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1. For all assessees and all assets except shares and debentures owned by a non-resident

(a) Short-term capital gain shall be computed by deducting out of full value of consideration the following amounts: 

(i) expenditure incurred wholly and exclusively in connection with such transfer, 
(ii) the cost of acquisition of the asset; and
(iii) the cost of any improvement thereto.

(b) Long-term capital gain shall be computed by deducting out of full value of consideration the following amounts:

Section 48: Method Of Computing Capital Gain

(i) expenditure incurred wholly and exclusively in connection with such transfer, 
(ii) the indexed cost of acquisition; and
(iii) the indexed cost of any improvement thereto. (c) Where capital asset being shares, debentures or warrants as referred in Section 47(iii) are transferred under a gift or irrevocable trust the market value on the date of transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer. Expenses disallowed u/s Section 48

Any amount paid on account of Security Transaction Tax shall not be allowed to be deducted u/s 48.

 

For the above purposes:

A. 'Indexed cost of acquisition' means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the first year in which asset was held by the assessee or for the year beginning on the 1st day of April 2001, whichever is later.

B. "Indexed cost of any improvement" means the amount which bears the cost of improvement the same proportion as cost Inflation Index for the year in which the asset is sold bears tothe cost Inflation Index for the year in which improvement to the asset took place.

C. "Cost Inflation Index", in relation to a previous year, means such Index as the Central government may, having regard to seventy five per cent of average rise in the Consumer

Price Index (urban) for the immediately preceding previous year to such previous year, by notification in the Official Gazette, specify, in this behalf. 

Cases in which the Indexation of Cost is not to be done while Calculating Long Term Capital Gain

(i) Transfer of long term debentures or bonds other than capital indexed bonds issued by the Government. [Proviso 3 to section 48].

(ii) Transfer of Soverign Gold Bond issued by RBI under the Soverign Gold Bond Scheme,2015.

(iii) Transfer of shares in or debentures of an Indian Company by a non-resident assessee [Proviso 2 to section 48].

(iv) Transfer of an undertaking or division (assets etc.) in slump sale [section 50 B].

 

(v) Transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust referred to in section 112A. [Third Proviso to section 48].

(vi) Transfer of units purchased in foreign currency [section 115 B]. 

(vii) Global Depository Receipts (GDRs) or bonds purchased in foreign currency by a non resident [section 115AC]

(viii) Global Depository Receipts (GDRs) or bonds purchased in foreign currency by any resident individual [section 115 ACA]

(ix) Securities (other than units referred to in section 115AB) purchased by Foreign Institutional Investors (FIIS) [section 115AD)

(x) Transfer of foreign exchange asset by a non-resident Indian [section 115D]

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Category Income Tax, Other Articles by - Ritik Chopra 



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