under his parents undertakin l house on
the head or HUF for 2 g for at the date
“income years least 2 of
from immediatel years transfer.
house y preceding immediatel He should
property” the date of y preceding not
transfer. the date of purchase
transfer. within 2
The years or
transfer construct
should be within 3
by way of years
compulsory after the
acquisition date of
of the transfer,
industrial another
undertakin residentia
g l house.
4. Qualifying One Land for land or Bonds of Unit One
assets i.e., residential being used building or NHAI or issued residentia
asset in house for right in RECL or before l unit
st
which situated in agriculture land or any 1 april situated
capital gain India/Two purpose building other 2019 of in India
is to be residential (urban/rura bond specified
invested houses in l) notified fund as

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 60

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

India, at by C.G notified

the option (redeem by the
of the able central
assessee, after 5 governm
where years) ent
capital
gains does
not
exceed Rs
2 crore
5. Time limit Purchase Purchase Purchase/c Purchase Purchase Purchase
for within 1 within a onstruct within a within a within 1
purchase/c year or period of 2 within 3 period of period of year or
onstruction before 2 years after years after 6 6 before 2
years the date of the date of months months years
after the transfer. transfer, for after the after the after the
date of shifting or date of date of date of
transfer or re- transfer. transfer. transfer
construct establishing or
within 3 the exiting construct
years undertakin within 3
after the g or setting years
date of up a new after the
transfer industrial date of
undertakin transfer
g
6. Amount of Cost of Cost of new Cost of new Capital Capital Cost of
exemption new agriculture asset or gain or gain or new
residential land or capital gain amount amount residentia
house or capital whichever specified notified l house >
two gain, is lower in bonds, units of net sale
houses, as whichever whichev specified considera
the case lower is er is fund, tion of
may be or exempt. lower. whichev original
capital Maximu er is asset,
gain, m lower. entire
whichever permissi Maximu capital
is lower, is ble m gain is
exempt investme permissi exempt.
nt out of ble Cost of
capital investme new
gain nt out of residentia

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 61

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

arising in capital l house <

any gain net
financial arising in considera
year is any tion of
Rs financial original
50lacs, year is asset,
whether Rs proportio
such 50lacs, nate
investme whether capital
nt is such gain is
made in investme exempt.
the nt is
current made in
F.Y or the
subsequ current
ent F.Y F.Y or
or both. subsequ
ent F.Y
or both.
EXTENSION OF TIME FOR ACQUIRING NEW ASSET OR DEPOSITING OR INVESTING AMOUNT OF
CAPITAL GAIN [ SECTION 54H ]
Where the transfer of the original assets referred to in sections 54, 54B, 54D, 54EC, and 54F is
by way of compulsory acquisition under any law and the amount of compensation awarded
for such acquisition is not received by the assessee on the date of transfer, then the period for
acquiring the new asset by the assessee referred to in those sections or, as the case may be,
the period available to the assessee under those sections for depositing or investing the
amount of capital gain in relation to such compensation as is not received on the date of the
transfer, shall be reckoned from the date of receipt of such compensation.
REFERENCE TO VALUATION OFFICER [ SECTION 55A ]
With a view to ascertaining the fair market value of a capital asset, the Assessing Officer may
refer the valuation of a capital asset to a Valuation Officer in following cases-
(1) in a case where the value of the asset as claimed by the assessee is in accordance with
the estimate made by registered valuer, if the Assessing Officer is of opinion that the
value so claimed is at variance with its fair market value.
(2) in any other case, if the Assessing Officer is of opinion
(i) that the fair market value of the asset exceeds the value of the asset as
claimed by the assessee by –
(a) Rs 25,000; or
(b) 15% of the value claimed by the assessee;

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 62

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

(ii) that having regard to the nature of the asset and other relevant circumstances,
it is necessary so to do.
TAXABILITY OF CAPITAL GAIN
SHORT TERM CAPITAL GAIN

Section 111A other case

1. equity share normal rates

2. units of equity oriented fund
3. units of business trust i.e. on the basis of slab

STT paid on transfer

15%
[ IFSC ke case main STT exempt hai ]

Individual & HUF apni basic exemption limit se adjust kar sakte hai. STCG 15% wale ko.

Chapter VI – A ki deduction bhi allowed hai adjust karna [ deduction u/s 80C to 80RRB ]

LONG TERM CAPITAL GAIN

Section 112 other case

1. Individual & HUF [ resident ] 20% [ land, building ]

20% [ basic exemption limit se adjust kar sakte hai ]

2. Domestic company – 20%
3. Non resident or a foreign company

Unlisted securities other case

(+) 20%
Private co.

10% [ sale consideration – cost ]

 No indexation
 No converting into other currency

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 63

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

Chapter VI-A ki deduction nahi milti LTCH ke case main.

Note: [ sabke liye applicable ]
Proviso to section 112 [ exception to section 112 ]

Tax on listed securities (other than units) + ZCB

(i) 10% of gross capital gain [ sale – cost ] [ no indexation ]

(ii) 20% of LTCG [ sale – ICOA ]
Lower of two ( i or ii )
Jo 111A wale short term the jisme 15% tax tha vahi agar LTCG hue toh section 112A main
cover honge.
Section 112A

LTCG

(1) Equity share (2) equity oriented fund (3) business trust

STT paid on acquisition and transfer [ equity share ]

Or
STT paid on transfer [ equity oriented fund or business trust ]

STT not applicable in case of IFSC

Tax [ LTCG ] agar 1 lacs se exceed hue toh 10% ke hesab se tax lagega [ 1 lacs tak exempt ]

Individual & HUF esme basic exemption limit ka fayada utha sakte hai and balance
main 10% ke hesab se tax denge

(1) No indexation
(2) No converting into other currency
(3) Tax rebate [ section 87A ] not available
(4) No deduction u/s chapter VI-A
Computation of COA [section 112A]
Step 1: COA
Step 2: (1) FMV on 31/3/2018 or
(2) Sale consideration
(1) Or (2) whichever is lower
Step 1 and step 2 [ whichever is higher ]

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 64

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

Meaning of FMV:
Circumstance FMV
(i) In a case where the capital asset is listed If there is trading in such asset on such
on any recognized stock exchange as on exchange on 31-01-2018
31-01-2018 The highest price of the capital asset
quoted on such exchange on the said
date
If there is no trading in such asset on
such exchange on 31-01-2018
The highest price of such asset on such
exchange on a date immediately
preceding 31-01-2018 when such asset
was traded on such exchange.
(ii) In a case where the capital asset is a unit The net asset value of such unit as on
which is not listed on any recognized stock the said date
exchange as on 31-01-2018
(iii) In a case where the capital asset is an FMV = COA * CII of 2017-18 i.e. 272
equity share in a company which is not CII for the first year in which the
listed on a recognized stock exchange as on Asset was held by the assessee or
31-01-2018 but listed on such exchange on 2001-02 whichever is later.
the date of transfer listed on a recognized
stock exchange on the date of transfer and
which became the property of the assessee
in consideration of share which is not listed
on such exchange as on 31-01-2018 by way
of transaction not regarded as transfer
under section 47
CBDT clarification imp for exam
Question Answer
1. What is the meaning of Long term capital gains mean gains arising from the
long term capital under the transfer of long-term capital asset.
new tax regime for long It provides for a new long-term capital gains tax
term capital gains…? regime for the following assets-
i) Equity Shares in a company listed on a
recognised stock exchange;
ii) Unit of an equity oriented fund; and
iii) Unit of a business trust.
The new tax regime applies to the above assets, if-
(a) the assets are held for a minimum date of
acquisition; and period of twelve months from
the date of acquisition; and

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 65

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

(b) the STT is paid at the time of transfer.

However, in the case of equity shares acquired
after 1-10-2004, STT is required to be paid
even at the time of acquisition (subject to
notified exemptions)
2. What is the point of The tax will be levied only upon transfer of the long-
chargeability of the tax? term capital asset on or after 1t April, 2018, as defined
in clause (47) of section 2 of the Act.
3. What is the method for The long-term capital gains will be computed by
calculation of long-term deducting the cost of acquisition from the full value of
capital gains? consideration on transfer of the long-term capital
asset.
4. How do we determine the The cost of acquisition for the long-term capital asset
cost of acquisition for acquired on or before 31st of January, 2018 will be the
assets acquired on or actual cost.
before 31st January, 2018? However, if the actual cost is less than the fair market
value of such asset as on 31st of January, 2018, the
fair market value will be deemed to be the cost of
acquisition.
Further, if the full value of consideration on transfer is
less than the fair market value, then such full value of
consideration or the actual cost, whichever is higher,
will be deemed to be the cost of acquisition.
5. Please provide illustrations The computation of long-term capital gains in
for computing long-term different scenarios is illustrated as under
capital gains in different Scenario 1 - An equity share is acquired on 1st of
scenarios, in the light of January, 2017 at Rs 100, its fair market value is Rs 200
answers to questions 4. on 31st of January, 2018 and it is sold on 1st of April,
2018 at Rs 250. As the actual cost of acquisition is less
than the fair market value as be taken as on 31st of
January, 2018, the fair market value of Rs 200 will
Rs 50 < 250 the cost of acquisition and the long-term
capital gain will be Rs 200).
Scenario 2 - An equity share is acquired on 1st of
January, 2017 at & 100, its fair market value is Rs 200
on 31st of January, 2018 and it is sold on 1st of
April, 2018 at Rs 150. In this case, the actual cost of
acquisition is less than the fair market value as on 31st
of January, 2018. However, the sale value is also less
than the fair market value as on 31st of January, 2018.
Accordingly, the sale value of Rs 150 will be taken as
the cost of acquisition and the long term capital gain

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 66

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

will be NIL (Rs150 - 150).

Scenario 3 - An equity share is acquired on 1st of
January, 2017 at Rs 100, its fair market value is Rs 50
on 31st of January, 2018 and it is sold on 1st of April,
2018 at Rs 150. In this case, the fair market value as
on 31st of January, 2018 is less than the actual cost of
acquisition, and therefore, the actual cost of Rs 100
will be taken as actual cost of acquisition and the
long-term capital gain will be Rs 50 (150 - 100).
Scenario 4 - An equity share is acquired on 31st of
January, 2017 at Rs 100, its 1st fair market value is Rs
200 on 31st of January, 2018 and it is sold on 1st of
April, 2018 at Rs 50. In this case, the actual cost of
acquisition is less than the fair market value as on 31st
January, 2018. The sale value market value as on 31st
of January, 2018 and also is less than the fair
acquisition. Therefore, the actual cost of
Rs 100 will be taken as the cost of acquisition in this
case. Hence, the long-term capital loss will be Rs 50 (
50 - 100) in this case
6. Whether the cost of Third proviso to Section 48, provides that the long-
acquisition will be inflation term capital gain will be computed without giving
indexed…? effect to the provisions of the second provisos of
section 48. Accordingly, it is clarified that the benefit
of inflation indexation of the cost of acquisition would
not be available for computing long-term capital gains
under the new tax regime.
7. What will be the tax The long-term capital gains exceeding Rs 1 lakh arising
treatment of transfer on or from transfer of these assets made on or after 1st
after 1st april 2018..? April, 2018 will be taxed at 10%. However, there will
be no tax on gains accrued upto 31st January, 2018.
8. What is the date from The holding period will be counted from the date of
which the holding period acquisition.
will be counted?
9. Whether tax will be No. There will be no deduction of tax at source from
deducted at source in case the payment of longterm capital gains to a resident
of gains by resident tax tax payer.
payer?
10. What will be the cost of The cost of acquisition of bonus shares acquired before
acquisition in the case of 31st January, 2018 will be determined as per Section
bonus shares acquired 55(2)(ac). Therefore, the fair market value of the

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 67

 INCOME TAX (Applicable for MAY’22/JUNE’22/NOV’22/DEC’22)

before 1st February 2018? bonus shares as on 31st January, 2018 will be taken as
cost of acquisition (except in some typical situations
explained in Ans 5), and hence, the gains accrued upto
31st January, 2018 will continue to be exempt.
11. What will be the cost of The cost of acquisition of right share acquired before
acquisition in the case 31st January, 2018 will be determined as per section
share acquired of right 55(2)(ac). Therefore, the fair market value of right
before 1st February 2018? share as on 31st January, 2018 will be taken as cost of
acquisition
(except in some typical situations explained in Ans 5),
and hence, the gains accrued upto 31st January, 2018
will continue to be exempt.
12. What will be the treatment Long-term capital loss arising from transfer made on
of long-term capital loss or after 1st April, 2018 will be allowed to be set-off
arising from transfer made and carried forward in accordance with existing
on or after 1st April, 2018? provisions of the Act. Therefore, it can be set-off
against any other long-term capital gains and
unabsorbed loss can be carried forward to subsequent
eight years for set-off against long-term capital gains.

ARHAM INSTITUTE, CA VARDHAMAN DAGA, 9039600091 Page 68