COMPUTATION OF CAPITAL GAIN & ITS PROVISIONS
Capital Gain can be computed as follows:
|
Particular |
Amount |
|
Full value of consideration (FVOC) |
xxx |
|
Less: Expenses incurred in connection of Transfer |
xxx |
|
Net Consideration |
xxx |
|
Less: Cost of Acquisition (COA) |
xxx |
|
Less: Cost of Improvement (COI) |
xxx |
|
Capital Gain |
xxx |
Proviso added by FA -23: Provided that the Cost of Acquisition or Cost of Improvement shall not include the deduction claimed in respect of interest u/s 24(b) or under the provisions of Chapter VI-A.
First proviso to Section 48: Capital gain in case of Non-Resident:
|
S.NO |
EXPLANATION |
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|
1. |
It is applicable to Non-resident assessee including Foreign Company; |
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|
2. |
Assets being share & debenture of Indian Company; |
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|
3. |
Such asset acquired in foreign currency by way of purchase or reinvestment; |
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|
4. |
Capital gain then be calculated in foreign currency & after that it shall be reconverted into Indian currency.
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NOTES: i. Assessee should be Non-resident in the year of sale. ii. Index benefit not available where first proviso applies. |
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Second proviso (exception) to Section 48: Indexation (not applicable w.e.f. 23rd July 2024):
In case of long-term capital asset, Cost of acquisition & Cost of indexation should be indexed:
INDEXED COST OF ACQUISITION:
(A*B)/C, where:
|
A |
Cost of Acquisition. |
|
B |
Cost inflation index of the year of transfer. |
|
C |
Cost inflation index for the first year in which asset was held by assessee or for the year 01-02, whichever is later. |
INDEXED COST OF IMPROVEMENT:
(A*B)/C, where:
|
A |
Cost of Improvement. |
|
B |
Cost inflation index of the year of transfer. |
|
C |
Cost inflation index for the year in which the improvement to the asset took place. |
COST INFLATION INDEX (CII)
|
COST INFLATION INDEX (CII) |
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|
F.Y. |
CII |
F.Y. |
CII |
F.Y. |
CII |
|
2001-02 |
100 |
2009-10 |
148 |
2017-18 |
272 |
|
2002-03 |
105 |
2010-11 |
167 |
2018-19 |
280 |
|
2003-04 |
109 |
2011-12 |
184 |
2019-20 |
289 |
|
2004-05 |
113 |
2012-13 |
200 |
2020-21 |
301 |
|
2005-06 |
117 |
2013-14 |
220 |
2021-22 |
317 |
|
2006-07 |
122 |
2014-15 |
240 |
2022-23 |
331 |
|
2007-08 |
129 |
2015-16 |
254 |
2023-24 |
348 |
|
2008-09 |
137 |
2016-17 |
264 |
2024-25 |
363 |
NOTE: From 23rd July 2024, indexation benefits are not available on transfer of long-term capital assets, regardless of holding period.
Third proviso to Section 48:
First and second proviso “NOT APPLICABLE” for computation of Long-Term Capital Gain (LTCG) referred u/s 112A.
Fourth proviso to Section 48: No indexation in case of Debentures & Bonds
Index benefit not allowed in case of bonds & debentures except Capital Indexation Bonds and Sovereign Gold Bonds issued by RBI.
As per Section 47, No capital gain will arise in case of Individual on redemption of Sovereign Gold Bonds issued by RBI.
|
TRANSFER OF SOVERIGN GOLD BONDS |
|
|
Individual |
If redeemed on maturity then, no Capital Gain will arise due to Section 47 |
|
If redeemed before maturity Capital Gain will arise with benefit of Indexation. |
|
|
Others |
Capital gain applicable on transfer on or before maturity and index benefit is also available. |
Fifth proviso to Section 48: Foreign Exchange Fluctuation gain on Rupee denominated bond in case of Non-resident.
Any gain arising on rupee appreciation against foreign currency at the time of redemption of Rupee Denominated Bonds (Rupee denominated Bonds) of Indian company, shall be ignored for the purpose of computation of full value of consideration.
Sixth proviso to Section 48: Certain transfers not considered as transfer (will discuss in next blog).
Seventh proviso to Section 48: Security Transaction Tax (STT) not Allowed:
Security Transaction Tax paid on sale/ purchase of shares/ units shall not be allowed under capital gain.
If it is paid at time of sale: Not treated as transfer expense.
If it is paid at time of purchase: Not added to cost of acquisition.
Cost of Acquisition (COA)
INTANGIBLE ASSETS/ RIGHTS/ LICENSE:
Cost of Acquisition in the following cases will be:
If Self-Generated = Always Nil.
If Purchase = Purchase Price.
|
S.NO |
ASSETS |
|
1. |
Goodwill or any other intangible asset of Business or Profession, |
|
2. |
Trademark or Brand name associate with a Business or Profession, |
|
3. |
Right to manufacture, produce, process any article or things (patent & copyright), |
|
4. |
Right to carry on any Business or Profession, |
|
5. |
Tenancy rights, Loom hours, Route permits or any other rights. |
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NOTES: i. Benefit of Fair market value as on 01/04/2001 is not available in case of above assets. ii. Capital gain on transfer of self-generated goodwill of a profession or self-generated trademark/ brand name associated with a profession, is not chargeable to tax upto A.Y 20-21. iii. In case of Goodwill, in respect of which depreciation has been claimed upto P.Y 19-20, the cost of acquisition would be purchase price as reduced by depreciation claimed by the assessee. |
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BONUS SHARE & SECURITY:
If acquired before 01/04/2001: Fair Market Value (FMV) as on 01/04/2001.
If acquired after 01/04/2001: Nil.
Period of holding in case of shares & securities: From allotment date till the date of transfer.
NOTE: If Section 112A apply & Bonus shares allotted before 01/02/2018 then cost of acquisition is Fair Market Value (FMV) as on 31/01/2018.
BONUS SHARE & SECURITY:
If acquired by shareholders: Cost of acquisition will be amount paid to the company & Period of Holding will be from allotment date till date of transfer.
Renouncement of Right by Shareholder: Capital gain will be applicable and will be calculated as below:
|
Full value of consideration |
xxx |
|
Less: Cost of Acquisition |
Nil |
|
Short term capital gain |
xxx |
Period of holding will be offer date to renouncement date.
In hands of purchaser of right:
Cost of acquisition: Amount paid to Company for shares + Amount paid for purchase of right.
Period of Holding: From date of allotment of shares till date of transfer.
Cost of Improvement (COI)
|
1. |
In case of goodwill or any other intangible asset of business, patent, copyright, right to carry on any business or profession or any other right – Always Nil. |
|
2. |
In case of any other assets capital expenses incurred on improvement on or before 01/04/2001 is to be ignored and any improvement done after 01/04/2001 shall be taken into account. |
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