Tax Ready Reckoner

Under the Income Tax Act, 1961, certain transactions involving capital assets are excluded from the definition of “transfer”, meaning no capital gains tax applies. These exemptions are covered under Sections 46 and 47. 1. Key Exemptions Under Section 47 The following transactions do not qualify as “transfer” and thus do not attract capital gains tax: A. Transactions Related to Companies SECTION TRANSACTION CONDITION […]

A format to compute the capital gain is given below: Computation of Short-term Capital Gains Full value of consideration —   Less: (a) Expenditure incurred wholly and exclusively in connection with such a transfer, — (b) Cost of acquisition — (c) Cost of improvement — — Gross short-term capital gains — Less: Exemption, if available,

The “Full Value of Consideration” (FVC) is the total amount received or receivable when a capital asset is transferred. It is crucial for calculating capital gains tax under Section 48 of the Income Tax Act, 1961. 1. What is Included in Full Value of Consideration? COMPONENT DESCRIPTION EXAMPLE Sale Price Actual amount received from the buyer ₹50L for a property Advance Received Earnest

Under Section 48 of the Income Tax Act, 1961, certain expenses incurred during the transfer of a capital asset are deductible when computing capital gains. These expenses reduce the taxable capital gain. 1. Allowable Deductions (Section 48) EXPENSE TYPE DESCRIPTION EXAMPLES Brokerage/Commission Fees paid to brokers, agents, or intermediaries Real estate agent fees (1-2% of sale value) Legal Fees

Section 49 specifies how the cost of acquisition of a capital asset is determined when it is acquired through certain non-purchase modes, such as inheritance, gift, will, distribution on liquidation, or transfer under a revocable/irrevocable trust. Key Provisions of Section 49 1. Assets Acquired Without Direct Purchase [Section 49(1)] When a capital asset is acquired in any of

Section 55(2) of the Income Tax Act, 1961, provides crucial rules for determining the cost of acquisition of capital assets when computing capital gains. This provision is essential for calculating taxable gains accurately, especially in scenarios involving gifts, inheritance, or specific types of assets like goodwill, shares, or depreciable property. Below is a detailed breakdown of the

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