Capital Gains

Section 55(1)(b) of the Income Tax Act, 1961, defines the cost of improvement for capital assets, which is crucial for computing capital gains tax. This provision specifies what expenditures qualify as improvements and how they are treated for tax purposes. Key Provisions Under Section 55(1)(b) 1.  Definition of Cost of Improvement Capital expenditureincurred by the assessee (or […]

Explanation (iii) to Section 48 of the Income Tax Act, 1961, defines the indexed cost of acquisition for computing long-term capital gains (LTCG). This provision adjusts the original purchase price of an asset for inflation using the Cost Inflation Index (CII), ensuring taxpayers are taxed only on real gains (after accounting for inflation). Key Provisions 1. Formula for Indexed Cost of Acquisition CII:

Explanation (iv) to Section 48 of the Income Tax Act, 1961, governs the indexation of improvement costs for computing long-term capital gains (LTCG). This provision allows taxpayers to adjust capital expenditures made on improving an asset for inflation, ensuring only real gains (after accounting for inflation) are taxed. Key Provisions 1.  Formula for Indexed Cost of Improvement CII (Cost Inflation Index): Published

Here we discuss all the Provisions towards Computation of Capital Gain in certain Special Cases and the method of Computation is different. 1.  Taxation of Zero-Coupon Bonds as “Capital Gains” Zero-coupon bonds (ZCBs) are unique debt instruments that do not pay periodic interest but are issued at a discount and redeemed at face value upon maturity. In

When non-residents (NRIs/Foreign Investors) transfer shares/debentures of Indian companies, special tax provisions apply under: Proviso to Section 48(Tax calculation method) Rule 115A(Tax rates and exemptions) 1. Key Tax Rules for Non-Residents (A) Tax Rates ASSET TYPE HOLDING PERIOD TAX RATE Listed Shares >12 months (LTCG) 10% (no indexation) Unlisted Shares >24 months (LTCG) 20% (with indexation) Debentures/Bonds Any period 10% (if

The Income Tax Act provides multiple exemptions to reduce or eliminate capital gains tax liability if the proceeds are reinvested in specified assets or meet certain conditions. Below is a categorized list of key exemptions: 1. Exemptions for Residential Property Reinvestment (A) Section 54 – Sale of Residential Property Eligibility: LTCG from sale of a residential house property. Exemption: Reinvest

Section 54 of the Income Tax Act, 1961 provides tax exemption on long-term capital gains (LTCG) arising from the sale of a residential house property, if the proceeds are reinvested in another residential property. 1. Eligibility Conditions ✅ Asset Sold: Must be a residential house property (not commercial/land). ✅ Holding Period: Property must be held for >24 months (LTCG applies). ✅ Reinvestment: Must purchase/construct another residential house in India.

Section 54B of the Income Tax Act, 1961, provides a tax exemption on capital gains arising from the transfer of agricultural land, provided the proceeds are reinvested in another agricultural property within a specified period. 1. Eligibility Conditions ✔ Applicable to: Individuals and HUFs (not companies, LLPs, or firms). ✔ Asset Type: Only agricultural land used for farming for at least 2 years before transfer.

Section 54D of the Income Tax Act, 1961, provides tax exemption on capital gains arising from the compulsory acquisition of land or buildings used for industrial purposes, if the proceeds are reinvested in new industrial assets. 1. Eligibility Conditions ✅ Asset Type: Land or building used for industrial/business purposes (factory, warehouse, etc.). ✅ Acquisition Type: Must be compulsorily acquired by the government (not voluntary sale). ✅ Holding Period:

Section 54EC of the Income Tax Act, 1961, provides tax exemption on long-term capital gains (LTCG) from the sale of land or building if the proceeds are invested in specified bonds (e.g., NHAI, REC, or other government-approved bonds). 1. Eligibility Conditions ✅ Asset Sold: Must be land, building, or both (not applicable to other assets like shares, gold, etc.). ✅ Holding Period: Must be held for >24 months (LTCG applies).