Capital Gain

Chargeability-Sec 45
Capital Asset- any property including rights of management or control
• Excludes
A stock-in-trade
Personal effects i.e, movable assets like apparel, furniture, car etc
held for personal use (but artwork, paintings, jewelry is not personal
effect and it is treated as capital asset even though used for personal
purposes)
Agricultural land in rural areas
Gold Bonds/ Special Bearer Bonds/Gold Deposit Bonds
Short Term Capital Asset
Applicable upto 22-07- Applicable from 23-07-
Particulars 2024 2024 Remarks

Listed securities including The word other than a unit is omitted wef 23-07-
Shares (other than a unit) 2024. Hence for all listed units including units of
Units of Equity Oriented business trust the period of holding shall be not
Fund or a Zero Coupon Bond Not more than 12 months Not more than 12 months more than 12 months

Unlisted shares Not more than 24 months Not more than 24 months No change

Immovable Property Not more than 24 months Not more than 24 months No change

All other capital assets Not more than 36 months Not more than 24 months
Period of Holding-Key points
 Asset acquired by will, inheritance, at the time partition of the family
assets – period of holding of the previous owner should also be
included
 Conversion of stock-in-trade into asset-period from the date of
conversion into capital asset
 Rights/Bonus shares- from the date of allotment of rights/bonus
shares
 Conversion of preference shares/bonds into equity shares-from the
date of allotment of pref shares/bonds
 Allotment of share in amalgamation/merger-period from the date of
acquisition of the shares in amalgamating co./demerged co.
Transactions not considered as transfer-sec 47
• Distribution of assets on liquidation/partition of family
• Transfer made between wholly owned subsidiary co to holding co or
vice versa
• Redemption of Sovereign Gold Bonds issued by RBI
• Conversion of bonds/debentures to equity shares
• Conversion of preference shares to equity shares
• Transfer of assets on conversion of firm to a Ltd Co. Subject to
conditions
• Transfer of assets on conversion of Pvt/Unlisted Ltd Co. to LLP
Subject to conditions
• Succession of proprietary concern by Ltd Co
Computation
Short term capital Gains Long Term Capital Gains
Sales Consideration Sales Consideration
Less: Less:
i. Expenses on transfer i. Expenses on transfer
ii. Cost of acquisition ii. Indexed Cost of acquisition (wef
iii. Cost of improvement 23-07-24 indexation benefit
removed)
Less: Deductions iii. Indexed Cost of improvement
Sec 54B, 54D, 54G & 54GA (wef 23-07-24 indexation benefit
removed)
Less: Deductions
Sec 54, 54B, 54D, 54EC, 54ED, 54EE,
54F, 54G, 54GA & 54GB
CII for 2024-25 is 363
Amendment wef 23-07-2024-Sec 112
• Indexed cost of acquisition is allowed for upto 22-07-2024 for all Long term
assets. Wef 23-07-2024 indexation benefit has been removed
• However for Resident Individual/HUF LTCG arising on transfer of
land/building/both acquired before 23-07-2024 shall be computed as
follows:
a) 12.5% without indexation of cost of acquisition &
improvement
b) 20% with indexation of cost of acquisition & improvement
Whichever is lower
Indexed Cost of acquistion
A) Asset is acquired by the assessee
Cost of acquisition x CII of the year of transfer/CII of the year of
acquisition
If the asset is acquired before 01-04-2001
Cost of acquisition or FMV as on 01-04-2001 (whichever is more) X CII
of year of transfer/CII for 2001-02
B) Asset is acquired from the previous owner
Cost of acquisition to previous owner X CII of the year of transfer/CII of
the year asset is first held by the assessee
Computation-Key Points
1. Capital gain on conversion of capital asset to stock in trade will be
taxable in the PY in which the stock in trade is sold
2. Insurance claims Sec 45(1A)
• If the compensation is received for damage/destruction of the asset
due to flood, cyclone etc then it is treated as capital gain
• If the compensation is nature of revenue receipt, eg: the asset is
repaired and used, any insurance money received is revenue receipt
and should be reduced from the Repair expenditure
• If compensation received for theft, then it cannot be treated as
capital gains. It is a revenue receipt
Cost of acquisition-Key Points
• Long term capital asset-equity share in a company or unit of equity
oriented fund acquired before 01-04-2001- Cost of acquisition shall be
higher of a) actual cost of acqusition or b) FMV of such asset as on 01-04-
2001
• Any asset becoming property of the assessee before 01-04-2001-Cost of
acquisition or its FMV as on 01-04-2001 at the option of the assessee
• Capital asset becoming property of the assessee due to
partition/succession etc-it became property of previous owner before 01-
04-2001 –cost of acquisition to the previous owner or FMV as on 01-04-
2001
• Cost of acquisition of equity share on conversion of preference share to
equity share-deemed to be cost of preference share
• Cost of acquisiton in case of conversion of inventory into capital asset-Cost
of capital asset in such case is deemed to be FMV of inventory as on date
which it is converted into capital asset
Slump Sale-Sec 50B
• Meaning-transfer of one or more undertakings for lump sum
consideration without assigning values to the individual assets and
liabilities in such sale
• Computation
• If the undertaking or division owned and held for more than 36
months, then long-term capital gain.
• 'net worth' of the undertaking or division shall be deemed to be the
cost of acquisition and the cost of improvement for the purpose of
sections 48 and 49 of the Act.
• No benefit of indexation
Sec 50C- Transfer of land or building
• If the asset transferred is land/building/both (STCA or LTCA)
• Stamp Duty Value exceeds 110% of the Sale Consideration
• Then, the Stamp duty Value shall be considered as full value of consideration
• If the stamp duty value as on date of agreement is different than value as on date
of registration, then the Stamp duty Value as on the ‘Date of agreement’ shall be
taken as Full value of consideration
Example: Sale consideration Rs 60,00,000 Stamp duty value Rs 65,00,000
110% of Sale consideration= 66,00,000
Full Value of Consideration will be Rs 60,00,000 ie Sale consideration
5. Sec 50 CA- transfer unlisted shares in a co.- if the sale consideration is less than
FMV on date of transfer, then FMV will be taken as sale consideration
Capital Gain on transfer shares/debentures by Non residents
(proviso 1 to Section 48 & Rule 115A)
• Cost of acquisition shall be converted into foreign currency which was
used to purchase of shares-average rate of TT buying & selling on
date of acquisition of shares
• Cost of transfer-shall be converted into foreign currency which was
initially used for purchase of shares-average rate of TT buying &
selling on date of transfer of shares
• Full value of consideration-shall be converted into foreign currency
which was initially used for purchase of shares- shares-average rate of
TT buying & selling on date of transfer of shares
Capital Gain in foreign currency (LTCG/STCG) shall be converted into
rupees at TT buying rate only on date of transfer of capital asset
Tax on Capital Gain-Special rate Sec 111A
STCG arising from sale of equity share or equity oriented mutual funds
and such transaction is chargeable to STT
• Tax rate of 15%- for transfer upto 22-07-2024
• Tax Rate of 20%-for transfer on or after 23-07-2024

Note: All other STCG is taxable at normal rates of tax

No deduction under Chapter VIA-Deduction to be allowed from GTI less
STCG
Tax on Long term Capital Gains-Sec 112
• Transfer of an asset upto 22-07-2024- Rate of 20% is applicable
• Transfer of an asset on and from 23-07-2024-Rate of 12.5% is
applicable
• Benefit of indexation removed-Resident individual/HUF is eligible for
indexation benefit for land/building/both (Second proviso to Sec
112(1)(a))
Basic exemption limit for LTCG is Rs 1 lakh for transfer upto 22-07-2024
Basic exemption limit for LTCG is 125,000 for transfer on and from 23-
07-2024
 Section 54 54B 54D 54EC 54F 54 GB

Asset
Compulsory LTCA residential
transferred/LTCG Residential House/LTCG Agricultural Land LTCA L&B LTCA other than HP
acquisition of L&B house or land
/STCG

Eligible assessee Individual/HUF Individual/HUF Industrial Undertaking Any assessee Individual/HUF Individual/HUF

a) Purchase/Contruction
of 2 residential house
Bonds of NHAI, REC
if CG is < ₹ 2 cr (once
etc Equity shares in an
Amount to be in lifetime) b) If CG New L&B for
New Agricultural land One New HP eligible co. and
invested in > ₹ 2 cr then only one industrial undertaking
Max limit of Rs 50 purchase "new asset"
house
lakhs
b) Max limit of Rs 10 Cr
wef AY 2024-25
*Purchase before 1 yr of *Purchase before 1 yr
Time limit by transfer or 2 yrs after of transfer or 2 yrs
within 2 years from within 3 years from 6 months from date of within 1 year from
which amount to transfer after transfer
the date of transfer the date of transfer transfer date of transfer
be invested *Construct within 3 yrs of *Construct within 3
transfer yrs of transfer
New asset should not
New land should not New L&B should not New Bonds should not New HP should not be
New HP should not be be transferred within
Other Conditions be transferred within be transferred within be transferred within transferred within 3
transferred within 3 yrs 3 yrs (Computers) or 5
3 yrs 3 yrs 5 yrs yrs
years (other assets)
Amount invested (Max 10 Amount invested or Amount invested or Amount invested (Max Cost of new house × Amount Invested ×
Amount of
Cr) or Capital gain Capital gain Capital gain 50 lakhs) Capital gain Capital Gains/Net Capital Gains/Net
deduction
whichever is less whichever is less whichever is less whichever is less Consideration Consideration