cmabdtheblogger: Direct Taxation

Direct Taxation

CAPITAL GAINS

Part A: Discussion and explanation of the provisions of the Income Tax Act, 1961 with regard to computation of taxable income under the head capital gains and computation of tax liability when there are LTCG and STCG in the total income.

Part B: 22 Illustrations with Solutions.

Part A

Any gain arising from the transfer of a capital asset during the previous year is chargeable to tax under the head ‘capital gains’ in the immediately following assessment year subject to exemptions u/s 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA, 54GB. Therefore, capital gains tax liability arises only under the following conditions:

1. There should be a capital asset.

2. The capital asset should be transferred by the assessee.

3. The transfer should take place during the previous year.

4. There should be some profits or gains arising as a result of such transfer.

5. Such profits or gains should not fall u/s 54, 54B, 54D, 54EC, 54F, 54G and 54GA as stated above for being exempted.

Capital asset

Capital asset includes property of any kind whether fixed or circulating, movable or immovable, tangible or intangible. The following assets are, however, not capital assets:

1. Stock-in-trade or stock of raw materials held for the purpose of business or profession.

2. Personal effects of the assessee e.g. computer, car, garments, wearing apparel, furniture etc. held for personal use of the assessee or for the use of any member of his family dependent on him. (Jewellery is not to be taken as personal effects i.e. jewellery is considered as capital asset.)

3. Rural agricultural land in India i.e. agricultural land which is situated in any area

(a) Outside the jurisdiction of a municipality, or

(b) Outside any notified area.

4. 6½% Gold Bonds (1977) or 7% Gold Bonds (1980) or National Defence Gold Bonds (1980) issued by Central Government.

5. Special Bearer Bonds (1991).

6. Gold Deposit Bonds (1999).

Short term and long term capital assets

Meaning of short-term capital asset

Under section 2(42A) of the Income Tax Act "short-term capital asset" means a capital asset held by an assessee for not more than thirty-six months immediately preceding the date of its transfer:

Provided that in the case of

1. Equity or preference shares (listed in a recognised stock exchange in India) or

2. Securities e.g. debentures, bonds, Government securities, derivatives, etc. (listed in a recognized stock exchange in India) or

3. Units of UTI (whether quoted or not) or

4. Units of an equity oriented fund (whether quoted or not) or

5. Zero-Coupon Bonds (whether quoted or not)

– The capital assets will be called “short-term capital assets” if they are held by an assessee for not more than twelve months immediately preceding the date of their transfer:

Provided further that in the case of

1. Equity or preference shares (not listed in a recognised stock exchange in India) or

2. Immovable property, being land or building or both

– The capital assets will be called “short-term capital assets” if they are held by an assessee for not more than twenty-four months immediately preceding the date of their transfer.

Meaning of short-term capital gain

Under section 2(42B) of the Income Tax Act "short-term capital gain" means capital gain arising from the transfer of a short-term capital asset.

Meaning of long-term capital asset

Under section 2(29A) of the Income Tax Act "long-term capital asset" means a capital asset which is not a short-term capital asset.

Meaning of long-term capital gain

Under section 2(29B) of the Income Tax Act "long-term capital gain" means capital gain arising from the transfer of a long-term capital asset.

Transfer of capital asset

Transfer, in relation to capital asset, includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law [Sec. 2(47)]. Under section 47, the following transactions, however, are not regarded as transfers:

1. Distribution of assets in kind by a company to its shareholders on its liquidation.

2. Distribution of capital assets in kind by a Hindu Undivided Family to its members at the time of total or partial partition of the Family.

3. Transfer of capital asset under gift, will or irrevocable trust (except gift of ESOP shares).

4. Transfer of capital asset between holding company and its 100% subsidiary company, if the transferee-company is an Indian company. [Section 47 (i v)/ (v)]

5. Transfer of capital asset in a scheme of amalgamation/demerger, if the transferee-company is an Indian company.

6. Transfer of shares in amalgamating/demerged company in lieu of allotment of shares in amalgamated/resulting company, if the transferee-company is an Indian company.

7. Transfer of capital asset by a banking company to a banking institution in a scheme of amalgamation of the banking company with the banking institution.

8. Transfer of shares held in an Indian company, in a scheme of amalgamation, by the amalgamating foreign company to the amalgamated foreign company, if –

(i) At least 25% of the shareholders (in value) of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company; and

(ii) Such transfer of shares does not attract tax on capital gains in the country, in which the amalgamating company is incorporated.

9. Transfer of shares in an Indian company by a foreign company to another foreign company in a scheme of demerger, provided

(i) Persons holding at least 75% shares (in value) in the demerged company become shareholders in the resulting company; and

(ii) The above transfer of shares does not attract capital gains tax in the country in which the demerged company is incorporated.

10. Transfer of foreign currency convertible bonds (FCCB) or global depository receipts (GDR) by a non-resident to another non-resident, if the transfer is made outside India.

11. Transfer of 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 other notified public museum or institution.

12. Conversion of bonds or debentures or debenture-stock or deposit certificate in any form, of any company into shares or debentures of that company. It may be noted that conversion of preference shares into equity shares is treated as transfer.

13. Transfer of land of a sick industrial company (the sick industrial company being managed by its workers’ co-operative) under a scheme prepared and sanctioned u/s 18 of Sick Industrial Companies (Special Provisions) Act, 1985, provided the above transfer is made during the period commencing from the previous year in which the said company has become a sick industrial company and ending with the previous year in which the entire net worth of the company becomes equal to or exceeds the accumulated losses. “Net worth” for this purpose means paid-up share capital and free reserves. “Free reserves” for this purpose means all reserves created out of the profits and share premium account but do not include reserves created out of revaluation of assets.

14. Transfer of capital asset in the case of conversion of private company or unlisted public company (hereinafter referred to as “company”) into limited liability partnership (LLP) in accordance with the provisions of sections 56 and 57 of the Limited Liability Partnership Act, 2008, if the following six conditions are satisfied:

(a) All assets and liabilities of the company immediately before conversion should become the assets and liabilities of the LLP at the time of conversion.

(b) All the shareholders of the company immediately before the conversion should become the partners of the LLP and their capital contribution and profit sharing ratio in the LLP are in the same proportion as their shareholding in the company on the date of conversion.

(c) No consideration will be paid by LLP to the company. The shareholders of the company do not receive any consideration or benefit (directly or indirectly) other than by way of share in profit and capital contribution in the LLP.

(d) The aggregate of the profit sharing ratio of the shareholders of the company in the LLP shall not be less than 50% immediately after conversion and at the time during the period of 5 years from the date of conversion.

(e) The total sales, turnover or gross receipts in business of the company in any of the 3 previous years preceding the previous year in which the conversion takes place should not be more than Rs 60 lakh.

(f) The total value of the assets as appearing in the books of account of the company in any of the three previous years preceding the previous year in which the conversion takes place does not exceed 5 crore rupees; and

(g) No amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for a period of 3 years from the date of conversion.

15. Transfer of capital asset in the case of Conversion of a partnership firm into a company if the following conditions are satisfied:

(a) All the assets and liabilities of the firm/AOP/BOI immediately before conversion are taken over by the company.

(b) All the partners of the firm immediately before conversion become the shareholders of the company.

(c) The partners of the firm do not receive any consideration/benefit (directly or indirectly) in any form other than by way of allotment of shares (may be equity or preference) in the company.

(d) The partners of the firm become shareholders in the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the conversion

(e) The aggregate of the shareholding in the company of the partners of the firm is not less than 50% of the total voting power in the company and their shareholding continues to be as such for a period of 5 years from the date of the succession.

16. Transfer of capital asset in the case of conversion of a sole proprietary concern into a company if the following conditions are satisfied:

(a) All the assets and liabilities of the sole proprietary concern immediately before conversion are taken over by the company.

(b) The sole proprietor does not receive any consideration/benefit (directly or indirectly) in any form other than by way of allotment of shares (may be equity or preference) in the company.

(c) The shareholding in the company of the sole proprietor is not less than 50% of the total voting power in the company and the shareholding of the sole proprietor shall continue to be as such for a period of 5 years from the date of the succession.

17. Transfer of capital asset involved in a scheme for lending of any securities under an agreement or arrangement, subject to the guidelines issued by the SEBI or RBI in this regard, which the assessee has entered into with the borrower of such securities.

18. Any transfer of capital asset in a reverse mortgage.

19. Transfer of a capital asset (being a Government security carrying periodic payment of interest) made outside India through an intermediary dealing in settlement of securities by a non-resident to another non-resident.

20. 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.

Withdrawal of exemption in certain cases [Section 47A (1)]

Where at any time before the expiry of a period of eight years from the date of the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47,—

i. Such capital asset is converted by the transferee company into, or is treated by it as, stock-in-trade of its business, or

ii. The parent company or its nominees or, as the case may be, the holding company ceases or cease to hold the whole of the share capital of the subsidiary company,

the amount of profits or gains arising from the transfer of such capital asset not charged under section 45 by virtue of the provisions contained in clause (iv) or, as the case may be, clause (v) of section 47 shall, notwithstanding anything contained in the said clauses, be deemed to be income chargeable under the head "Capital gains" of the previous year in which such transfer took place.

Format for computation of capital gains

Computation of short term capital gains

Particulars	Rs
Sale value (i.e. sale consideration) of the capital asset	×××
LESS: Expenditure incurred in connection with the transfer of the capital asset	×××
Net sale consideration	×××
LESS: Cost of acquisition	×××
LESS: Cost of improvement	×××
Short Term Capital Gains before exemption	×××
LESS: Exemption u/s 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA, 54GB.	×××
Taxable Short Term Capital Gains	×××

Computation of long term capital gains

Particulars	Rs
Sale value (i.e. sale consideration) of the capital asset	×××
LESS: Expenditure incurred in connection with the transfer of the capital asset	×××
Net sale consideration	×××
LESS: Indexed cost of acquisition	×××
LESS: Indexed cost of improvement	×××
Long Term Capital Gains before exemption	×××
LESS: Exemption u/s 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA, 54GB.	×××
Taxable Long Term Capital Gains	×××

Sale value (i.e. sale consideration)

Sale consideration of an asset may be received in cash or in kind. If it is received in kind then fair market value of such asset is taken as full value of consideration.

It makes no difference whether the full value of sale consideration is received during the previous year or not. Even if the full value of sale consideration is received in instalments in different years, the entire value of sale consideration is to be taken into account for computing capital gains which become chargeable in the year of transfer.

Expenditure incurred in connection with the transfer of capital asset

Examples of expenditure incurred in connection with the transfer of capital asset are brokerage or commission paid for securing a purchaser, cost of stamp duty, registration fees borne by the seller, travelling expenses, litigation expenses, etc.

Cost of acquisition

Cost of acquisition of an asset is the value for which it was acquired by the assessee. Expenses of capital nature for completing or acquiring the title to the property are also to be included in the cost of acquisition. But in few cases as described below notional cost of acquisition is considered as cost of acquisition.

(I) COST TO THE PREVIOUS OWNER [SEC 49(1)]

Cost to the previous owner is deemed to be the cost of acquisition to the assessee in cases where capital asset became the property of the assessee under any of the following modes of transfer:

(a) Distribution of assets on the total or partial partition of an HUF.

(b) Getting some assets under a gift or will.

i. Succession or inheritance, or

ii. Dissolution of a firm, Body of Individuals (BOI) or Association of persons (AOP) where such dissolution had taken place before 1.4.1987, or

iii. Liquidation of a company, or

iv. Transfer of a trust, or

v. A wholly owned Indian Subsidiary from its holding company, or

vi. An Indian holding company from its wholly owned subsidiary, or

vii. A scheme of amalgamation.

(d) Acquisition of property by HUF where one of its members has converted his self acquired property into joint family property.

Other important points w.r.t. section 49(1)

1. In order to find out whether the capital asset is short term or long term in the above cases, the period of holding of the previous owner shall be taken into consideration.

2. The benefit of indexation will be available from the year in which the asset was first held by the previous owner.

3. Where the cost of acquisition of previous owner is unascertainable, the fair market value of the asset on the date on which the previous owner had acquired the same shall be deemed to be the cost of acquisition.

(II) COST OF ACQUISITION BEING THE FAIR MARKET VALUE AS ON 1.4.2001 [SEC 55(2)]

In the following cases the assessee may take, at his option, either actual cost or the fair market value of the asset (other than depreciable asset) as on 1.4.2001 as cost of acquisition:

(a) Where the capital asset became the property of the assessee before 1.4.2001; or

(b) Where the capital asset became the property of the assessee by any mode of transfer u/s 49(1) and the capital asset became the property of the previous owner before 1.4.2001.

Other important points w.r.t. section 55(2)

1. When the option as stated u/s 55(2) is available, the actual cost of the asset or fair market value as on 1.4.2001, whichever is higher, is taken as the cost of acquisition.

2. The option is not available in respect of transfer of capital asset in the nature of goodwill, trademark, patent rights, copyrights, etc. (i.e. Intangible Fixed Assets, whether self generated or otherwise).

(III) COST OF ACQUISITION IN THE CASE OF DEPRECIABLE ASSETS [SEC 50]

Section 50 is applicable under two different situations in two different ways as follows:

A. When WDV of a block of assets at the end of the previous year is zero [Sec. 50(1)]

B. When at the end of the previous year a block of assets is empty [Sec. 50(2)]

	Block is not empty at the end of previous year		Block is empty at the end of previous year
	WDV ≠ 0	WDV = 0	WDV ≠ 0	WDV = 0
	Case I (Rs)	Case II (Rs)	Case III (Rs)	Case IV (Rs)
WDV of the block of assets at the beginning of the previous year [Plant A+B+C]	2,50,000	2,50,000	2,50,000	2,50,000
ADD: COA of assets, falling within the same block of assets, during the previous year	Nil	Nil	Nil	Nil
LESS: Proceeds from Sale of assets (net of any expenditure incurred in connection with the sale *in case Section 50 is applicable*), falling within the same block of assets, during the previous year	2,20,000 (A+B)	3,00,000 (A+B)	2,20,000 (A+B+C)	3,00,000 (A+B+C)
WDV of the block of assets at the end of the previous year	30,000	(50,000)	30,000	(50,000)
	Depreciation is allowed on Rs 30,000	Short term capital gains Rs50,000	Short term capital loss Rs30,000	Short term capital gains Rs50,000
	U/s 32 of the Income Tax Act.	U/s 50(1) of the Income Tax Act.	U/s 50(2) of the Income Tax Act.	U/s 50(2) of the Income Tax Act.

Note: No depreciation is allowed when Section 50(1) or Section 50(2) is applicable

Other important points w.r.t. section 50

1. If a depreciable asset is transferred (not being a transfer of any depreciable asset by a power generating unit) and the transfer does not fall under any of the above two situations, then capital gain is not chargeable to tax.

2. In the above two situations, the capital gain or loss is always short term capital gain or loss.

3. If two or more depreciable assets falling in the same block of assets are transferred, short term capital gain or loss cannot be separately calculated. In such a case, the computation of capital gain or loss can be made for the entire block of assets.

(IV) COST OF ACQUISITION IN CASE OF BONUS SHARES AND RIGHT SHARES

Cost of acquisition in case of bonus shares

1. COA of bonus shares allotted before 1.4.2001 is the FMV of such shares as on 1.4.2001.

2. COA of bonus shares allotted on or after 1.4.2001 is zero.

3. The period of holding for bonus shares shall be determined from the date of allotment of such bonus shares (not from the date of acquisition of original shares).

Cost of acquisition in case of right shares

1. COA of original shares is the amount actually paid for acquiring these shares. If the original shares were purchased before 1.4.2001, COA of such shares would be actual purchase price or FMV of such shares as on 1.4.2001, whichever is higher.

2. When any 'rights entitlement' is renounced by the assessee in favour of any other person, the COA of such 'rights entitlement' is nil and the capital gain out of such renouncement is short term capital gain in the hands of the original shareholder.

3. COA of right shares acquired by the assessee (as original shareholder) by exercising his 'rights entitlement' is the amount actually paid by the assessee for acquiring these right shares.

4. COA of right shares purchased by the person in whose favour the 'rights entitlement' has been renounced by the original shareholder = the price paid to the renouncer of 'rights entitlement' + amount paid to the company against allotment of the right shares.

(V) COST OF ACQUISITION IN CASE OF ADVANCE MONEY RECEIVED [SEC 51]

1. When any advance or other money received and forfeited by the assessee in respect of any capital asset (in course of negotiations for transfer of such asset), the advance money so received shall be deducted from the cost at which the asset was acquired, or from the fair market value, as the case may be, in computing the cost of acquisition. Advance money received and forfeited by the previous owner is not be considered and deducted. Where after the deduction of advance money received and forfeited cost of acquisition becomes negative, cost of acquisition shall be taken as the nil.

2. The advance money so forfeited, however, will be taxable in the hands of recipient u/s 56(2) (ix) under the head “Income from other sources” in the year in which the advance money is forfeited with effect from the assessment year 2015-16. Consequently, any such advance money so forfeited (i.e. has been included in the total income of the assessee) on or after 1.4.2014 will not be deducted from cost of acquisition when the capital asset is ultimately transferred.

(VI) COST OF ACQUISITION WHEN DEBENTURES ARE CONVERTED

INTO SHARES OR OTHER DEBENTURES [SEC 49(2A)]

1. Any transfer by way of conversion of debentures into shares or other debentures will not be regarded as transfer giving rise to capital gains.

2. Capital gains will arise on the sale of converted shares or debentures. For this purpose, cost of acquisition will be the proportionate cost of original debentures.

3. The period of holding shall be determined from the date of allotment of debentures and the benefit of indexation will also be available from the date of allotment of debentures.

[Vide: Notification No. 18/2016 dated the 17th March, 2016]

Cost of improvement

1. ‘Cost of improvement’ is a capital expenditure incurred to increase the value of the capital asset.

2. Expenditure incurred before 1.4.2001 with respect to ‘cost of improvement’ is not to be taken into account for calculating capital gains.

3. Any ‘cost of improvement’ incurred on or after 1.4.2001 is only to be considered for capital gains.

4. In any case, ‘cost of improvement’ in relation to (a) goodwill of a business, or (b) right to manufacture, produce or process any article or thing, or (c) right to carry on any business, is always taken to be the nil.

Formulas for Indexing of ‘cost of acquisition’ and ‘cost of improvement’

Indexed Cost of Acquisition [When Section 49(1) is not applicable]

= COA × [CII of the year in which asset is transferred ÷ CII of the year in which asset was first held by the assessee or CII of 2001 – 2002, whichever is later]

Indexed Cost of Acquisition [When Section 49(1) is applicable]

= COA × [CII of the year in which asset is transferred ÷ CII of the year in which asset was first held by the previous owner or CII of 2001 – 2002, whichever is later]

Indexed Cost of Improvement

= COI × [CII of the year in which asset is transferred ÷ CII of the year in which the cost was incurred]

Important note:

In the following cases, the benefit of indexation is not available even if a long term capital asset is transferred:

	Capital assets	Transferor
1	*Bonds or debentures* (other than capital indexed bonds issued by the Government)	Any person
2	Shares in or debentures of an Indian company acquired by utilizing convertible foreign exchange	Non-resident
3	*Depreciable asset* (other than an asset used by a power generating unit eligible for depreciation on SLM basis)	Any person
4	Undertaking or division transferred by way of slump sale	Any person
5	Units purchased in foreign currency	Offshore fund
6	Global Depository Receipts (GDR) purchased in foreign currency	Non-resident
7	Global Depository Receipts (GDR) purchased in foreign currency and held by a resident individual who is an employee of an Indian company engaged in information technology or software services	Resident individual
8	Listed securities owned by a Foreign Institutional Investor (FII)	FII

Tax Rates for Capital Gains from transfer of Bonds and Debentures:

Listed Bonds and Debentures:

Tax on LTCG	10% without indexation
Tax on STCG	As per slab rates

Unlisted Bonds and Debentures:

Tax on LTCG	20% without indexation
Tax on STCG	As per slab rates

Capital gains exempt from tax u/s 10

1. Capital gain on transfer of US64 [Sec 10(33)]

Any income arising from the transfer of a capital asset being a unit of US64 is not chargeable to tax if the transfer of such assets takes place on or after 1.4.2002. This rule is applicable whether the capital asset (US64) is long term capital asset or short term capital asset.

2. Capital gain on compulsory acquisition of urban agricultural land

[Sec 10(37)]

Capital gain (short term or long term) arising from compensation (and/or additional compensation) or consideration which is received by the assessee, is exempted from tax if the following conditions are satisfied –

(a) The assessee is an individual or a Hindu Undivided Family (HUF).

(b) He or it owns an agricultural land situated in urban area.

(d) The agricultural land was used by the assessee (and/or his parents if the land was owned by an individual) for agricultural purposes during 2 years immediately prior to the date of transfer (i.e. the compulsory acquisition).

(e) The compensation (and/or additional compensation) or consideration is received by the assessee after 31.3.2004.

3. Capital gain on transfer of securities covered by Securities Transaction Tax [Sec 10(38)]

Capital gain on transfer of securities covered by Securities Transaction Tax is exempt from tax if the following conditions are satisfied –

(a) The taxpayer is an individual, HUF, firm or company or any other taxpayer.

(b) The asset which is transferred is a long term capital asset.

(d) The transaction takes place on or after 1^st October, 2004.

(e) At the time of transfer, the transaction is chargeable to securities transaction tax.

It may be noted that, if the capital gain on transfer of securities covered by securities transaction tax is a short term capital gain, by virtue of section 111A, it is taxable @ 15% (+ HE Cess).

Capital gain in certain special cases

1. Computation of capital gain in the case of conversion of capital asset

Into stock-in-trade [Sec 45(2)]

(a) With effect from the assessment year 1985-86 conversion of capital asset into stock-in-trade is treated as transfer u/s 2(47) in the year in which conversion takes place.

(b) It is chargeable to capital gains tax in the year in which stock-in-trade is sold.

(c) FMV of the capital asset on the date on which it was converted into stock-in trade shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.

2. Computation of capital gain on transfer of firm’s assets to partners

And vice versa [Sec 45(3) and (4)]

(a) The capital gain is chargeable to tax in the previous year in which such transfer takes place.

(b) When it is a transfer of capital asset by a partner to a firm, u/s 45(3) the book value of the capital asset shall be taken as full value of consideration received as a result of transfer.

(c) When it is a transfer of capital asset by a firm to a partner, u/s 45(4) the fair market value of the capital asset shall be taken as full value of consideration received as a result of transfer.

3. Computation of capital gain in the case of compulsory acquisition of an asset [Sec 45(5)]

Where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely:—

(a) The capital gain computed with reference to the compensation awarded in the first instance or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as income under the head "Capital gains" of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received; and

(b) The amount by which the compensation or consideration is enhanced or further enhanced by the court, Tribunal or other authority shall be deemed to be income chargeable under the head "Capital gains" of the previous year in which such amount is received by the assessee:

Provided that any amount of compensation received in pursuance of an interim order of a court, Tribunal or other authority shall be deemed to be income chargeable under the head "Capital gains" of the previous year in which the final order of such court, Tribunal or other authority is made;

(c) Where in the assessment for any year, the capital gain arising from the transfer of a capital asset is computed by taking the compensation or consideration referred to in clause (a) or, as the case may be, enhanced compensation or consideration referred to in clause (b), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration.

Explanation:

For the purposes of this sub-section,—

(a) The capital gain may arise either by way of compulsory acquisition under any law, or by way of approval or determination of the consideration by the Central Government or the Reserve Bank of India.

(b) Compensation received is taken as full value of sale consideration.

(c) The capital gain is chargeable to tax in the previous year in which the compensation (or part thereof) is first received by the assessee. Indexation benefit is, however, available up to the year in which the compensation is awarded in the first instance or, as the case may be, the consideration is determined or approved in the first instance by the Central Government or the Reserve Bank of India.

(d) Cost of acquisition and cost of improvement in case of initial compensation are the actual cost to the assessee. But in case of enhanced compensation, if any, received by the assessee later, cost of acquisition and cost of improvement shall be taken as the nil.

(e) Litigation expenses incurred for getting the compensation enhanced are deductible as expenses in calculating the capital gain against the enhanced compensation.

(f) If the enhanced compensation is received by any person other than the person who made the transfer (because of the death of the transferor or for any other reason), it is taxable as income of the recipient.

4. Computation of capital gain in the case of non-resident [Sec 48]

Provisions of section 48 will be applicable if the following conditions are satisfied:

(i) The taxpayer is a non-resident.

(ii) He acquires shares in (or debentures of) an Indian company by utilising foreign currency.

(iii) The capital asset may be a short term capital asset or a long term capital asset.

If the above conditions are satisfied, capital gain will be computed as follows:

	Particulars	currency	Conversion rate	currency
	Sale consideration	In Indian currency	Average exchange rate on the date of transfer	In foreign currency
LESS	Cost of acquisition	In Indian currency	Average exchange rate on the date of acquisition	In foreign currency
LESS	Expenditure on sale	In Indian currency	Average exchange rate on the date of transfer	In foreign currency
=	Capital gain	−	−	In foreign currency
i.e.	Capital gain	In foreign currency	Buying rate On the date of transfer	In Indian currency

5. Computation of capital gain in the case of self-generated asset

[Sec 55(2) (a)]

(a) An asset which does not cost anything to the assessee in terms of money in its creation or acquisition is a self-generated asset. Examples of self-generated assets are: goodwill of a business, right to manufacture, produce or process any article or thing, right to carry on any business, tenancy right, route permit, loom hour, trade mark, brand name, etc.

(b) In case of transfer of self-generated asset, cost of acquisition is always taken to be nil. Cost of improvement, in case of transfer of self-generated asset, is also taken to be nil except in the cases of tenancy right, route permit, loom hour, trade mark and brand name. In the cases of tenancy right, route permit, loom hour, trade mark and brand name the cost of improvement will be taken on actual basis. Cost of improvement of goodwill will also be taken to be nil.

(c) In case of transfer of any self-generated asset as stated above, expenses on transfer on actual basis are deductible from sale consideration.

(d) In the case of transfer of any self-generated asset as stated above, acquired before 1.4.2001, the option of taking either the actual cost or the fair market value of the asset as on 1.4.2001 as cost of acquisition is not available to the assessee.

(e) Transfer of any other self-generated asset (like self-generated goodwill of a profession, a new formula patented by the inventor to grow seedless oranges) is not chargeable to tax.

(f) If goodwill of a business is purchased and later on transferred, the purchase price will be taken as cost of acquisition and cost of improvement, in this case, will be taken as the nil. A similar rule is applicable when a right to manufacture, produce or process any article or thing or right to carry on any business are purchased and later on transferred.

6. Computation of capital gain on transfer of bonus shares

Already discussed under ‘cost of acquisition’ – see page: 12 of this note.

7. Computation of capital gain on transfer of rights shares

Already discussed under ‘cost of acquisition’ – see page: 12 of this note.

8. Computation of capital gain on distribution of assets by companies in liquidation [Sec 46]

(a) If assets are distributed by a company under liquidation to its shareholders, there is no transfer of capital asset and, therefore, no capital gains tax is chargeable in the hands of the company.

(b) If assets are distributed by a company under liquidation to its shareholders, there is a capital gain in the hands of the shareholders. The sale consideration in this case will be the difference between the fair market value of the assets received by the shareholders on the date of distribution and the amount treated as dividend to the extent of accumulated profit of the company at the time of its liquidation [FMV of assets received – Share of accumulated profit on the date of liquidation treated as dividend]. From the sale consideration, as calculated above, COA / Indexed COA of the shares held by the assessee, expenditure on sale, etc. will be deducted to find out the capital gain.

9. Computation of capital gain on conversion of debentures into shares

[Sec 49(2A)]

Already discussed under ‘cost of acquisition’ – see page: 13 of this note.

10. Computation of capital gain on transfer of security in demat form

[Sec 45(2A)]

For computing capital gain chargeable to tax in this case, the cost of acquisition and period of holding of any security shall be determined on the basis of FIFO method.

11. Computation of capital gain on transfer of shares in amalgamated company [Sec 49(2)]

(a) The cost of shares of the amalgamating company will become the cost of shares of the amalgamated company.

(b) To find out whether the shares in the amalgamated company are long term capital assets or not, the period of holding shall be determined from the date of acquisition of the shares in the amalgamating company.

12. Computation of capital gain on transfer of shares in demerged company

Or resulting company [Sec 49(2C)/ (2D)]

(a) Cost of acquisition of shares in resulting company

= [COA of shares in demerged company before demerger] x [Net assets transferred in the demerger ÷ Net worth of the demerged company before demerger]

Cost of acquisition of shares in demerged company after demerger

= [COA of shares in demerged company before demerger] x [Net assets of the demerged company after demerger ÷ Net worth of the demerged company before demerger]

= [COA of shares in demerged company before demerger] – [COA of shares in resulting company]

(b) To find out whether the shares in the resulting company are long term capital assets or not, the period of holding shall be determined from the date of acquisition of the shares in the demerged company.

13. Computation of capital gain on receipt of insurance claim for damage or

Destruction of a capital asset [Sec 45(1A)]

(a) Section 45(1A) is applicable when the damage or destruction is due to:

i. Flood, typhoon, hurricane, cyclone, earthquake or other natural calamities, or

ii. Riot or civil disturbance, or

iii. Accidental fire, or

iv. War or any war-like situation.

(b) Capital gain is taxable in the previous year in which the insurance claim is received.

(c) Insurance claim received is to be taken as full value of consideration and any profits or gains arising from receipt of such insurance claim shall be chargeable to income-tax under the head “Capital gains”.

14. Computation of capital gain on buy-back of shares by a company

[Sec 46A]

(a) Capital gain arising from buy-back of shares is taxable in the hands of shareholders.

(b) The amount of capital gain in this case will be the difference between the value of consideration received by the shareholder from the company for the shares bought back and the cost of acquisition of such shares.

15. Computation of capital gain on transfer of shares or securities by an employee received under stock option plan or sweat equity plan

[Sec 49(2AA)]

(a) Cost of acquisition

Time of allotment of the shares	Cost of acquisition
During 1999 – 2000 or on or after 1.4.2009	FMV on the date of exercise of option
Before 1.4.2007 (not being during 1999 – 2000)	Actual amount paid to acquire the shares
On or after 1.4.2007 but before 1.4.2009	FMV on the date of vesting of option

(b) Capital gain would be taxable in the year in which shares or securities are transferred.

16. Computation of capital gain in the case of slump sale [Sec 50B]

Slump sale means the transfer of one or more undertakings for a lump sum consideration without assigning values to the individual assets and liabilities in such sales. Provisions regarding computation of capital gain in the case of slump sale u/s 50B are as follows:

(a) Any profits or gains arising from the slump sale affected in the previous year shall be chargeable to tax as long term capital gain and shall be deemed to be the income of the previous year in which the transfer took place. Where, however, an undertaking owned and held by the assessee for not more than 36 months, is transferred under the slump sale, then capital gain shall be deemed to be short term capital gain.

(b) In the case of slump sale of an undertaking, the net worth of the undertaking shall be taken as cost of acquisition and cost of improvement.

(d) Any change in the value of assets on account of revaluation of assets shall be ignored for the purpose of computing the net worth.

(e) In the case of depreciable asset, the aggregate value of assets shall be the written down value of block of assets u/s 43(6) of the Income Tax Act, 1961.

(f) In the case of capital asset, if the entire cost is allowable as deduction u/s 35AD, the value of assets shall be taken as the nil.

(g) In the case of non-depreciable asset, the value of assets shall be taken as the book value of the assets.

(h) Values of the outside liabilities should be the values as appearing in the books of account.

(i) Net worth cannot be negative.

(j) The benefit of indexation will not be available.

(k) Every assessee, in the case of slump sale, shall furnish along with the return of income, a report of a chartered accountant in Form No. 3CEA certifying that the net worth of the undertaking or division, as the case may be, has been correctly arrived at.

17. Computation of capital gain on transfer of equity share allotted and right to trade given at the time of corporatisation of a recognised stock exchange [Sec 55(2)(ab)]

(a) Cost of acquisition

Capital asset

Cost of acquisition

Equity share in newly formed stock exchange

Cost of acquisition of membership ticket

in the old stock exchange

Right to trade in the new stock exchange

Nil

(b) The period of holding of the aforesaid assets should be determined from the date of holding of membership ticket, for the first time, in the old exchange.

18. Computation of capital gain in the case of land and building [Sec 50C]

If the sale consideration of any land or building or both is less than the SDV, then the SDV is to be taken as full value of consideration.

Provided that, where the SDV does not exceed 110% (w.e.f. 1.4.2021) of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall be deemed to be the full value of the consideration.

If the assessee disputes the SDV, then the SDV as finally accepted for stamp duty purpose will be the full value of consideration. But again, if the assessee does not dispute the SDV, but wants the FMV to be determined by a valuation officer, then the FMV or SDV whichever is less will be the full value of consideration.

[SDV (i.e. Stamp Duty Value) is the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty in respect of transfer by an assessee of a land or building or both]

19. Computation of capital gain after bonus stripping [Sec 94(8)]

Where—

(a) Any person buys or acquires any units (may be referred to as original units) within a period of three months prior to the record date;

(b) Such person is allotted additional units without any payment on the basis of holding of such units on such date;

(c) Such person sells or transfers all or any of the units referred to in clause (a) i.e. original units within a period of nine months after such date, while continuing to hold all or any of the additional units referred to in clause (b) above,

then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units (i.e. original units) shall be ignored for the purposes of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in clause (b) above as are held by him on the date of such sale or transfer.

Important note:

"Record date" means such date as may be fixed by—

i. A company for the purposes of entitlement of the holder of the securities to receive dividend; or

ii. A Mutual Fund or the Administrator of the specified undertaking or the specified company as referred to in the Explanation to section 10 (35), for the purposes of entitlement of the holder of the units to receive income, or additional unit without any consideration, as the case may be.

Exemptions from tax against capital gains

1. Capital gains arising from the transfer of residential house property

[Sec 54]

(a) Available to an individual or HUF.

(b) Available only if the capital asset transferred is a residential house property whose income is taxable under the head ‘income from house property’. The residential house property may be self occupied or let out.

(d) To claim exemption the assessee will have to purchase or construct another residential house property.

(e) In case of purchase of new house property, it should be purchased within one year before or 2 years after the date of transfer.

(f) In case of construction of new house property, the construction should be completed within 3 years from the date of transfer. Date of commencement of construction is irrelevant. Construction may be commenced even before the date of transfer.

(g) Holding legal title of the new house property is not necessary but what is necessary is payment of full consideration or substantial part of it within the specified period.

(h) Exemption is not limited to acquisition of only one house property. Exemption is available when one or more house property is bought or constructed after transfer of one house property. Similarly, exemption is available when one house property is bought or constructed after transfer of one or more house property.

(i) In case of compulsory acquisition of house property the specified period will be determined from the date of receipt of compensation.

(j) Amount of exemption:

Amount of exemption will be the amount of capital gains generated on transfer of residential house property or the amount invested in purchasing or constructing the new residential house property, whichever is less.

If the new residential house property is transferred within a period of 3 years from the date of its acquisition or completion of construction, the amount of exemption given earlier will be taken back and shall be deemed to be a short-term capital gain of the previous year in which the new house is transferred.

(k) Scheme of deposit:

Under this scheme the assessee has to submit along with the return of income a proof of deposit made in “Capital gains deposit A/c”. The amount to be deposited in this account is the unutilised part of sale consideration supposed to be used for purchase or construction of the new house property till the date of submission of return. On the basis of proof of such deposit, the assessing officer will give exemption. By withdrawing money from the deposit account, new residential house property can be purchased or constructed within the specified period (which is 2 or 3 years, as the case may be).

If the amount of deposit is not utilised fully for purchase or construction of new residential house property within the stipulated period, then the unutilised amount shall be treated as long term capital gain of the previous year in which the specified period expires.

2. Capital gains arising from the transfer of land used for agricultural purpose

[Sec 54B]

(a) Available to an individual or HUF.

(b) Capital asset should be agricultural land.

(d) The agricultural land must be used by the assessee or his parents for agricultural purpose for a period of at least 2 years immediately preceding the date of transfer.

(e) The taxpayer has to purchase another agricultural land within a period of 2 years from the date of transfer or from the date of receipt of compensation in case of compulsory acquisition.

(f) Amount of exemption:

Amount of exemption will be the amount of capital gains generated on transfer of agricultural land or the amount invested in purchasing new agricultural land, whichever is less. If the new agricultural land is transferred within a period of 3 years from the date of its acquisition, the amount of exemption given earlier will be taken back.

(g) Scheme of deposit:

Under this scheme the assessee has to submit along with the return of income a proof of deposit made in “Capital gains deposit A/c”. The amount to be deposited in this account is the unutilised part of sale consideration supposed to be used for purchase of the new agricultural land till the date of submission of return. On the basis of proof of such deposit, the assessing officer will give exemption. By withdrawing money from the deposit account, new agricultural land can be purchased within 2 years from the date of transfer. If the amount of deposit is not utilised fully for purchase of new agricultural land within the stipulated period, then the unutilised amount shall be treated as long term capital gain or short term capital gain, depending upon the original capital gain, of the previous year in which the period of 2 years from the date of transfer expires.

3. Capital gains on compulsory acquisition of land and building, forming part of industrial undertaking [Sec 54D]

(a) Available to individual, HUF, firm, company or any other person. [Available to any taxpayer]

(b) It may be long term as well as short term capital asset.

(d) Such land and building must have been used by the assessee at least for 2 years before such compulsory acquisition.

(e) Assessee has to purchase or construct any other land or building within 3 years from the date of receipt of compensation.

(f) Newly acquired land and building should also be used by the assessee for the purpose of same industry.

(g) Amount of exemption:

Amount of exemption will be the amount of capital gains generated on transfer by way of compulsory acquisition of land or building or the amount invested in new land and building, whichever is less. If the new land and building is transferred within a period of 3 years from the date of its acquisition, the amount of exemption given earlier will be taken back.

(h) Scheme of deposit:

Under this scheme the assessee has to submit along with the return of income a proof of deposit made in “Capital gains deposit A/c”. The amount to be deposited in this account is the unutilised part of sale consideration supposed to be invested in new land and building till the date of submission of return. On the basis of proof of such deposit, the assessing officer will give exemption. By withdrawing money from the deposit account, investment can be made in new land and building within 3 years from the date of receipt of compensation. If the amount of deposit is not utilised fully for investment in new land and building within the stipulated period, then the unutilised amount shall be treated as long term capital gain or short term capital gain, depending upon the original capital gain, of the previous year in which the period of 3 years from the date of receipt of compensation expires.

4. Capital gains to be exempted on investment in certain bonds

[Sec 54EC]

(a) Available to individual, HUF, firm, company or any other person. [Available to any taxpayer]

(b) Long-term capital asset, being land or building or both, should be transferred by the assessee.

(c) Capital gains arising from such transfer should be invested within 6 months after the date of such transfer, in the long-term specified assets. Specified assets, in this case, are any bond redeemable after 5 years (redeemable after five years, if issued on or after the 1st day of April, 2018) and issued by –

(i) The National Highways Authority of India (NHAI);

(ii) The Rural Electrification Corporation Limited (REC);

(iii) Power Finance Corporation Limited (PFC);

(iv) Indian Railway Finance Corporation Limited (IRFC);

(v) Any other bond being notified by the Central Government.

(d) Amount of exemption:

Amount of exemption will be the minimum of the following two:

(i) Amount of investment in the new asset; or

(ii) Amount of the capital gain.

(e) Investment in long-term specified asset, from the capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year cannot exceed Rs 50 lakh.

(f) If the specified assets are transferred within 3 years from the date of their acquisition, the amount of exemption given earlier will be deemed to be the income by way of long term capital gains of previous year in which the specified assets are transferred.

(g) Scheme of deposit is not available.

5. Capital gains to be exempted on investment in units of a specified fund

[Sec 54EE]

(a) Available to individual, HUF, firm, company or any other person. [Available to all assessee]

(b) Any Long-term capital asset should be transferred by the assessee.

(c) Capital gains arising from such transfer should be invested within 6 months after the date of such transfer, in the long-term specified assets. Long-term specified asset, in this case, means a unit or units, issued before 1.4.2019, of such fund as may be notified by the Central Government.

(d) Amount of exemption:

Amount of exemption will be the minimum of the following:

i. The amount of investment in the new asset; or

ii. The amount capital gain.

(f) If the specified assets are transferred within 3 years from the date of their acquisition or a loan is taken on security of the specified assets within the same period as above, the amount of exemption given earlier will be deemed to be the income by way of long term capital gains of previous year in which the specified assets are transferred or the loan is taken.

(g) Scheme of deposit is not available.

6. Capital gains on transfer of long term capital asset other than

Residential house property [Sec 54F]

(a) Available to an individual or HUF.

(b) The capital asset required to be transferred is a long term capital asset other than a residential house property.

(c) The assessee has to purchase a new residential house property within one year before or 2 years after the transfer or has to construct a new residential house property within 3 years after the transfer.

(d) In case of compulsory acquisition the above time limits should be determined from the date of receipt of compensation.

(e) Holding legal title of the new house property is not necessary but what is necessary is payment of full consideration or substantial part of it within the specified period.

(f) For availing exemption taxpayer should not own more than one residential house property on the date of transfer. He should also not purchase within 2 years from the date of transfer of the original assets or construct within 3 years from the date of transfer of the original assets any other residential house property except the new house property.

(g) Amount of exemption:

Amount of exemption will be the amount of capital gains computed as follows:

(i) If the cost of the new asset (i.e. investment in the new asset) is more than or equal to the net sale consideration in respect of the original asset, the whole of such capital gain shall be exempted;

(ii) If the cost of the new asset (i.e. investment in the new asset) is less than the net sale consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall be exempted. In other words, the amount of exemption in this case shall be:

[Cost of the new house or amount deposited under the scheme of deposit x (Capital gain before exemption ÷ Net sale consideration)]

(h) If the new house property is transferred within 3 years from the date of its acquisition, then the exemption given earlier will be taken back. Moreover, if any residential house property other than the new house property is purchased within 2 years or constructed within 3 years of the original transfer, exemption given earlier on capital gains will be taken back and shall be deemed to be a long term capital gain of the previous year in which the new house is transferred or the other residential house is purchased or constructed.

(i) Scheme of deposit:

Under this scheme the assessee has to submit along with the return of income a proof of deposit made in “Capital gains deposit A/c”. The amount to be deposited in this account is the unutilised part of sale consideration supposed to be used for purchase or construction of the new house property till the date of submission of return. On the basis of proof of such deposit, the assessing officer will give exemption. By withdrawing money from the deposit account, new residential house property can be purchased or constructed within the specified period (which is 2 or 3 years, as the case may be).

If the amount of deposit is not utilised fully for purchase or construction of new residential house property within the stipulated period, then an amount equal to

[Unutilised amount x (Amount of original capital gain ÷ Net sale consideration)] shall be treated as deemed long-term capital gain of the previous year in which the period of 3 years from the date of transfer of original asset expires.

7. Capital gains arising on transfer of assets in cases of shifting of industrial undertaking from urban area to rural area [Sec 54G]

(a) Available to all assessee.

(b) Here the capital gains should arise from the transfer of a capital asset, being machinery or plant or building or land or any rights in building or land used for the purposes of the business of an industrial undertaking situate in an urban area.

(c) Transfer of these capital assets should be part of shifting of such industrial undertaking to any area other than urban area.

(d) The assessee has to purchase new plant or machinery and acquire new land or building or construct new building and shift the original assets to such new area within a period of 1 year before or 3 years after the date of transfer.

(e) Amount of exemption:

Amount of exemption will be the minimum of the following:

i. The amount expended for the purchase or acquisition or construction of new assets as stated above (including shifting expenses);

ii. The capital gain.

(f) If the newly acquired assets are transferred within 3 years from the date of their acquisition, the exemption given earlier shall be taken back and shall be subtracted from the cost of acquisition of newly acquired assets.

(g) Scheme of deposit:

If the amount of deposit is not utilised fully for purchase of new assets within the stipulated period, then the unutilised amount shall be treated as long term capital gain or short term capital gain, depending upon the original capital gain, of the previous year in which the period as stated above from the date of transfer expires.

8. Capital gains arising on transfer of assets in cases of shifting of industrial undertaking from urban areas to Special Economic Zone (SEZ) [Sec 54GA]

(a) Available to all assessee.

(c) Transfer of these capital assets should be affected in the course of shifting of such industrial undertaking to Special Economic Zone (SEZ). [SEZ may be developed in any urban area or any other area].

(d) The assessee has to purchase new plant or machinery and acquire new land or building or construct new building and shift the original assets and transfer the establishment of such undertaking to such SEZ within a period of 1 year before or 3 years after the date of transfer.

(e) Amount of exemption:

Amount of exemption will be the minimum of the following:

i. The amount expended for the purchase or acquisition or construction of new assets as stated above (including shifting expenses);

ii The capital gain.

(g) Scheme of deposit:

9. Capital gains arising on transfer of residential property for investment in eligible company

[Sec 54GB]

(a) Applicable to Individual and HUF.

(b) Conditions:

1. Assessee must have transferred a long-term capital asset being residential property (i.e. a house or a plot of land).

2. Such transfer should take place between 1.4.2012 and 31.3.2021.

3. Assessee must subscribe in the equity shares of an eligible company within the due date of furnishing income tax return for the relevant assessment year.

Eligible company means a company which fulfils the following conditions:

i. It is an Indian company;

ii. The company should be incorporated during the period from the 1st day of April of the previous year relevant to the assessment year in which the capital gain arises to the due date of furnishing of return of income u/s 139(1) by the assessee;

[E.g.: If Mr. X has transferred his residential property as on 10/08/2019, then company should be incorporated between 01/04/2019 and due date of furnishing return u/s 139(1) by Mr. X (i.e. 31/07/2020 assuming his accounts are not liable for audit)].

iii. The company is engaged in the business of manufacture of an article or a thing or in an eligible business.

[Eligible business means a business which involves innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property].

iv. It is a company in which the assessee has more than 25% share capital or more than 25% voting rights after the subscription in shares by the assessee; and

v. It is a company which qualifies to be a small or medium enterprise (i.e., SME) under the Micro, Small and Medium Enterprises Act, 2006 or is an eligible start-up (as referred to in sec. 80-IAC);

4. The company should utilise this amount for purchase of new asset within prescribed time.

New asset means new plant and machinery but does not include:

i. Any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person (Second-hand machine

ii. Any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest-house;

iii. Any office appliances including computers or computer software;

iv. Any vehicle; or

v. Any machinery or plant, for which 100% deduction is allowed (whether by way of

depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year;

vi. In case of an eligible start-up, being a technology driven start-up so certified by the Inter-Ministerial Board of Certification notified by the Central Government, the new asset shall include computers or computer software.

(c) Time limit for acquisition of new assets:

The company should purchase new asset within 1 year from the date of subscription in equity shares by the assessee.

[E.g.: In the aforesaid case, Mr. X is required to subscribe in the equity shares of an eligible company within the due date of furnishing income tax return for the relevant assessment year (i.e. 31/07/2020 assuming his accounts are not liable for audit). If Mr. X has subscribed in equity capital of eligible company on 15/12/2019, then company should acquire new asset within 1 year from 15/12/2019.]

The amount of the net consideration, which has been received by the company for issue of shares to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the due date of furnishing of the return of income by the assessee u/s 139, shall be deposited by the company, before the said due date in the Capital Gain Deposit Scheme.

(d) Amount of exemption:

Minimum of the following:

1. (Investment in the new assets by the eligible company × Capital gains) ÷ Net sale consideration;

2. Capital gains.

[Net sale consideration = Sale consideration – Expenses on transfer]

(e) Revocation of benefit and its treatment:

1. If the newly acquired asset is transferred by the eligible company within 5 years from the date of its acquisition, benefit availed earlier shall be revoked. However, in case of new assets being computer or computer software, the lock in period is 3 years instead of 5 years.

2. If the equity shares of the eligible company is transferred by the assessee within 5 years from the date of its acquisition, benefit availed earlier shall be revoked.

3. If the amount, held in Capital Gains Deposit Account Scheme (1988), is unutilized, benefit availed earlier shall be revoked.

(f) Treatment of revoked income:

1. Revocation due to case 1 & 2 above

Such revoked income (exemption or proportionate thereof) shall be taxable in the hands of the assessee (i.e., the person who has transferred residential property) as long-term capital gain in the year of revocation of condition.

Note: It is to be noted that capital gains, arising on transfer of shares or of the new asset, in the hands of the assessee or the company, as the case may be is also taxable separately.

2. Revocation due to case 3 above

(i) Chargeable amount in hands of the assessee (i.e., the person who has transferred residential property) is –

(Unutilised amount for which benefit u/s 54GB is availed × Original capital gain) ÷ Net sale consideration;

(ii) Chargeable amount is taxable as long term capital gain of the previous year in which 1 year from the date of the subscription in equity shares by the assessee expires.

Computation of Tax liability

When there are LTCG and STCG in Total Income

Steps for Computation of total tax liability

[When,

(1) Securities Transaction Tax (STT) is NOT applicable, and

(2) Benefit of basic exemption limit u/s 112 is NOT available i.e.

(Taxable income – LTCG) ≥ Basic exemption limit]

STEP: 1

Compute Taxable Income (i.e. GTI – Deductions u/s 80C to 80U)

STEP: 2

Deduct LTCG taxable u/s 112

STEP: 3

Find out income tax on the amount arrived at after STEP: 2

STEP: 4

Find out income tax on LTCG u/s 112 [@ 20% or 10%, as the case may be]

STEP: 5

Add the amounts of income tax arrived at in STEP: 3 and STEP: 4 to find the total income tax

STEP: 6

Add Health and Education Cess @ 4% to the total income tax as arrived at in STEP: 5 to find the total tax liability

Computation of tax liability on LTCG in certain cases [Sec. 112]:

1. Under section 112, LTCG is taxable @ 20% (+ SC + HE Cess).

2. If LTCG is from transfer of listed securities (other than units) or zero coupon bonds and the benefit of indexation is not taken, LTCG is taxable @ 10% (+ SC + HE Cess).

3. However, in case of an NRI or a Foreign Company, if the LTCG is from transfer of unlisted securities or shares of a company not being a company in which the public are substantially interested, income-tax on LTCG will be calculated (without giving benefit of indexation) @ 10% (+ SC + HE Cess).

4. Deductions, however, u/s 80C to 80U are not available in respect of any LTCG.

Under section 112, a relief is available to the assessee, if the following conditions are satisfied:

1. The taxpayer is resident individual or resident HUF.

2. [Net Income − LTCG, winning from lotteries and other incomes which are taxable at special rates] < Basic exemption limit.

If the above conditions are satisfied tax liability on LTCG will be calculated @ 20% (+ SC + HE Cess) on the amount arrived at as follows:

[LTCG − {Basic exemption limit − (Net Income – LTCG − winning from lotteries and other incomes which are taxable at special rates)}]

i.e. [Net Income − Basic exemption limit − winning from lotteries and other incomes which are taxable at special rates]

Computation of tax liability on STCG in certain cases [Sec. 111A]:

Under section 111A, STCG is taxable @ 15% (+ SC + HE Cess) without allowing any deduction u/s 80C to 80U, if the following conditions are satisfied:

1. The STCG is generated on transfer of equity shares in companies or units of equity oriented mutual funds or units of business trusts.

2. The STCG is generated during the previous year.

3. The Securities Transaction Tax (STT) is applicable.

If the above conditions are not fulfilled the STCG is taxable at normal rate like any other income after allowing deductions u/s 80C to 80U.

Under section 111A, a relief is available to the assessee in case of certain STCG, if the following conditions are satisfied:

1. The taxpayer is resident individual or resident HUF.

2. The Securities Transaction Tax (STT) is applicable in respect of such STCG.

3. [Net Income − Such STCG] < Basic exemption limit.

If the above conditions are satisfied tax liability on such STCG will be calculated @ 15% (+ SC + HE Cess) on the amount arrived at as follows:

[Such STCG − {Basic exemption limit − (Net Income − Such STCG)}]

i.e. [Net Income − Basic exemption limit]

Section: 112A.

1. Notwithstanding anything contained in section 112, the tax payable by an assessee on his total income shall be determined in accordance with the provisions of sub-section (2), if—

i. the total income includes any income chargeable under the head "Capital gains";

ii. the capital gains arise 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;

iii. securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004)−

(a) In a case where the long-term capital asset is in the nature of an equity share in a company, has been paid on acquisition and transfer of such capital asset; or

(b) In a case where the long-term capital asset is in the nature of a unit of an equity oriented fund or a unit of a business trust, has been paid on transfer of such capital asset.

2. The tax payable by the assessee on the total income referred to in sub-section (1) shall be the aggregate of—

i. the amount of income-tax calculated on such long-term capital gains exceeding Rs 1 lakh @ 10% (+ SC + HE Cess); and

ii. the amount of income-tax payable on the total income as reduced by the amount of long-term capital gains referred to in sub-section (1) as if the total income so reduced were the total income of the assessee:

Provided that in the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by such long-term capital gains is below the maximum amount which is not chargeable to income-tax, then, the long-term capital gains, for the purposes of clause (i), shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax. In other words, u/s 112A also a relief is available to the assessee, if the following conditions are satisfied:

1. The taxpayer is resident individual or resident HUF.

2. [Net Income − LTCG as per this section] < Basic exemption limit.

If the above conditions are satisfied tax liability on LTCG will be calculated @ 10% (+ SC + HE Cess) on the amount arrived at as follows:

[LTCG as per this section − {Basic exemption limit − (Net Income − LTCG as per this section)}]

i.e. [Net Income − Basic exemption limit]

Part B

Illustration: 1

Ali has 10,000 shares of X (P) Ltd. acquired on 15/05/1981 for Rs 12 each. On 15/07/1983 he converted 6,000 of such shares into stock in trade. On that date, market value of such share was Rs 15 each. On 1/05/2007, he further converted 2,000 of such shares into stock in trade. On such date, market value of the share was Rs 30 each. On 17/02/2021, he sold all shares for Rs 225 each. Brokerage incurred 2%. State taxation treatment of all these transactions. Fair market value of such shares as on 01-04-2001 was Rs 16 each.

Solution: 1

Computation of capital gains in the hands of Ali for A. Y. 2021- 22

Particulars	Shares converted On 1.5.2007	Shares not converted but sold on 17.2.2021
Number of shares	2,000	2,000
	Rs	Rs
Sale consideration (FMV on the date of conversion) [30 × 2,000]	60,000
Sale consideration (Actual sale price) [225 × 2,000]		4,50,000
Less: Brokerage on sale [4,50,000 × 2%]		(9,000)
Net sale consideration	60,000	4,41,000
Less: Indexed COA
16 × 2,000 × (129 ÷ 100)	(41,280)
16 × 2,000 × (301 ÷ 100)		(96,320)
LTCG	18,720	3,44,680

Computation of business income in the hands of Ali for A. Y. 2021- 22

Particulars	Shares converted On 15.7.1983	Shares converted On 1.5.2007
Number of shares	6,000	2,000
	Rs	Rs
Sale consideration (Actual sale price) [225 × 6,000]	13,50,000
Sale consideration (Actual sale price) [225 × 2,000]		4,50,000
Less: Brokerage @ 2%	(27,000)	(9,000)
Net sale consideration	13,23,000	4,41,000
Less: Cost of stock sold (FMV on the date of conversion)
Rs 15 × 6,000	(90,000)
Rs 30 × 2,000		(60,000)
Business Income	12,33,000	3,81,000

Important notes:

Under section 45 (2) capital gains on conversion of capital asset into stock-in-trade shall be computed as follows:

(a) With effect from the assessment year 1985-86 conversion of capital asset into stock-in-trade is treated as transfer u/s 2 (47) in the year in which conversion takes place.

(b) It is chargeable to capital gains tax in the year in which stock-in-trade is sold.

(c) FMV of the capital asset on the date on which it was converted into stock-in trade shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset.

Illustration: 2

Sunil has a house property acquired on 7/07/1995 for Rs 3, 00,000. He incurred improvement expenditure on such property Rs 70,000 on 16/08/2000 and Rs 50,000 on 17/07/2010. Market value of such property as on 1/04/2001 is Rs 4, 50,000. On 16/08/2013, such property is compulsorily acquired by the Government and compensation decided at Rs 11, 50,000. 20% of the compensation received on 31/03/2021 and balance on 2/04/2021. On further appeal, on 16/08/2021 enhanced compensation is declared by the Government Rs 2, 00,000. Expenditure incurred to get enhanced compensation is Rs 11,000. Such compensation received on 18/08/2022. Compute income under the head Capital Gains of Sunil for the assessment years 2021-22, 2022-23 and 2023-24.

Solution: 2

Computation of capital gains in the hands of Sunil for A. Y. 2021- 22

Particulars	Rs
Sale consideration	11,50,000
Less: Expenses on transfer	Nil
Net sale consideration	11,50,000
Less: Indexed COA [Rs 4,50,000 × (220 ÷ 100)]	(9,90,000)
Less: Indexed COI [Rs 50,000 × (220 ÷ 167)]	(65,868)
LTCG	94,132

Computation of capital gains in the hands of Sunil for A. Y. 2023- 24

Particulars	Rs
Sale consideration (enhanced compensation)	2,00,000
Less: Expenses on transfer	11,000
Net sale consideration	1,89,000
Less: Indexed COA	Nil
Less: Indexed COI	Nil
LTCG	1,89,000

Important notes:

1. There are no capital gains taxable in the A. Y. 2022- 23, because the assessee has not received the enhanced compensation during the P. Y. 2021- 22.

2. The capital gain computed with reference to the compensation awarded in the first instance by the Central Government shall be chargeable as income under the head "Capital gains" of the previous year in which such compensation or part thereof was first received.

3. The amount by which the compensation is enhanced or further enhanced by the court, Tribunal or other authority shall be deemed to be income chargeable under the head "Capital gains" of the previous year in which such amount is received by the assessee.

4. Cost of acquisition and cost of improvement in case of initial compensation are the actual cost to the assessee. But in case of enhanced compensation, if any, received by the assessee later, cost of acquisition and cost of improvement shall be taken as the nil.

5. Litigation expenses incurred for getting the compensation enhanced are deductible as expenses in calculating the capital gain against the enhanced compensation.

6. Expenditure incurred before 1.4.2001 with respect to ‘cost of improvement’ is not to be taken into account for calculating capital gains.

Illustration: 3

Balance sheet of Purva India (P) Ltd. as on 31/12/2020

Liabilities	Rs	Assets	Rs
Eq. Sh. Cap. of Rs 10 each	8,00,000	Land	6,00,000
Preference share capital	1,00,000	Building (WDV as per IT Act)	3,00,000
Reserves	2,00,000	Machinery (WDV as per IT Act)	4,00,000
Loan	6,00,000	Current Assets	10,00,000
Creditors	6,00,000
	23,00,000		23,00,000

Additional information:

Company went into liquidation on the balance sheet date and all current assets and building realized at book value. The realized money was applied in payment of outside liabilities and preference shareholder. Utkarsh is a holder of 10% equity share and 20% preference share of the company. Equity shares were originally acquired by him on 16/08/2002 at face value. However, he subscribed to preference share on 01/04/2020, which was issued at par. He received a part of land (MV Rs 5, 00,000) and cash (for preference share) Rs 20,000.

Compute capital gain in hands of company & Utkarsh.

Solution: 3

Capital gains in the hands of the company

Under section 46 (1), If assets are distributed by a company under liquidation to its shareholders, there is no transfer of capital asset and, therefore, no capital gains tax is chargeable in the hands of the company. However, if any capital asset is sold in the market, the same shall be liable to capital gain in the hands of the company. In the given problem, only one capital asset i.e. building (current assets are not capital assets) is sold in the market. But, since the building has been sold at book value, in this case also there will be no capital gain arising in the hands of the company.

Capital gains in the hands of Utkarsh, a shareholder of the company

Computation of capital gains in the hands of Utkarsh for A. Y. 2021- 22

Particulars	Rs
In case of equity shares:
Sale consideration [W. N. 1]	4,80,000
Less: Expenses on transfer	Nil
Net sale consideration	4,80,000
Less: Indexed COA [10% of Rs 8,00,000 × (301 ÷ 105)]	(2,29,333)
LTCG	2,50,667
In case of preference shares:
Sale consideration [W. N. 2]	20,000
Less: Expenses on transfer	Nil
Net sale consideration	20,000
Less: COA [20% of Rs 1,00,000]	20,000
STCG	Nil

Working notes:

1. Sale consideration in case of equity shares

FMV of land received

Rs 5,00,000

Less: 10% of accumulated profit on the date of liquidation

(Rs 2, 00,000 × 10%)

Rs 20,000

Sale consideration

Rs 4,80,000

2. Sale consideration in case of preference shares

FMV of asset received (cash)	Rs 20,000
Less: Share of outstanding preference dividend payable by the company	Nil
Sale consideration	Rs 20,000

Important notes:

If assets are distributed by a company under liquidation to its shareholders, there is a capital gain in the hands of the shareholders. The sale consideration in this case will be the difference between the fair market value of the assets received by the shareholders on the date of distribution and the amount treated as dividend to the extent of accumulated profit of the company at the time of its liquidation [FMV of assets received – Share of accumulated profit on the date of liquidation treated as dividend].

Illustration: 4

Harsha Limited acquired 100% holding interest [being 50,000 shares] in S (P) Limited (an Indian Company) for Rs 10, 00,000 on 10/12/2002. On 07/03/2015, Harsha Limited transferred its land (cost of acquisition of which is Rs 2, 00,000 acquired on 5/05/2004) to S (P) Limited for Rs 9, 00,000. On 31/03/2021, Harsha Limited transferred 1,000 shares of S (P) Limited for Rs 1, 00,000. Show tax treatment.

Solution: 4

Computation of capital gains in the hands of H Ltd for A. Y. 2015- 16

Particulars	Rs
Sale consideration [for sale of land by H Ltd to S (P) Ltd]	9,00,000
Less: Expenses on transfer	Nil
Net sale consideration	9,00,000
Less: Indexed COA [Rs 2,00,000 × (240 ÷ 113)]	(4,24,779)
Less: Indexed COI	Nil
LTCG	4,75,221

Computation of capital gains in the hands of H Ltd for A. Y. 2021- 22

Particulars	Rs
Sale consideration [for sale of 1,000 shares of S (P) Ltd]	1,00,000
Less: Expenses on transfer	Nil
Net sale consideration	1,00,000
Less: Indexed COA [(Rs 10,00,000 ÷ 50,000) × 1,000 × (301 ÷ 105)]	(57,333)
Less: Indexed COI	Nil
LTCG	42,667

Important notes:

Under section 47A (1) where at any time before the expiry of a period of eight years from the date of the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47,—

i. Such capital asset is converted by the transferee company into, or is treated by it as, stock-in-trade of its business, or

ii. The parent company or its nominees or, as the case may be, the holding company ceases or cease to hold the whole of the share capital of the subsidiary company,

the amount of profits or gains arising from the transfer of such capital asset not charged under section 45 by virtue of the provisions contained in clause (iv) or, as the case may be, clause (v) of section 47 shall, notwithstanding anything contained in the said clauses, be deemed to be income chargeable under the head "Capital gains" of the previous year in which such transfer took place.

Illustration: 5

S Ltd. transferred its machinery (WDV of the block of asset Rs 2, 00,000 as per Income tax Act) to its 100% holding company H Ltd. (Indian company) as on 15/05/2020 for Rs 2, 40,000. On 31/07/2020, H Ltd. converted such asset into stock in trade (Market value as on 31/07/2020 is Rs 3, 00,000) and sold on 17/08/2020 for Rs 3, 20,000. H Ltd. has no such block of machinery. Show tax treatment.

Solution: 5

Computation of capital gains in the hands of S Ltd for A. Y. 2021- 22

Particulars	Rs
Sale consideration [for sale of machinery by S Ltd to H Ltd]	2,40,000
Less: Expenses on transfer	Nil
Net sale consideration	2,40,000
Less: COA (WDV as on 1.4.2020)	(2,00,000)
Less: COI	Nil
STCG	40,000

Computation of capital gains in the hands of H Ltd for A. Y. 2021- 22

Particulars	Rs
Sale consideration [FMV of the machinery on the date of its conversion into stock]	3,00,000
Less: Expenses on transfer	Nil
Net sale consideration	3,00,000
Less: COA (Acquired during the previous year 2020- 21)	(2,40,000)
Less: COI	Nil
STCG	60,000

Important notes:

Taxable business income in the hands of H Ltd for A. Y. 2020- 21 for sale of such converted machinery = Rs 3, 20,000 – Rs 3, 00,000 = Rs 20,000.

Illustration: 6

Mr. Joseph has 1,000 equity shares of X Ltd. that he acquired on 17/08/2007 through will of his father. His father acquired such shares on 17/07/2004 through gift from his father in law (Mr. Z). Mr. Z acquired such shares on 18/08/2000 for 20 each. Fair market value of such shares as on –

1/04/2001	17/07/2004	17/08/2007
Rs 18 each	Rs 25 each	Rs 40 each

On 31/03/2013, X Ltd. amalgamated with Y Ltd. and amalgamated company issued its 3 equity shares for every two equity shares of amalgamating company. On 2/04/2020, Mr. Joseph sold 1,000 shares of Y Ltd to one of his friends for Rs 38 each. Compute capital gain.

Solution: 6

Computation of capital gains in the hands of Joseph for A. Y. 2021- 22

Particulars	Rs
Sale consideration [1,000 shares @ Rs 38 each]	38,000
Less: Expenses on transfer	Nil
Net sale consideration	38,000
Less: Indexed COA [COA per share Rs 13.33 × 1,000 × (301 ÷ 200)]	(20,062)
Less: Indexed COI	Nil
LTCG	17,938

Working note:

COA per share = COA of shares in amalgamating company (X Ltd) ÷ Number of shares allotted by amalgamated company (Y Ltd)

= (Price per share on 18.8.2000 or FMV per share on 1.4.2001, whichever is higher i.e. Rs 20 × 1,000) ÷ 1,500

= Rs 13.33

Important notes:

Under section 49(2) for computing capital gain on transfer of shares in amalgamated company,

(a) The cost of shares of the amalgamating company will become the cost of shares of the amalgamated company.

Illustration: 7

T Ltd. grants option to its employee Rajat on 1^st April, 2016 to apply for 100 shares of the company for making available right in the intellectual property to the employer-company at a pre-determined price of Rs 150 per share with date of vesting of the option being 1^st April, 2018 and exercise period being 1^st April, 2018 to 31^st March, 2021. Mr. Rajat exercises his option on 31^st May, 2020 and shares are allotted / transferred to him on 13^th June, 2020. Fair market values of such share on different dates are as under:

01-04-2016	01-04-2018	31-05-2020	13-06-2020
Rs 470	Rs 890	Rs 1,250	Rs 1,470

On 31^st December, 2020, Mr. Rajat gifted 25 shares to his brother and sold balance shares at market value of Rs 2,180 per share. Compute taxable value of perquisite, if any, and capital gain in hands of Mr. Rajat for A.Y. 2021-22.

Solution: 7

Computation of capital gains in the hands of Mr. Rajat for A. Y. 2021- 22

Particulars	Rs
Sale consideration [Rs 2,180 × 100]	2,18,000
Less: Expenses on transfer	Nil
Net sale consideration	2,18,000
Less: COA [FMV on 31.5.2019 (date of exercising option) Rs 1,250 × 100]	(1,25,000)
Less: COI	Nil
STCG	93,000

Important notes:

Under section 49(2AA), capital gain on transfer of shares or securities by an employee received under stock option plan or sweat equity plan will be computed as follows:

(a) Cost of acquisition

Time of allotment of the shares	Cost of acquisition
During 1999 – 2000 or on or after 1.4.2009	FMV on the date of exercise of option
Before 1.4.2007 (not being during 1999 – 2000)	Actual amount paid to acquire the shares
On or after 1.4.2007 but before 1.4.2009	FMV on the date of vesting of option

(b) Capital gain would be taxable in the year in which shares or securities are transferred.

Illustration: 8

X Ltd. has several undertakings carrying on several businesses. During the year 2020-21, the company sold one of its undertakings (as it was continuously generating loss since last 5 years) for a lump sum value of Rs 300 lacs without assigning value to individual asset and liabilities. Book value of sundry assets and liabilities of the undertaking as on the date of sale is as under:

Items	Book Value	Market Value
Land	Rs 50 lakhs (Stamp Duty Value Rs 70 lakhs)	Rs 100 lakhs
Machinery	Rs 70 lakhs (WDV as per IT Act Rs 60 lakhs)	Rs 100 lakhs
Furniture	Rs 50 lakhs (WDV as per IT Act Rs 90 lakhs)	Rs 75 lakhs
Stock	Rs 30 lakhs	Rs 35 lakhs
Debtors	Rs 40 lakhs	Rs 40 lakhs
Creditors	Rs 50 lakhs

Brokerage on transfer paid @ 5%. Compute capital gain.

Solution: 8

Computation of capital gains in the hands of X Ltd for A. Y. 2021- 22

(Rs in Lacs)

Particulars	Rs
Sale consideration	300
Less: Brokerage on transfer (Rs 300 L × 5%)	(15)
Net sale consideration	285
Less: COA [W. N.]	(220)
Less: COI	Nil
LTCG	65

Working notes:

Computation of Cost of Acquisition (Net Worth)

(Rs in Lacs)

Particulars	Rs	Rs
Book value of non-depreciable assets:
Land	50
Stock	30
Debtors	40	120
Add: WDV as per Income Tax Act of depreciable assets:
Machinery	60
Furniture	90	150
Value of total assets		270
Less: Book value of outside liabilities (Creditors)		50
Net worth (cost of acquisition)		220

Important notes:

1. Slump sale means the transfer of one or more undertakings for a lump sum consideration without assigning values to the individual assets and liabilities in such sales.

2. Net worth of the undertaking shall be taken as cost of acquisition and cost of improvement.

3. Net worth = Value of total assets – Value of total outside liabilities

4. Revaluation of assets shall be ignored for the purpose of computing the net worth.

5. In the case of depreciable asset, the aggregate value of assets shall be the written down value of block of assets u/s 43(6) of the Income Tax Act, 1961.

6. In the case of non-depreciable asset, the value of assets shall be taken as the book value of the assets.

7. Values of the outside liabilities should be the values as appearing in the books of account.

8. The benefit of indexation will not be available.

Illustration: 9

Mr. A, who transfers land and building on 2-01-2021, furnishes the following information -

a) Net consideration received Rs 10 lakhs;

b) Value adopted by stamp valuation authority, which was not contested by Mr. A Rs 12 lakhs;

c) Value ascertained by Valuation Officer on reference by the Assessing Officer Rs 13 lakhs;

d) This land was distributed to Mr. A on the partial partition of his HUF on 1-04-2001. Fair market value of the land as on 1-04-2001 was Rs 1, 00,000.

e) A residential building was constructed on the above land by Mr. A at a total cost of Rs 2, 00,000 (construction completed on 1-12-2004) during the Financial Year 2004-05.

Compute capital gain.

Solution: 9

Computation of capital gains in the hands of Mr. A for A. Y. 2021- 22

Particulars	Rs
Sale consideration (Higher of actual consideration received and SDV)	12,00,000
Less: Expenses on transfer	Nil
Net sale consideration	12,00,000
Less: Indexed COA of land [Rs 1,00,000 × (301 ÷ 100)]	(3,01,000)
Less: Indexed COA of building [Rs 2,00,000 × (301 ÷ 113)]	(5,32,743)
LTCG	3,66,257

Important notes:

1. If the sale consideration of any land or building or both is less than the SDV, then the SDV is to be taken as full value of consideration.

2. Provided that, where the SDV does not exceed 110% (w.e.f. 1.4.2021) of the consideration received or accruing as a result of the transfer, the consideration so received or accruing as a result of the transfer shall be deemed to be the full value of the consideration.

3. If the assessee disputes the SDV, then the SDV as finally accepted for stamp duty purpose will be the full value of consideration. But again, if the assessee does not dispute the SDV, but wants the FMV to be determined by a valuation officer, then the FMV or SDV whichever is less will be the full value of consideration.

Illustration: 10

Liza transferred the following assets on 2-05-2020. Determine her capital gain for the A.Y. 2021-22.

Particulars	Cost (Rs)	MV as on 1.4.2001 (Rs)	Sale Value (Rs)
Land acquired in 1976	25,000	1,00,000	30,00,000
Goodwill of business [Business commenced on 1.5.1995]	Nil	40,000	2,00,000
Tenancy right	Nil	30,000	3,00,000
Goodwill of profession	Nil	15,000	1,50,000

Brokerage paid on transfer @ 2%

Solution: 10

Computation of capital gains in the hands of Liza for A. Y. 2021- 22

Particulars	Land (Rs)	Goodwill of Business (Rs)	Tenancy Right (Rs)
Sale consideration	30,00,000	2,00,000	3,00,000
Less: Brokerage on transfer (@ 2%)	(60,000)	(4,000)	(6,000)
Net sale consideration	29,40,000	1,96,000	2,94,000
Less: Indexed COA [1,00,000 × (301 ÷ 100)]	3,01,000	Nil	Nil
Less: Indexed COI	Nil	Nil	Nil
LTCG	26,39,000	1,96,000	2,94,000

Important notes:

1. In case of transfer of self-generated asset, cost of acquisition is always taken to be nil. Cost of improvement, in case of transfer of self-generated asset, is also taken to be nil except in the cases of tenancy right, route permit, loom hour, trade mark and brand name.

2. In case of transfer of any self-generated asset as stated above, expenses on transfer on actual basis are deductible from sale consideration.

3. Transfer of any other self-generated asset (like self-generated goodwill of a profession, a new formula patented by the inventor to grow seedless oranges) is not chargeable to tax.

Illustration: 11

Mr. Rocky purchased 1,000 shares of Azad (P) Ltd @ Rs 12 per share as on 1/08/1998. Company declared one bonus share for every two shares held on 31/03/2000. As on 7/07/2006, Rocky got 500 shares of the same company as gift from his friend Rakesh (Rakesh acquired such share on 1/04/2001 @ Rs 14 per share). As on 1/03/2020, company further declared one bonus share for every five shares held. On 1/01/2021, Rocky sold all the shares @ Rs 50 each. Find capital gain of Mr. Rocky.

Solution: 11

Statement showing number of shares received and sold by Mr. Rocky

Date	Particulars	Number of shares	Price / share
01.08.1998	Original shares purchased by Rocky	1.000	Rs 12
31.03.2000	Rocky received bonus shares (1,000 × ½ )	500
07.07.2006	Rocky received gift shares from Rakesh	500
01.04.2001	Rakesh purchased these gift shares		Rs 14
01.03.2020	Rocky received bonus shares (2,000 × ¹/₅)	400
01.01.2021	Rocky sold all his shares	2,400	Rs 50

Computation of capital gains in the hands of Rocky for A. Y. 2021- 22

Particulars	Rs
LTCG
Sale consideration of 2,000 shares (Rs 50 × 2,000)	1,00,000
Less: Indexed cost of original 1,000 shares [(14 × 1,000) × (301 ÷ 100)]	(42,140)
Less: Indexed cost of 500 bonus shares [(14 × 500) × (301 ÷ 100)]	(21,070)
Less: Indexed cost of 500 gifted shares [(14 × 500) × (301 ÷ 122)]	(17,270)
LTCG	19,520
STCG
Sale consideration of 400 shares received on 1.3.2019 (Rs 50 × 400)	20,000
Less: Cost of acquisition	Nil
STCG	20,000

Important notes:

1. Cost of bonus shares allotted before 1.4.2001 is FMV as on 1.4.2001.

2. Cost of bonus shares allotted on or after 1.4.2001 is nil.

3. When there is previous owner, holding period will be counted from the year in which the asset was first held by the assessee (i.e. base year for indexing will be the year in which the asset was first held by the assessee).

Illustration: 12

Mr. A purchased 5,000 units of a mutual fund as on 10/10/2020 @ Rs 80. On 1/11/2020, the fund declares 4 bonus units for every 5 units held. The record date for declaring bonus is 01/11/2020.

On 01/12/2020, Mr. A sold 2,500 original units @ Rs 20.

On 10/01/2021, Mr. A sold 1,000 bonus units @ Rs 25.

On 12/02/2021, Mr. A sold remaining 2,500 original units @ Rs 30.

On 14/03/2021, Mr. A sold remaining 3,000 bonus units @ Rs 45.

All units sold to his friend. Compute capital gain.

Solution: 12

Computation of capital gains in the hands of Mr. A for A. Y. 2021- 22

Particulars	Rs
Sale consideration of 4,000 bonus units [(Rs 25 × 1,000) + (Rs 45 × 3,000)]	1,60,000
Less: Expenses for transfer	Nil
Net sale consideration	1,60,000
Less: COA of 1,000 bonus units sold on 10.1.2021 (Rs 37.50 × 1,000)	(37,500)
Less: COA of 3,000 bonus units sold on 14.3.2021 (Rs 79.17 × 3,000)	(2,37,510)
STCL	1,15,010

Working notes:


Number of bonus units received on 1.11.2020 (5,000 × ⁴/₅)	4,000

Loss on sale of original units to be ignored u/s 94 (8):
Out of sale on 1.12.2020 [(80 – 20) × 2,500] (Rs)	1,50,000
Out of sale on 12.2.2021 [(80 – 30) × 2,500] (Rs)	1,25,000

COA per unit of 1,000 bonus units sold on 10.1.2021 (1,50,000 ÷ 4,000) (Rs)	37.50
COA per unit of 3,000 bonus units sold on 14.3.2021 [(1,50,000 – Rs 37.50 × 1,000 + 1,25,000) ÷ (4,000 – 1,000)] (Rs)	79.17

Important note:

Under section 94 (8) where—

(a) Any person buys or acquires any units (may be referred to as original units) within a period of three months prior to the record date,

(b) Such person is allotted additional units without any payment on the basis of holding of such units on such date, and

(c) Such person sells or transfers all or any of the units referred to in clause (a) i.e. original units within a period of nine months after such date, while continuing to hold all or any of the additional units referred to in clause (b) above,

then, the loss, if any, arising to him on account of such purchase and sale of all or any of such units (i.e. original units) shall be ignored for the purposes of computing his income chargeable to tax and, notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in clause (b) above as are held by him on the date of such sale or transfer of the original units.

Illustration: 13

Mr. Raunak purchased 1,000 shares of Zey (P) Ltd @ Rs 12 per share as on 1/08/2019. As on 1/05/2020, company declared one right share for each share held @ Rs 15 each. Mr. Raunak renounced 40% of such right in favour of Miss Rani @ Rs 2 per share and for balance, he subscribed to the company. On 1/07/2020, Mr. Raunak and Miss Rani sold all the shares to one of their friend @ Rs 50 each. Find capital gain of both the assessee.

Solution: 13

Computation of capital gains in the hands of Raunak for A. Y. 2021- 22

Particulars	Rs
Sale consideration of rights (Rs 2 × 1,000 × 40%)	800
Sale consideration of all the shares including the right shares (Rs 50 × 1,600)	80,000
Less: Expenses on transfer	Nil
Net sale consideration	80,800
Less: COA of original shares (Rs 12 × 1,000)	(12,000)
Less: COA of right shares (Rs 15 × 600)	(9,000)
STCG	59,800

Computation of capital gains in the hands of Rani for A. Y. 2021- 22

Particulars	Rs
Sale consideration of all the right shares (Rs 50 × 400)	20,000
Less: Expenses on transfer	Nil
Net sale consideration	20,000
Less: COA of the rights (Rs 2 × 400)	(800)
Less: COA of the right shares (Rs 15 × 400)	(6,000)
STCG	13,200

Illustration: 14

Following are the incomes of Mr. X aged 45 years for the previous year 2020-21:

Short term capital gain on transfer of shares on which STT is paid	Rs 1,30,000
Other income	Rs 1,66,000

Calculate tax of Mr. X for the assessment year 2021-22.

Solution: 14

Computation of tax liability of Mr. X for A. Y. 2021- 22

Particulars	Rs
STCG	1,30,000
Other income	1,66,000
Total Income	2,96,000
Conditions u/s 111A are satisfied:
1. The taxpayer is resident individual or resident HUF.
2. The Securities Transaction Tax (STT) is applicable.
3. [TI – STCG] = Rs 1, 66,000 < Basic exemption limit.
∴ Benefit of basic exemption limit will available to the assessee.

Total income	2,96,000
Less: Basic exemption limit	2,50,000
Taxable STCG	46,000
Taxable other income	1,66,000
Income tax on STCG (46,000 × 15%) (a)	6,900
Income tax on other income (less than basic exemption limit) (b)	Nil
Total income tax [a + b]	6,900
Add: Surcharge (TI does not exceed Rs 50 Lacs)	Nil
Income tax and Surcharge	6,900
Less: Rebate u/s 87A (TI does not exceed Rs 5 Lacs) [Rs 6,900 or 12,500, whichever is less]	6,900
Income tax after rebate	Nil
Add: Health and Education Cess	Nil
Tax Liability	Nil

Illustration: 15

Mr. Jadu has sold following assets on 31.03.2021:

Assets transferred	Cost (Rs)	Acquired on	Sold for (Rs)	Transfer Exp. (Rs)
Land	4,00,000	19.08.2009	15,00,000	40,000
Government Securities	10,000	17.07.2006	1,00,000	5,000
Debentures (Listed)	20,000	17.04.2010	1,00,000	2,000

Compute his tax liability.

Solution: 15

Computation of capital gains in the hands of Jadu for A. Y. 2021- 22

Particulars	Land (Rs)	Government Securities (Rs)	Listed Debentures (Rs)
Sale consideration	15,00,000	1,00,000	1,00,000
Less: Expenses on transfer	(40,000)	(5,000)	(2,000)
Net sale consideration	14,60,000	95,000	98,000
Less: Indexed COA [Rs 4,00,000 × (301 ÷ 148)]	(8,13,514)
Less: Indexed COA [Rs 10,000 × (301 ÷ 122)]		(24,672)
Less: COA (Benefit of indexation is not available)			(20,000)
Less: COI	Nil	Nil	Nil
LTCG	6,46,486	70,328	78,000

Assumption: [TI – LTCG] > BEL

Computation of tax liability of Mr. Jadu for A. Y. 2021- 22

Particulars	Rs
First alternative: If benefit of indexation for Govt. Securities is taken
Tax on LTCG from Govt. Securities (Rs 70,328 × 20%)	14,066
Tax on LTCG from listed debentures (Rs 78,000 × 10%)	7,800
Tax on LTCG from Land (Rs 6, 46,486 × 20%)	1,29,297
Income Tax	1,51,163
Add: Surcharge (Assuming TI does not exceed Rs 50 Lacs)	Nil
Income tax and Surcharge	1,51,163
Less: Rebate u/s 87A (TI > Rs 5 Lacs)	Nil
Income tax after rebate	1,51,163
Add: Health and Education Cess (Rs 1, 51,163 × 4%)	6,046.52
Tax Liability (Rounded off u/s 288B)	1,57,210

Computation of tax liability of Mr. Jadu for A. Y. 2021- 22

Particulars	Rs
Second alternative: If benefit of indexation for Govt. Securities is not taken
Tax on LTCG from Govt. Securities [(Rs 1,00,000 – 5,000 – 10,000) × 10%]	8,500
Tax on LTCG from listed debentures (Rs 78,000 × 10%)	7,800
Tax on LTCG from Land (Rs 6, 46,486 × 20%)	1,29,297
Income Tax	1,45,597
Add: Surcharge (Assuming TI does not exceed Rs 50 Lacs)	Nil
Income tax and Surcharge	1,45,597
Less: Rebate u/s 87A (TI > Rs 5 Lacs)	Nil
Income tax after rebate	1,45,597
Add: Health and Education Cess (Rs 1, 45,597 × 4%)	5,823.88
Tax Liability (Rounded off u/s 288B)	1,51,420

Tax Liability = Lower of two alternatives i.e. Rs 1, 51,420

Illustration: 16

Mr. Sidhartha had a residential house property taxable u/s 22. He acquired this property on 12/08/2005 for Rs 2, 00,000. Later on he sold this property on 1/03/2021 for Rs 25, 00,000. He then acquired another residential house property on 31/03/2021 for Rs 17, 00,000 for self-occupation. On 1/03/2022, he sold such new residential house for Rs 30, 00,000. Compute his capital gain for the A.Y. 2021-22 and 2022-23.

Solution: 16

Computation of capital gains in the hands of Sidhartha for A. Y. 2021- 22

Particulars	Rs
Sale consideration (of original house property)	25,00,000
Less: Expenses on transfer	Nil
Net sale consideration	25,00,000
Less: Indexed COA [Rs 2,00,000 × (301 ÷ 117)]	(5,14,530)
Less: Indexed COI	Nil
LTCG (Before Exemption)	19,85,470
Less: Exemption u/s 54 (cost of purchase of new house property)	(17,00,000)
LTCG	2,85,470

Computation of capital gains in the hands of Sidhartha for A. Y. 2022- 23

Particulars	Rs
Sale consideration (of new house property)	30,00,000
Less: Expenses on transfer	Nil
Net sale consideration	30,00,000
Less: COA – Exemption claimed earlier u/s 54 now taken back [17,00,000 – 17,00,000]	Nil
STCG	30,00,000

Illustration: 17

X Ltd. has a building acquired on 17/08/2019 for Rs 5, 00,000. The assessee, as a tenant, earlier used the building for industrial purpose since last 7 years and even after purchase it is continuously used for industrial purpose. Such building is compulsorily acquired by Government at an agreed value of Rs 12, 00,000 as on 15/07/2020. The compensation was received on 1/03/2021. The written down value of the block (consist of 3 buildings) as on 1/04/2020 is Rs 7, 50,000.

The company acquired a new building for industrial purpose for Rs 2, 00,000 as on –

Case A) 31/03/2021; Case B) 2/04/2021. Determine the taxable capital gain of X Ltd. in each of two cases.

Solution: 17

Case: A - Computation of capital gains in the hands of X Ltd.

For A. Y. 2021- 22

Particulars	Rs
Sale consideration (Compensation received from Government)	12,00,000
Less: Expenses on transfer	Nil
Net sale consideration	12,00,000
Less: COA
WDV as on 1.4.2020 7,50,000
(+) Addition during 2020- 21 2,00,000	(9,50,000)
Less: Indexed COI	Nil
STCG (Before Exemption)	2,50,000
Less: Exemption u/s 54D (investment in purchase of new building)	(2,00,000)
STCG	50,000

Case: B - Computation of capital gains in the hands of X Ltd.

For A. Y. 2021- 22

Particulars	Rs
Sale consideration (Compensation received from Government)	12,00,000
Less: Expenses on transfer	Nil
Net sale consideration	12,00,000
Less: COA
WDV as on 1.4.2020	(7,50,000)
Less: Indexed COI	Nil
STCG (Before Exemption)	4,50,000
Less: Exemption u/s 54D (investment in purchase of new building)	(2,00,000)
STCG	2,50,000

Illustration: 18

Sonu has jewellery acquired on 17/07/2010 for Rs 5, 00,000. On 18/08/2013 Sonu incurred improvement expenditure on such jewellery by adding diamond to it worth Rs 3, 00,000. On 18/08/2019, he transferred such jewellery to his friend Monu for a price of Rs 40, 00,000.

Sonu already has a self-occupied house property in Lucknow. He, however, on 17/03/2020 purchased another residential house property for Rs 30, 00,000 for the purpose of letting out.

As on 5/04/2021, his friend offered him house worth Rs 25, 00,000 (Value for Stamp duty purpose is only Rs 14, 00,000) for Rs 15, 00,000 only and Sonu purchased the same.

On 7/04/2022, Sonu sold the new house acquired from his friend for Rs 19, 00,000. Value determined for the stamp duty purpose was Rs 22, 00,000 and market value as on the date of transfer was Rs 26, 00,000.

Compute capital gain in the hands of Sonu for several years.

Solution: 18

Computation of capital gains in the hands of Sonu for A. Y. 2020- 21

Particulars	Rs
Sale consideration (of jewellery)	40,00,000
Less: Expenses on transfer	Nil
Net sale consideration	40,00,000
Less: Indexed COA [Rs 5,00,000 × (289 ÷ 167)]	(8,65,269)
Less: Indexed COI [Rs 3,00,000 × (289 ÷ 220)]	(3,94,091)
LTCG (Before Exemption)	27,40,640
Less: Exemption u/s 54F [30,00,000 × (27,40,640 ÷ 40,00,000)]	(20,55,480)
LTCG	6,85,160

Computation of capital gains in the hands of Sonu for A. Y. 2022- 23

Since Sonu (the assessee) has purchased another house property within 2 years of the original transfer (dated 18.08.2019), exemption given earlier u/s 54F shall be revoked (taken back) and shall be deemed to be a long term capital gain for the previous year in which the other house property has been purchased.

∴ LTCG for the A. Y. 2022- 23 is Rs 20, 55,480.

Computation of capital gains in the hands of Sonu for A. Y. 2023- 24

Particulars	Rs
Sale consideration (of house property) [SDV exceeds the consideration received by more than 10% of such consideration]	22,00,000
Less: Expenses on transfer	Nil
Net sale consideration	22,00,000
Less: COA	(15,00,000)
Less: COI	Nil
STCG	7,00,000

Illustration: 19

Mr. X has sold following assets during the year 2020-21:

Items	Cost of acquisition	Sale consideration	Year of acquisition
Land	Rs 10 lakhs	Rs 150 lakhs	1998- 99
Jewellery	Rs 30 lakhs	Rs 120 lakhs	2008- 09

On 31/03/2021, he has purchased a residential house for Rs 30, 00,000 for self occupation purpose as he had no other house till date. Compute his capital gain.

Solution: 19

Computation of capital gains in the hands of Mr. X for A. Y. 2021- 22

Particulars	Land (Rs)	Jewellery (Rs)
Sale consideration	150,00,000	120,00,000
Less: Expenses on transfer	Nil	Nil
Net sale consideration	150,00,000	120,00,000
Less: Indexed COA
[10,00,000 × (301 ÷ 100)	30,10,000
[30,00,000 × (301 ÷ 137)		65,91,241
LTCG (Before Exemption)	119,90,000	54,08,759
Less: Exemption u/s 54F [30,00,000 × (119,90,000 ÷ 150,00,000)]	23,98,000	Nil
LTCG	95,92,000	54,08,759

Important note:

If the exemption u/s 54F would have taken against jewellery, the amount of exemption would have been:

[30, 00,000 × (54, 08,759 ÷ 1, 20, 00,000)] = Rs 13, 52,190 which is less than the amount of exemption if taken against land. This is why the exemption u/s 54F has been taken against land.

Illustration: 20

X Ltd. is shifting its undertaking from Jaipur to Napasar (other than urban area). In this regard it sold its 4 machineries and 2 sets of furniture during the previous year 2020-21 as under –

Fixed Assets	Rate of Depreciation	Book Value (Rs)	Sold for (Rs)
Machinery:
A	15%	2,00,000	3,00,000
B	15%	3,00,000	8,00,000
C	15%	5,00,000	6,00,000
D	30%	6,00,000	5,00,000
Furniture:
X	10%	1,00,000	2,00,000
Z	10%	60,000	90,000

WDV of the blocks of assets are as under –

Name of the Block	Block consists of	WDV as on 1.4.2020 (Rs)
Machinery – 15%	A, B and C	11,00,000
Machinery – 30%	D	9,00,000
Furniture – 10%	X and Z	1,50,000

X Ltd. is seeking whether the transaction shall be taxable as slump sale or not and compute capital gain. On 7/04/2021, assessee further purchased machineries worth Rs 3, 70,000 and land worth of Rs 1, 00,000 for the purpose of new industrial undertaking. Compute capital gain.

Solution: 20

Capital gains (before exemption) in the hands of X Ltd. for A. Y. 2021- 22

Particulars	Furniture ROD- 10% Rs	Machinery ROD- 15% Rs	Machinery ROD- 30% Rs
Sale consideration (sold during 2020- 21)	2,90,000	17,00,000	5,00,000
Less: COA (WDV as on 1.4.2020)	(1,50,000)	(11,00,000)	(9,00,000)
STCG (Before Exemption)	1,40,000	6,00,000
Book value as on 31.3.2021 (before depreciation)			4,00,000
Depreciation for the year 2020- 21 [4,00,000 × 30%] (Assumed: The Block is not empty as on 31.3.2021)			1,20,000
Book value as on 31.3.2021 (after depreciation)			2,80,000

Capital gains (after exemption) in the hands of X Ltd. for A. Y. 2021- 22

Particulars	Rs
Total STCG (Before Exemption) [1,40,000 + 6,00,000]	7,40,000
Less: Exemption u/s 54G (3,70,000 + 1,00,000)	(4,70,000)
STCG (After Exemption)	2,70,000

Illustration: 21

Raj Ltd. has an industrial undertaking operating in an urban area. During the year 2020-21, it sold its two machineries for Rs 2, 00,000 and Rs 3, 80,000 in course of shifting its industrial undertaking from urban area to rural area. The written down value of the block (consists of 4 machineries) as on 1/04/2020 was Rs 3, 50,000.

The company incurred Rs 20,000 expenses on other purposes as specified in a scheme framed by the Central Government for the purposes of this section. Determine its taxable capital gain, if the company acquired new machinery for industrial purpose for Rs 50,000 as on –

Case A) 28/03/2021; Case B) 12/04/2021.

Solution: 21

Case: A - Computation of capital gains in the hands of Raj Ltd.

For A. Y. 2021- 22

Particulars	Rs	Rs
Sale consideration (of machinery)		5,80,000
Less: Expenses incurred		(20,000)
Net sale consideration		5,60,000
Less: COA
WDV as on 1.4.2020	3,50,000
Additions during 2020- 21	50,000	(4,00,000)
STCG (Before Exemption)		1,60,000
Less: Exemption u/s 54G		(50,000)
STCG (After Exemption)		1,10,000

Case: B - Computation of capital gains in the hands of Raj Ltd.

For A. Y. 2021- 22

Particulars	Rs	Rs
Sale consideration (of machinery)		5,80,000
Less: Expenses incurred		(20,000)
Net sale consideration		5,60,000
Less: COA
WDV as on 1.4.2020	3,50,000
Additions during 2020- 21	Nil	(3,50,000)
STCG (Before Exemption)		2,10,000
Less: Exemption u/s 54G		(50,000)
STCG (After Exemption)		1,60,000

Illustration: 22

During the previous year 2020-21, Jay exchanges his agricultural land (being acquired on 1-04-2002 for Rs 40,000) against the agricultural land of Vijay (being acquired on 1-02-2020 for Rs 90,000). Fair market value of such properties on the date of transfer is Rs 3, 00,000. Compute capital gain assuming that both the land is situated in urban area.

Solution: 22

Computation of capital gains in the hands of Jay for A. Y. 2021- 22

Particulars	Rs
Sale consideration (of agricultural land)	3,00,000
Less: Expenses on transfer	Nil
Net sale consideration	3,00,000
Less: Indexed COA [Rs 40,000 × (301 ÷ 105)]	(1,14,667)
Less: Indexed COI	Nil
LTCG (Before Exemption)	1,85,333
Less: Exemption u/s 54B (Rs 1,85,333 or Rs 3,00,000 whichever is lower)	(1,85,333)
LTCG (After Exemption)	Nil

Computation of capital gains in the hands of Vijay for A. Y. 2021- 22

Particulars	Rs
Sale consideration (of agricultural land)	3,00,000
Less: Expenses on transfer	Nil
Net sale consideration	3,00,000
Less: COA	(90,000)
Less: COI	Nil
STCG (Before Exemption)	2,10,000
Less: Exemption u/s 54B	Nil
STCG (After Exemption)	2,10,000

Important note:

Vijay is not eligible for exemption u/s 54B, because he has not used the agricultural land at least for 2 years before it is transferred.

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Tuesday, September 28, 2021

Direct Taxation - Capital Gains

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