CAWorld1995

Capital gain arises if a person transfers a capital asset. section 47 excludes various transactions from the definition of 'transfer'. Thus, transactions covered under section 47 are not deemed as 'transfer' and, hence, these transactions will not give rise to any    capital gain. Transfer of capital asset by way of gift, will, etc., are few major transactions covered in section 47. Thus, if a person gifts his capital asset to any other person, then    no capital gain will arise in the hands of the person making the gift (*). If the person receiving the capital asset by way of gift, will, etc. subsequently transfers such asset, capital gain will arise in his hands. Special provisions are designed  to  compute capital gains in the hands of the person receiving the asset by way of gift, will, etc. In such a case, the cost of acquisition of the capital asset will be the cost of  acquisition to the previous owner and the period of holding of the capi...

Generally, transfer means sale, however, for the purpose of Income-tax Law "Transfer”,    in relation to a capital asset, includes: i.   Sale, exchange or relinquishment of the asset; ii.   Extinguishment of any rights in relation to a capital asset; iii.   Compulsory acquisition of an asset; iv. Conversion of capital asset into stock-in-trade; v. Maturity or redemption of a zero coupon bond; vi.   Allowing possession of immovable properties to the buyer in part performance of the contract; vii.   Any transaction which has the effect of transferring an (or enabling the enjoyment of) immovable property; or viii.   Disposing of or parting with an asset or any interest therein or creating any interest in any asset in any manner whatsoever.

The fair market value of the asset as on 1st June, 2016 [which has been taken into account for the purpose of said declaration Scheme, 2016] shall be deemed as cost of acquisition of the asset. [This provision is applicable w.e.f. 1-4-2017]

Generally, cost of acquisition of a capital asset is the cost incurred   in   acquiring   the capital asset. It includes the purchase consideration plus any expenditure incurred exclusively for acquiring the capital asset. However, in respect of capital asset acquired before 1st April, 2001, the cost of acquisition will be higher of the actual cost   of   acquisition of the asset or fair market value of the asset as on 1st April, 2001. This option is not available in the case of a depreciable asset.

Indexation is a process by which the cost of acquisition/improvement of a capital asset is adjusted against inflationary rise in the value of asset. The benefit of indexation is   available only in case of long-term capital assets and is not available in case of short-   term capital assets.

Short-term capital gain arising on account of transfer of short-term capital asset is computed as follows: Particulars Rs. Full value of consideration ( i.e.,  Sales value of the asset) XXXXX Less:  Expenditure incurred wholly and exclusively in connection with transfer of capital asset (E.g., brokerage, commission, etc.)   (XXXXX) Net Sale Consideration XXXXX Less:  Cost of acquisition ( i.e ., the purchase price of the capital asset) (XXXXX) Less:  Cost of improvement ( i.e.,  post purchase capital expenses incurred  on  addition/improvement to the capital asset) (XXXXX) Short-Term Capital Gain XXXXX ​