1. Definition of ‘Transfer’ [Section 2(47)]
A transfer includes:
- Sale, exchange, or relinquishment
- Compulsory acquisition under law
- Conversion into stock-in-trade
- Maturity/redeem of insurance policies
- Extinguishment of rights
- Possession given in part performance of contract
- Any transaction allowing enjoyment of immovable property
Exceptions (Not treated as transfer):
✔ Gifts to specified relatives
✔ Will/inheritance (except subsequent sale)
✔ Partition of HUF property
✔ Transfer under amalgamation/demerger (Section 47)
2. Taxable Events Triggering Capital Gains
| TRANSACTION TYPE | TAX TREATMENT | EXAMPLE |
| Sale | Full value of consideration taxable | Selling ancestral property |
| Exchange | FMV of received asset considered | Land swapped for commercial space |
| Relinquishment | Compensation treated as consideration | Giving up tenancy rights |
| Compulsory Acquisition | Government compensation amount | Land acquired for metro project |
| Conversion to Stock-in-Trade | Deemed transfer at FMV | Developer converting land to inventory |
3. Computation Mechanism
Capital Gain Formula:
Capital Gain = Full Value of Consideration Received (-)
1. Cost of Acquisition (COA)
2. Cost of Improvement (COI)
3. Expenditure on Transfer
Special Valuation Rules:
- Section 50C:For immovable property, higher of actual sale value or stamp duty value
- Section 50D:FMV adopted if consideration not determinable
- Section 55A:Reference to Valuation Officer in disputed cases
4. Cost Basis Determination
| ACQUISITION TYPE | COST CONSIDERED |
| Purchase | Actual purchase price + incidental costs |
| Inheritance | Previous owner’s cost (indexed from their holding period) |
| Gift | Donor’s purchase cost or FMV at gift date |
| Self-generated | Nil (e.g., goodwill) or actual creation cost |
5. Holding Period Calculation
Critical Dates:
- Purchase Date:Date of registration (property) or contract note (shares)
- Transfer Date:Date of sale deed execution or possession transfer
Illustration:
- Property bought: 15-Mar-2020
- Sold: 20-Aug-2023
- Holding Period: 3 years 5 months → LTCG (>24 months)
6. Compliance Requirements
- Documentation:
- Purchase/sale agreements
- Improvement cost receipts
- Valuation reports (if applicable)
- Tax Deducted at Source:
- 1% TDS on property sale > ₹50 lakh (Section 194-IA)
- 1% TDS on listed securities > ₹10 lakh (Section 194LA)
- ITR Reporting:
- Schedule CG (Capital Gains)
- Schedule 112A (for equity LTCG)
- Exemption claims under Sections 54/54EC/54F
7. Practical Example:
Mr. A sells inherited gold:
- Inherited: 01-Jan-2005 (FMV ₹2 lakh)
- Sold: 15-Jun-2024 for ₹8 lakh
- Indexed COA: ₹2L × (348/117) = ₹5.95L
- LTCG: ₹8L – ₹5.95L = ₹2.05L
- Tax: 20% of ₹2.05L = ₹41,000
