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Capital gain on compulsary acquition by govt

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Querist : Anonymous

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Querist : Anonymous (Querist)
12 March 2012 please give some relevant examples of aforesaid or any provision
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CA Siddhartha Bhardwaj

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CA Siddhartha Bhardwaj (Expert)
12 March 2012 Capital gain on compulsoru acquisition is governed by Section 45(5) of the Income Tax Act.

Points:

1. Period of holding - From date of purchase to date of compulsory acquisition by Govt.

2. Nature of capital gain - Held for 36 months or more, then Long term otherwise short term.

3. Taxability - Taxable in the year in which compensation or part of the compensation is RECEIVED and NOT in the year of acquisition.
However, indexation shall be done only upto the year of indexation.

4. Tax rate - LTCG: 20%, STCG: Included in total income and taxable at normal rates.

5. In case, enhanced compensation is received later on, the same is fully taxable in the year of receipt.
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