Capital gain

Tax planning 842 views 3 replies

NIKITA

302 Points Joined February 2011

If jewellery is sold by an individual which was gifted to him on his marriage 5 years back, then how would capital gain be calculated??

As per section 49(ii) if a gifted asset is sold then cost of acquisition is the cost to the previous owner. And as per section 48 indexation will be applicable from the year in which the asset was acquired by the assessee i.e. the date of marriage in this case..

Also i have read somewhere that in case if a gift is sold then cost of acquisition will be the amount on which the tax has been paid by the assessee in the year of acquisition. But in this case gift is received on marriage hence exempt from payment of income tax.

M really confused. Please help me

Replies (3)

CA RICHA BADALIA

CA CS

1682 Points Joined August 2011

Under Section 47 Gift is an exempet transfer and no capital gain tax is chargeable on transfer by way of gift.Section 2(42A) clarifies that in case of exempted transfer period of holding shall be calculated with reference to previous owner .Further Sec 49(1) provides that in case of gift the COA shall be calculated with reference to that of previous owner .However Sec 48 which deals with indexation of COA provides that index of the year in which the assessee had acquired the asset should be considered.Examining the above inconsisteny the Chandigarh Tribunal has ruled in case of PUSPA DEVI SOFAT that having regard to legislative intention and harmonious construction of legal provision it is permissible for the assessee to take indexation of the year in which previous owner has acquired it.

Any of the index can be taken but appropriate note is to be provided with the relevant case law as stated above.

NIKITA

302 Points Joined February 2011

Thnx Richa for you reply. But still please clarify me whether according to you cost of acquisition of gift will be the cost to the prev owner and indexation will be applicable from the year in which it was acquired by prev owner? N in this case how can u ask the person gifting you jewellery in your marriage about the cost and date of purchase of jewellery..