Income-Tax Act, 2025 | Chapter-4 | Computation Of Total Income

Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents.

The provisions of sections 26 to 54, to the extent contrary to this section, shall not apply to the manner of computation of profits and gains of the specified business in sub-section (2).
The profits and gains of any specified business as mentioned in column B of the Table below, carried on by a specified assessee as mentioned in column C of the said Table during a tax year, shall be computed in the manner specified in column D thereof, and shall be deemed to be the profits and gains of such business of such assessee chargeable to tax for the said tax year under the head “Profits and gains of business or profession”.
For the purposes of sub-section (2) (Table: Sl. Nos. 4 and 5) the specified assessee may claim that the profits actually earned from the specified business are lower than the business profits computed under sub-section (2), if,—
1. he keeps and maintains such books of account and other documents as required under section 62; and
2. gets his accounts audited and furnish a report of such audit as required under section 63.
Any loss, allowance or deduction allowable under the provisions of this Act shall not be allowed against the income computed in the manner specified in sub-section (2).
The written down value of any asset used for the purposes of specified business or profession shall be computed, as if the assessee mentioned in column C of the Table in sub-section (2) had claimed and was actually allowed depreciation thereon for each of the relevant tax years.
For the purposes of sub-section (2) (Table: Sl. No. 5) the provisions of this section shall not apply where the provisions of section 54 or 59 or 207 or 527 apply for the purposes of computing profits and gains or any other income referred to in the said sections.
For the purposes of sub-section (2) (Table: Sl. No. 5), “plant” includes ships, aircrafts, vehicles, drilling units, scientific apparatuses and equipments used for the purposes of the specified business.
For the purposes of sub-section (2) (Table: Sl. No. 6), resident company shall satisfy the following:—
1. it is establishing or operating electronics manufacturing facility or a connected facility for manufacturing or producing electronic goods, article or thing in India, under a scheme notified by the Central Government in the Ministry of Electronics and Information Technology; and
2. it satisfies the conditions as may be prescribed in this behalf.
The provisions of sections 59 and 207 shall not apply to amounts referred to in sub-section (2) (Table: Sl. No. 6).

Maintenance of books of account

Any person carrying on specified profession; or
1. any person carrying on specified profession; or
2. any person carrying on business; or any profession [not being a profession referred to in clause (a)] and satisfying the conditions referred to in sub-section (2),
shall keep and maintain such books of account and other documents to enable the Assessing Officer to compute his total income under this Act.
The conditions in respect of persons referred to in sub-section (1)(b) shall be the following:—
1. where the income from business or profession exceeds ₹120000 or its total sales, turnover or gross receipts from such business or profession exceeds ten lakh rupees in any one of the three years immediately preceding the tax year; or
2. where business or profession is newly set up in the tax year, the income from business or profession is likely to exceed ₹120000 or its total sales, turnover or gross receipts from such business or profession is likely to exceed ten lakh rupees during such tax year; or
3. where during the tax year, the assessee referred to in section 58(2) or 61(2) (Table: Sl. Nos. 4 and 5), has claimed income from business or profession to be lower than the deemed profits as referred to in section 58(2) or section 61(2); or
4. in case of an individual or Hindu undivided family, clauses (a) and (b) shall be modified to the extent of income from such business or profession exceeding ₹250000 and its total sales, turnover or gross receipts from such business or profession exceeding twenty-five lakh rupees.
For the purposes of this section, the Board may prescribe—
1. the books of account and other documents (including inventories, wherever necessary) to be kept and maintained;
2. particulars to be contained therein;
3. the form, manner and place at which they shall be kept and maintained; and
4. the period for which such books of account and other documents are to be retained.
For the purposes of this section, the expression “specified profession” means—
1. legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration, information technology or company secretary; or
2. any other profession, as may be notified by the Board in this behalf.

Tax audit

Every person, carrying on the business or profession fulfilling any of the conditions specified in column B of the Table below, shall get his accounts of the tax year audited by an accountant, before the specified date.
The provisions of this section shall not apply where profits and gains of business or profession, declared by the assessee are as per section 58(2) or 61(2).
The assessee shall furnish by the specified date, the report of such audit in such form, duly signed and verified by the accountant and setting forth such particulars, as may be prescribed.
Where a person is required, by or under any other law, to get his accounts audited, then it shall be sufficient compliance of this section, if such person—
1. gets the accounts of such business or profession audited under such law before the specified date; and
2. furnishes by that specified date the report of such audit along with the report of the accountant in the form as may be prescribed.
For the purposes of this section,—
1. “specified date” in relation to the accounts of the assessee of the tax year, means the date one month prior to the due date for furnishing the return of income under section 263(1);
2. the payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is not account payee, shall be deemed to be the payment or receipt, as the case may be, in cash.

Special provision for computing deductions in case of business reorganisation of co-operative banks.

The deduction under section 33 or 44 or 52(1) (Table: Sl. No. 1 or 2) shall, in a case where business reorganisation of a co-operative bank has taken place during the tax year, be allowed as per provisions of this section.
The amount of deduction allowable to the predecessor co-operative bank or to the successor co-operative bank or to the converted banking company under section 33 or 44 or 52(1) (Table: Sl. No. 1 or 2) shall be determined as per the formula—
1. for predecessor co-operative bank:—
  
  A × B / C
2. for successor co-operative bank or converted banking company:—
  
  A × D / C
where,—

A = the amount of deduction allowable to the predecessor co-operative bank, if the business reorganisation had not taken place;
B = the number of days comprised in the period beginning with the 1st day of the tax year and ending on the day immediately preceding the date of business reorganisation; and
C = the total number of days in the tax year in which the business reorganisation has taken place.
D = the number of days comprised in the period beginning with the date of business reorganisation and ending on the last day of the tax year.
The provisions of section 44 or 52(1) (Table: Sl. No. 1 or 2) shall, in a case where an undertaking of the predecessor co-operative bank entitled to the deduction under the said section is transferred before the expiry of the period specified therein to a successor co-operative bank or to a converted banking company on account of business reorganisation, apply to the successor co-operative bank or to the converted banking company in the tax years subsequent to the year of business reorganisation as they would have applied to the predecessor co-operative bank, as if the business reorganisation had not taken place.

Interpretation for purposes of section 64

For the purposes of section 64,—
1. “amalgamation” means the merger of an amalgamating co-operative bank with an amalgamated co-operative bank, if—
  1. all the assets and liabilities of the amalgamating co-operative bank or banks immediately before the merger (other than the assets transferred, by sale or distribution on winding up, to the amalgamated co-operative bank) become the assets and liabilities of the amalgamated co-operative bank;
  2. the members holding 75% or more voting rights in the amalgamating co-operative bank become members of the amalgamated co-operative bank; and
  3. the shareholders holding 75% or more in value of the shares in the amalgamating co-operative bank (other than the shares held by the amalgamated co-operative bank or its nominee or its subsidiary, immediately before the merger) become shareholders of the amalgamated co-operative bank.
2. “amalgamating co-operative bank” means—
  1. a co-operative bank which merges with another co-operative bank; or
  2. every co-operative bank merging to form a new co-operative bank.
3. “amalgamated co-operative bank” means—
  1. a co-operative bank with which one or more amalgamating co-operative banks merge; or
  2. a co-operative bank formed as a result of merger of two or more amalgamating co-operative banks.
4. “business reorganisation” means reorganisation of business involving the amalgamation or demerger of a co-operative bank or conversion of a primary co-operative bank.
5. “conversion” means transition of a primary co-operative bank to a banking company under the scheme of the Reserve Bank of India as may be notified vide its circular number DCBR. CO. LS. PCB. Cir. No. 5/07.01.000/2018-19, dated 27th September, 2018.
6. “converted banking company” means a banking company formed as a result of conversion from primary co-operative bank.
7. “demerger” means the transfer by a demerged co-operative bank of one or more of its undertakings to any resulting co-operative bank, in such manner that—
  1. all the assets and liabilities of the undertaking or undertakings immediately before the transfer become the assets and liabilities of the resulting co-operative bank;
  2. the assets and the liabilities are transferred to the resulting co-operative bank at values (other than change in the value of assets consequent to their revaluation) appearing in its books of account immediately before the transfer;
  3. the resulting co-operative bank issues, in consideration of the transfer, its membership to the members of the demerged co-operative bank on a proportionate basis;
  4. the shareholders holding 75% or more in value of the shares in the demerged co-operative bank (other than shares already held by the resulting bank or its nominee or its subsidiary immediately before the transfer), become shareholders of the resulting co-operative bank, otherwise than as a result of the acquisition of the assets of the demerged co-operative bank or any undertaking thereof by the resulting co-operative bank;
  5. the transfer of the undertaking is on a going concern basis; and
  6. the transfer is as per the conditions specified by the Central Government, by notification, having regard to the necessity to ensure that the transfer is for genuine business purposes.
8. “demerged co-operative bank” means the co-operative bank whose undertaking is transferred, pursuant to a demerger, to a resulting bank.
9. “predecessor co-operative bank” means the amalgamating co-operative bank or the demerged co-operative bank, or the primary co-operative bank, which has been succeeded as a result of conversion.
10. “primary co-operative bank” shall have the meaning assigned to it in clause (ccv) of section 56 of the Banking Regulation Act, 1949 (10 of 1949).
11. “resulting co-operative bank” means—
  1. one or more co-operative banks to which the undertaking of the demerged co-operative bank is transferred in a demerger; or
  2. any co-operative bank formed as a result of demerger.
12. “successor co-operative bank” means the amalgamated co-operative bank or the resulting bank.

Interpretation

“agreement”, for the purposes of section 26(2)(h), includes any arrangement or understanding or action in concert,—
1. whether or not such arrangement, understanding or action is formal or in writing; or
2. whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings;
“banking company” means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act;
“commission or brokerage” shall have the meaning assigned to it in section 402(7);
“commodities transactions tax” and “commodity derivative” shall have the same meanings as respectively assigned to them in Chapter VII of the Finance Act, 2013 (17 of 2013);
“fees for technical services” shall have the meaning assigned to it in section 9(7)(b);
“housing finance company” means a public company formed or registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes;
“Indian Institute of Technology” shall have the same meaning as that of “Institute” defined in section 3(g) of the Institutes of Technology Act, 1961 (59 of 1961);
“Keyman insurance policy” shall have the meaning assigned to it in Schedule II (Note 1);
“limited liability partnership” shall have the same meaning as assigned to it in section 2(1)(n) of the Limited Liability Partnership Act, 2008 (6 of 2009);
“long-term finance”, for the purposes of section 32(e), means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years;
“micro enterprise” shall be an enterprise classified as such under the notification in this behalf by the Central Government under the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006);
“mineral oil” includes petroleum and natural gas;
“moneys payable” in respect of any tangible asset [as referred to in section 33(12)(a)(i)] includes—
1. any insurance, salvage or compensation moneys payable in respect thereof;
2. where the asset is sold, the price for which it is sold;
“non-scheduled bank” means a banking company as defined in section 5(c) of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank;
“paid” means, except for section 37, actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head “Profits and gains of business or profession”;
“permanent establishment” shall have the meaning assigned to it in section 173(c);
“plant” includes ships, vehicles, books, scientific apparatus and surgical equipment used for the business or profession but does not include tea bushes or livestock or buildings or furniture and fittings;
“predecessor entity” means—
1. the amalgamating Indian company in the case of amalgamation;
2. the demerged Indian company, in the case of demerger;
3. a firm, in the case of a succession of a firm by a company as referred to in section 70(1)(zd);
4. a private company or unlisted public company, in case of conversion as referred to in section 70(1)(ze);
“primary agricultural credit society” shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);
“primary co-operative agricultural and rural development bank” means a society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities;
“professional services” shall have the meaning assigned to it in section 402(28);
“public company” shall have the same meaning as assigned to it in section 2(71) of the Companies Act, 2013 (18 of 2013);
“public financial institution” shall have the same meaning as assigned to it in section 2(72) of the Companies Act, 2013 (18 of 2013);
“rate of exchange” means the rate of exchange determined or recognised by the Central Government for the conversion of Indian currency into foreign currency or foreign currency into Indian currency;
“royalty” shall have the same meaning as assigned to it in section 9(6)(b);
“rural branch” means a branch of a scheduled bank or a non-scheduled bank situated in a place which has a population of not more than ten thousand according to the last preceding census, of which the relevant figures have been published before the first day of the tax year;
“scientific research” means—
1. any activity for the extension of knowledge in the fields of natural or applied science including agriculture, animal husbandry or fisheries; and
2. the references to expenditure incurred on scientific research shall include all expenditure incurred for the prosecution, or the provision of facilities for the prosecution, of scientific research, but does not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research,
and the references to scientific research related to a business or class of business shall include any scientific research—
1. which may lead to or facilitate an extension of that business or, all businesses of that class;
2. of a medical nature which has a special relation to the welfare of workers employed in that business or, all businesses of that class;
“securities transaction tax” shall have the meaning assigned to it under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004);
“service”, for the purposes of section 26(2)(h), means a service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial nature such as—
1. accounting;
2. banking;
3. communication;
4. conveying of news or information;
5. advertising;
6. entertainment;
7. amusement;
8. education;
9. financing;
10. insurance;
11. chit funds;
12. real estate;
13. construction;
14. transport;
15. storage;
16. processing;
17. supply of electrical or other energy; and
18. boarding and lodging;
“small enterprise” shall be an enterprise classified as such under the notification in this behalf by the Central Government under the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006);
“speculative transaction” means a transaction in which a contract for the purchase or sale of any commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips, other than the following transactions:—
1. a specified derivative transaction as defined in clause (33);
2. a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchandising business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured, or merchandise sold by him;
3. a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations;
4. a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage, to guard against loss which may arise in the ordinary course of his business as such member;
“Specified Banking or Online Mode” shall mean transaction by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode, as may be prescribed;
“specified derivative transaction” means any transaction in respect of trading in derivatives referred to in section 2(ac) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or in respect of trading in commodity derivatives (other than agricultural commodity derivatives) which is chargeable to commodities transaction tax under Chapter VII of the Finance Act, 2013 (17 of 2013) or in respect of trading in agricultural commodity derivatives, if such transactions are—
1. is carried out—
  1. through a stock broker or such other intermediary registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) and the rules, regulations or bye-laws made or directions issued under those Acts; or
  2. by banks or mutual funds,
  electronically on screen-based systems of a recognised stock exchange; and
2. supported by a time stamped contract note issued by the intermediary to every client indicating in the contract note—
  1. the unique client identity number allotted under any law in force; and
  2. the Permanent Account Number allotted under this Act;
“State Government undertaking” includes—
1. a corporation established by or under any State Act;
2. a company in which more than 50% of the paid-up equity share capital is held by the State Government;
3. a company in which more than 50% of the paid-up equity share capital is held by the entity referred to in clause (a) or (b) (whether singly or taken together);
4. a company or corporation in which the State Government has the right to appoint the majority of the directors or to control the management or policy decisions, directly or indirectly, including by virtue of its shareholding or management rights or shareholders agreements or voting agreements or in any other manner;
5. an authority, a board or an institution or a body established or constituted by or under any State Act, or owned or controlled by the State Government;
“State Industrial Investment Corporation” means a Government company within the meaning of section 2(45) of the Companies Act, 2013 (18 of 2013), engaged in the business of providing long-term finance for industrial projects;
“State Financial Corporation” means a Financial Corporation established under section 3 or 3A or an institution notified under section 46 of the State Financial Corporations Act, 1951 (63 of 1951);
“successor entity” means—
1. the amalgamated Indian company, in the case of amalgamation;
2. the resulting Indian company, in the case of demerger;
3. a company, in case of a succession of a firm by a company as referred to in section 70(1)(zd);
4. a limited liability partnership, in case of conversion of private company or unlisted public company to a limited liability partnership, as referred to in section 70(1)(ze);
“taxable commodities transaction” shall have the meaning assigned to it under Chapter VII of the Finance Act, 2013 (17 of 2013);
“taxable securities transaction” shall have the meaning assigned to it under Chapter VII of the Finance Act, 2004 (13 of 2004);
“University” shall have the meaning assigned to it in section 70(2) (Table: Sl. No. 7).

Capital gains.

Any profits or gains arising from the transfer of a capital asset effected in a tax year shall, save as otherwise provided in sections 82, 83, 84, 85, 86, 87, 88 and 89, be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of the tax year in which the transfer took place.
Irrespective of anything contained in sub-section (1), if a person receives during any tax year any money or other assets under an insurance from an insurer on account of damage to, or destruction of, any capital asset, as a result of circumstances mentioned in sub-section (3), then—
1. any profits or gains arising from receipt of such money or other assets shall be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of such person of the tax year in which such money or other asset was received; and
2. for the purposes of section 72, the value of any money or the fair market value of other assets on the date of such receipt shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.
The following shall be the circumstances referred to in sub-section (2):—
1. flood, typhoon, hurricane, cyclone, earthquake or any other convulsion of nature; or
2. riot or civil disturbance; or
3. accidental fire or explosion; or
4. action by an enemy or action taken in combating an enemy (whether with or without a declaration of war).
In sub-section (2), “insurer” shall have the same meaning as assigned to it in section 2(9) of the Insurance Act, 1938 (4 of 1938).
Irrespective of anything contained in sub-section (1), if any profits or gains arises to a person from receipt of any amount, including a bonus, under a unit linked insurance policy to which the exemption specified at Schedule II (Table: Sl. No. 2) does not apply, then—
1. such profits and gains shall be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of such person in the tax year in which such amount was received; and
2. the income taxable shall be calculated in such manner, as may be prescribed.
Irrespective of anything contained in sub-section (1), if the profits or gains arising from the transfer by way of conversion of a capital asset into, or its treatment by the owner as, stock-in-trade of a business carried on by him, then—
1. such profits and gains shall be chargeable to income-tax as his income in the tax year in which such stock-in-trade is sold or otherwise transferred by him; and
2. for the purposes of section 72, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.
If any person, at any time during the tax year, had any beneficial interest in any securities and any profits or gains arise from transfer made by the depository or participant of such beneficial interest in respect of securities, then—
1. such profits and gains shall be chargeable to income-tax as the income of the beneficial owner of the tax year in which such transfer took place;
2. such profits and gains shall not be regarded as income of the depository who is deemed to be the registered owner of securities by virtue of section 10(1) of the Depositories Act, 1996 (22 of 1996); and
3. for the purposes of section 72 and section 2(101)(b), the cost of acquisition and the period of holding of any securities shall be determined on the basis of the first-in-first-out method.
In sub-section (7), “beneficial owner”, “depository” and “security” shall have the same meanings as respectively assigned to them in section 2(1)(a), (e) and (l) of the Depositories Act, 1996 (22 of 1996).
If any profits or gains arise from the transfer of a capital asset by a person, to a firm or other association of persons or body of individuals (not being a company or co-operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, then—
1. such profits and gains shall be chargeable to tax as his income of the tax year of such transfer; and
2. for the purposes of section 72 the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.
Irrespective of anything contained in sub-section (1), if a specified person receives during the tax year, any money or capital asset, or both, from a specified entity in connection with the reconstitution of such specified entity, then—
1. any profits or gains arising from such receipt shall be deemed as income of the specified entity of the tax year of such receipt by the specified person and chargeable to income-tax under the head “Capital gains”; and
2. such profits or gains shall be determined irrespective of anything to the contrary contained in this Act as follows:
  A = B + C – D
  where,
  - A = income chargeable to income-tax under this sub-section as income of the specified entity under the head “Capital gains”;
  - B = value of any money received by the specified person from the specified entity on the date of such receipt;
  - C = amount of fair market value of the capital asset received by the specified person from the specified entity on the date of such receipt; and
  - D = amount of balance in the capital account (represented in any manner) of the specified person in the books of account of the specified entity at the time of its reconstitution;
3. for the purposes of clause (b),—
  1. if the value of “A” as computed is negative, such value shall be deemed to be zero;
  2. the balance in the capital account of the specified person in the books of account of the specified entity shall be calculated without considering any increase in the capital account of the specified person due to revaluation of any asset or due to self-generated goodwill or any other self-generated asset; and
4. the provisions of this sub-section shall operate in addition to the provisions of section 8 and the taxation under the said section shall be worked out independently, when a capital asset is received by a specified person from a specified entity in connection with the reconstitution of such specified entity.
In sub-section (10),—
1. “reconstitution of the specified entity”, “specified entity” and “specified person” shall have the meanings respectively assigned to them in section 8;
2. “self-generated goodwill” and “self-generated asset” mean goodwill or asset, as the case may be, which has been acquired without incurring any cost for purchase or which has been generated during the course of the business or profession.
Irrespective of anything contained in sub-section (1), if the capital gain arises from the transfer of a capital asset by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, tribunal or other authority, the capital gain shall be dealt with in the following manner:—
1. the capital gains computed with reference to the compensation awarded in the first instance or, as the case may be, consideration determined or approved by the Central Government or the Reserve Bank of India in the first instance, shall be chargeable as income under the head “Capital gains” of the tax year in which such compensation or part thereof, or such consideration or part thereof, was first received;
2. the amount by which the compensation or consideration is enhanced or further enhanced by the court, tribunal or other authority shall be deemed to be income chargeable under the head “Capital gains” of the tax year in which such amount is received;
3. any compensation as referred to in clause (b) received in pursuance of an interim order of a court, tribunal or other authority shall be deemed as income chargeable under the head “Capital gains” of the tax year in which the final order of such court, tribunal or other authority is made; and
4. the capital gain assessed for any tax year under clause (a) or (b) shall be recomputed where the compensation or consideration referred to in clauses (a) to (c) is reduced by any court, tribunal or other authority, and such reduced value shall be taken to be the full value of the consideration.
In relation to the amount referred to in sub-section (12)(b) and (c),—
1. the cost of acquisition and the cost of improvement shall be taken as nil; and
2. in a case where the enhanced compensation or consideration is received by any other person due to the death of the person who made the transfer, or for any other reason, such amount shall be deemed as the income chargeable to tax under the head “Capital gains” in the hands of such other person.
Irrespective of anything contained in sub-section (1), if the capital gains arises to a person (being an individual or a Hindu undivided family), from the transfer of a capital asset, being land or building or both, under a specified agreement, then—
1. such capital gains shall be chargeable to income-tax for the tax year in which the certificate of completion for the whole or part of the project is issued by the competent authority; and
2. for the purposes of section 72, the stamp duty value, on the date of issue of the said certificate, of the share of such person, being land or building or both, in the project, as increased by any consideration received in cash or by a cheque or draft or by any other mode shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of such capital asset.
In sub-section (14),—
1. “competent authority” means the authority empowered to approve the building plan under any law;
2. “specified agreement” means a registered agreement in which a person owning land or building, or both, agrees to allow another person to develop a real estate project on such land or building, or both, in consideration of a share, being land or building or both, in such project, whether with or without payment of part of the consideration in cash.
The provisions of sub-section (14) shall not apply, if the person transfers his share in the project on or before the date of issue of the certificate of completion, and then,—
1. the capital gains shall be deemed to be the income of the tax year of such transfer; and
2. the provisions of this Act, other than sub-section (14), shall apply for the purpose of determination of full value of consideration.
Irrespective of anything contained in sub-section (1), the difference between the repurchase price of the units referred to in section 80CCB(2) of the Income-tax Act, 1961 (43 of 1961) and the capital value of such units shall be deemed to be the capital gains arising to the assessee in the tax year in which—
1. such repurchase takes place; or
2. the plan referred to in that section is terminated.
For the purposes of sub-section (17), “capital value of such units” means any amount invested by the assessee in the units referred to in section 80CCB(2) of the Income-tax Act, 1961 (43 of 1961).

Capital gains on distribution of assets by companies in liquidation.

Irrespective of anything contained in section 67, where the assets of a company are distributed to its shareholders on its liquidation, such distribution shall not be regarded as a transfer by the company for the purposes of the said section.
If a shareholder, on the liquidation of a company, receives any money or other assets from the company, then—
1. such shareholder shall be chargeable to income-tax under the head “Capital gains”, in respect of the money so received or the market value of the other assets on the date of distribution, as reduced by the amount assessed as dividend within the meaning of section 2(40)(c); and
2. the sum so arrived at shall be deemed to be the full value of the consideration for the purposes of section 72.

Capital gains on purchase by company of its own shares or other specified securities.

If a shareholder or a holder of other specified securities receives any consideration from any company for the purchase of its own shares or other specified securities held by such shareholder or holder of other specified securities, then, subject to the provisions of section 72, the difference between the cost of acquisition and the value of consideration so received shall be deemed to be the “Capital gains” arising to such shareholder or the holder of other specified securities, as the case may be, in the year in which the company purchases the shares or other specified securities.
In respect of capital gains referred to in sub-section (1), where a company purchases its own shares or other specified securities in accordance with the provisions of section 68 of the Companies Act, 2013 (18 of 2013) and the shareholder or holder of other specified securities is a promoter, the aggregate income-tax payable on such capital gains shall be—
1. the income-tax payable on such capital gains in accordance with the provisions of this Act; and
2. an additional income-tax in respect of capital gains specified in column B of the Table below, computed at the rate specified in column C or column D of the said Table.
For the purposes of this section,—
1. in the case of a company whose shares are listed on a recognised stock exchange in India, “promoter” shall have the same meaning as assigned to it in regulation 2(k) of the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 made under the Securities and Exchange Board of India Act, 1992 (15 of 1992);
2. in any other case, “promoter” means—
  1. a “promoter” as defined in section 2(69) of the Companies Act, 2013 (18 of 2013); or
  2. a person who holds, directly or indirectly, more than 10% of the shareholding in the company;
3. “specified securities” shall have the same meaning as assigned to it in Explanation 1 to section 68 of the Companies Act, 2013 (18 of 2013).

Transactions not regarded as transfer

The provisions of section 67 shall not apply to transfer—
1. by way of distribution of capital assets on the total or partial partition of a Hindu undivided family;
2. of a capital asset by an individual or a Hindu undivided family, under a will or a gift or an irrevocable trust;
3. of a capital asset, not being stock-in-trade, by a company to its subsidiary company, if—
  1. the parent company or its nominees hold the whole of the share capital of the subsidiary company; and
  2. the subsidiary company is an Indian company;
4. of a capital asset, not being stock-in-trade, by a subsidiary company to the holding company, if—
  1. the whole of the share capital of the subsidiary company is held by the holding company; and
  2. the holding company is an Indian company;
5. in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company, if the amalgamated company is an Indian company;
6. by a shareholder, in a scheme of amalgamation, of a capital asset being a share or shares held by him in the amalgamating company, if—
  1. the transfer is made in consideration of allotment to him of any share or shares in the amalgamated company except when the shareholder itself is the amalgamated company; and
  2. the amalgamated company is an Indian company;
7. in a scheme of amalgamation, to him of a capital asset being a share or shares held in an Indian company by the amalgamating foreign company to the amalgamated foreign company, if—
  1. at least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company; and
  2. such transfer does not attract tax on capital gains in the country in which the amalgamating company is incorporated;
8. in a scheme of amalgamation, of a capital asset, being a share of a foreign company, referred to in section 9(10)(a), which derives directly or indirectly its value substantially from the share or shares of an Indian company, held by the amalgamating foreign company to the amalgamated foreign company, if—
  1. at least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company; and
  2. such transfer does not attract tax on capital gains in the country in which the amalgamating company is incorporated;
9. of a capital asset by a banking company to a banking institution under a scheme of amalgamation of a banking company with a banking institution sanctioned and brought into force by the Central Government under section 45(7) of the Banking Regulation Act, 1949 (10 of 1949);
10. in a demerger, of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company;
11. of shares by the resulting company or issue of shares by such company, in a scheme of demerger to the shareholders of the demerged company, if the transfer or issue is made in consideration of demerger of the undertaking;
12. of a capital asset in a demerger, being a share or shares held in an Indian company, by the demerged foreign company to the resulting foreign company, if—
  1. the shareholders holding not less than 75% in value of the shares of the demerged foreign company continue to remain shareholders of the resulting foreign company; and
  2. such transfer does not attract tax on capital gains in the country in which the demerged foreign company is incorporated,
  and in such a case the provisions of sections 230 to 232 of the Companies Act, 2013 (18 of 2013) shall not apply;
13. of a capital asset in a demerger, being a share of a foreign company, referred to in section 9(10)(a), which derives directly or indirectly its value substantially from the share or shares of an Indian company, held by the demerged foreign company to the resulting foreign company, if—
  1. the shareholders holding not less than 75% in value of the shares of the demerged foreign company continue to remain shareholders of the resulting foreign company; and
  2. such transfer does not attract tax on capital gains in the country in which the demerged foreign company is incorporated,
  and in such a case the provisions of sections 230 to 232 of the Companies Act, 2013 (18 of 2013) shall not apply;
14. in a business reorganisation, of a capital asset by the predecessor co-operative bank to the successor co-operative bank or to the converted banking company;
15. by a shareholder, in a business reorganisation, of capital asset being share or shares held by him in the predecessor co-operative bank, if the transfer is made in consideration of the allotment to him of any share or shares in the successor co-operative bank or the converted banking company;
16. of a capital asset, being bonds or Global Depository Receipts as referred to in section 209(1), made outside India by a non-resident to another non-resident;
17. made outside India, of a capital asset, being rupee denominated bond of an Indian company issued outside India, by a non-resident to another non-resident;
18. of a capital asset made by a non-resident on a recognised stock exchange located in any International Financial Services Centre, where the consideration for such transaction is paid or payable in foreign currency, and such capital asset is—
  1. bond or Global Depository Receipt referred to in section 209(1); or
  2. rupee denominated bond of an Indian company; or
  3. derivative; or
  4. such other securities as may be notified by the Central Government;
19. of a capital asset, being a Government security carrying a periodic payment of interest, made outside India through an intermediary dealing in settlement of securities, by a non-resident to another non-resident;
20. in a relocation, of a capital asset by the original fund to the resulting fund;
21. by a shareholder or unit holder or interest holder, in a relocation, of a capital asset being share or unit or interest held by him in the original fund in consideration for the share or unit or interest in the resultant fund;
22. of a capital asset by India Infrastructure Finance Company Limited to an institution established for financing the infrastructure and development, set up under an Act of Parliament and notified by the Central Government for the purposes of this clause;
23. of a capital asset, under a plan approved by the Central Government, by a public sector company, to—
  1. another public sector company notified by the Central Government for the purposes of this clause; or
  2. the Central Government; or
  3. a State Government;
24. by way of redemption, of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015 or any subsequent Sovereign Gold Bond Scheme, if held by an individual from the date of original issue till maturity;
of a capital asset, being conversion of gold into Electronic Gold Receipt issued by a Vault Manager, or conversion of Electronic Gold Receipt into gold;
by way of conversion of bonds or debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company;
by way of conversion of bonds referred to in section 209(1) (Table: Sl. No. 1) into shares or debentures of any company;
by way of conversion of preference shares of a company into equity shares of that company;
of a capital asset, being any work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print, to—
1. the Government; or
2. a University; or
3. the National Museum, National Art Gallery or National Archives; or
4. such other public museum or institution as may be notified by the Central Government to be of national importance or of renown throughout any State;
of a capital asset or intangible asset by a firm to a company as a result of succession of the firm by a company in the business carried on by the firm, if—
1. all the assets and liabilities of the firm relating to the business immediately before the succession become the assets and liabilities of the company;
2. all the partners of the firm, immediately before the succession, become the shareholders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of the succession;
3. the partners of the firm do not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the company; and
4. the aggregate of the shareholding of the partners in the company is not less than 50% of the total voting power and such shareholding continues to not less than 50% for five years from the date of succession;
of a capital asset or intangible asset by a private company or unlisted public company (herein referred to as the company) to a limited liability partnership or transfer of a share or shares held in the company by a shareholder as a result of conversion of the company into a limited liability partnership under the provisions of sections 56 or 57 of the Limited Liability Partnership Act, 2008 (6 of 2009), if—
1. all the assets and liabilities of the company, immediately before the conversion, become the assets and liabilities of the limited liability partnership;
2. all the shareholders of the company, immediately before the conversion, become the partners of the limited liability partnership and their capital contribution and profit sharing ratio in the limited liability partnership are in the same proportion as their shareholding in the company on the date of conversion;
3. the shareholders of the company do not receive any consideration or benefit, directly or indirectly, other than by way of share in profit and capital contribution in the limited liability partnership;
4. the aggregate of the profit sharing ratio of the shareholders of the company in the limited liability partnership shall not be less than 50% at any time during five years from the date of conversion;
5. the total sales, turnover or gross receipts in the business of the company in any of the three tax years preceding the tax year in which the conversion takes place does not exceed sixty lakh rupees;
6. the total value of the assets, as appearing in the books of account of the company in any of the three tax years preceding the tax year in which the conversion takes place does not exceed five crore rupees; and
7. no amount is paid, either directly or indirectly, to any partner out of balance of accumulated profit standing in the accounts of the company on the date of conversion for three years from the date of conversion;
of a capital asset or intangible asset (by way of sale or otherwise) by a sole proprietorship concern to a company in case of succession of the sole proprietorship concern by the company in the business carried on by it, if—
1. all the assets and liabilities related to the business of the sole proprietary concern, immediately before the succession, become the assets and liabilities of the company;
2. the shareholding of the sole proprietor in the company is not less than 50% of the total voting power and such shareholding continues to be not less than 50% for five years from the date of the succession; and
3. the sole proprietor does not receive any consideration or benefit, directly or indirectly, except through allotment of shares in the company;
in a scheme for lending of any securities under an agreement or arrangement, entered into by the assessee with the borrower of such securities and which is subject to the guidelines issued by the Securities and Exchange Board of India or the Reserve Bank of India;
of a capital asset in a transaction of reverse mortgage under a scheme notified by the Central Government;
of a capital asset, being share or shares of a special purpose vehicle to a business trust in exchange of units allotted by that trust to the transferor;
of a capital asset by a unit holder, being a unit or units, held by him in the consolidating scheme of a mutual fund, in consideration of the allotment to the unit holder of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund subject to the condition that the consolidation is of two or more schemes—
1. of an equity-oriented fund; or
2. of a fund other than equity-oriented fund;
of a capital asset by a unit holder, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, in consideration of the allotment to the unit holder of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund;
of a capital asset, being an interest in a joint venture, held by a public sector company, in exchange for shares of a company incorporated outside India by the government of a foreign State, as per the laws of that foreign State.

Withdrawal of exemption in certain cases

The profits or gains arising from the transfer of capital asset not charged under section 67 by virtue of section 70(1)(c) and (d) shall, irrespective of anything contained in the said clauses, be deemed to be income chargeable under the head “Capital gains” of the tax year in which such transfer took place, if at any time before the expiry of eight years from the date of such transfer—
1. the transferee company converts the capital asset into, or treats it as, stock-in-trade of its business; or
2. the parent company or its nominees or the holding company, ceases or cease to hold the whole of the share capital of the subsidiary company.
If any of the conditions laid down in section 70(zd) or (zf) are not complied with, the profits or gains arising from the transfer of such capital asset or intangible asset not charged under section 67 by virtue of such conditions shall be deemed to be the profits and gains chargeable to tax under the head “Capital gains” of the successor company for the tax year in which such conditions are not complied with.
If any of the conditions laid down in section 70(ze) are not complied with, the profits or gains arising from the transfer of such capital asset or intangible assets or share or shares not charged under section 67 by virtue of such conditions shall be deemed to be the profits and gains chargeable to tax under the head “Capital gains” of the successor limited liability partnership or the shareholder of the predecessor company, for the tax year in which such conditions are not complied with.

Mode of computation of capital gains

Income chargeable under the head “Capital gains” shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the following amounts:—
1. expenditure incurred wholly and exclusively in connection with such transfer; and
2. the cost of acquisition of the asset and the cost of any improvement thereto.
For the purposes of item B of the formula in section 197(3), the provisions of sub-section (1) shall have effect as if for the words “cost of acquisition” and “cost of any improvement”, the words “indexed cost of acquisition” and “indexed cost of any improvement” had respectively been substituted.
In computing the income chargeable under the head “Capital gains”, the following amounts shall not be allowed as a deduction:—
1. the interest claimed as deduction under section 22(1)(b) or under Chapter VIII;
2. any sum paid as securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004).
If a unit holder receives any amount from a business trust with respect to a unit that is not in the nature of income under Schedule V (Table: Sl. No. 3 or 4) and is not chargeable to tax under section 92(2)(k) or 223(2), then—
1. such amount shall be reduced from the cost of acquisition of such unit; and
2. if the transaction of transfer of a unit is not considered as transfer under section 70 and cost of acquisition of such unit is determined under section 73, the amount received with respect to such unit before as well as after such transaction, shall be reduced from the cost of acquisition.
In case of value of any money or capital asset received by a specified person from a specified entity, as referred to in section 67(10), the specified entity, in addition to deductions under sub-section (1), shall also be entitled to a deduction calculated in such manner, as may be prescribed for computing the amount chargeable to income-tax in its hands under that sub-section which is attributable to the transfer of such capital asset.
In the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company (other than equity shares referred to in section 198) shall be computed—
1. by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures; and
2. the capital gains so computed in such foreign currency shall be reconverted into Indian currency, so, however, that the said manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every re-investment thereafter in, and sale of, shares in, or debentures of, an Indian company.
In the case of an assessee who is a non-resident, any gains arising on account of appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of an Indian company held by the assessee, shall be ignored for computing the full value of consideration under this section.
For the purposes of this section,—
1. “Cost Inflation Index”, in relation to a tax year, means such Index as the Central Government may, having regard to 75% of average rise in the Consumer Price Index (urban) for the immediately preceding tax year to such tax year, by notification, specify, in this behalf;
2. “indexed cost of acquisition” means an amount which bears to the cost of acquisition, the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on 1st April, 2001, whichever is later;
3. “indexed cost of any improvement” means an amount which bears to the cost of improvement, the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place; and
4. the conversion of Indian currency into foreign currency and the reconversion of foreign currency into Indian currency shall be at such rate of exchange as may be prescribed in this behalf.

Cost with reference to certain modes of acquisition

For the purposes of the Table in sub-section (1), in respect of the entries against—
1. serial number 1, “previous owner of the property” for any capital asset owned by an assessee, means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in column B thereof;
2. serial numbers 11 and 12, “main portfolio”, “segregated portfolio” and “total portfolio” shall have the same meanings as respectively assigned to them in the Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/160, dated the 28th December, 2018, issued by the Securities and Exchange Board of India;
3. serial numbers 14 and 15, “net worth” means the total of the paid-up share capital and general reserves as appearing in the books of account of the demerged company immediately before the demerger;
4. serial numbers 2, 14 and 15, the provisions as contained therein, shall, as far as may be, also apply in relation to business reorganisation of a co-operative bank as referred to in section 64.

Special provision for computation of capital gains in case of depreciable assets.

Irrespective of anything contained in section 2(101), for a capital asset forming part of a block of assets on which depreciation has been allowed under the Indian Income-tax Act, 1922 (11 of 1922) or under the Income-tax Act, 1961 (43 of 1961) or under this Act, the provisions of sections 72 and 73 shall be subject to the provisions of sub-sections (2) and (3).
If, during the tax year, the full value of consideration received or accruing for the transfer of one or more assets in a block of assets exceeds the total of the following:—
1. expenditure incurred wholly and exclusively in connection with such transfer;
2. the written down value of the block of assets at the start of the tax year; and
3. the actual cost of any asset falling within the block of assets acquired during the tax year,
such excess shall be deemed to be capital gains arising from the transfer of short-term capital assets.
If any block of assets ceases to exist for the reason that all the assets in that block are transferred during the tax year, then—
1. the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the tax year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assessee during the tax year; and
2. the income received or accruing as a result of such transfer or transfers shall be deemed to be capital gains arising from the transfer of short-term capital assets.

Special provision for cost of acquisition in case of depreciable asset

If depreciation has been obtained under section 33(2) for a capital asset in any tax year, the provisions of sections 72 and 73 shall apply subject to the modification that the written down value, as defined in section 41, of the asset, as adjusted, shall be taken as the cost of acquisition of the asset.

Special provision for computation of capital gains in case of Market Linked Debenture.

Irrespective of anything contained in section 2(101) or section 72, the gains on the transfer or redemption or maturity, of a capital asset as mentioned in sub-section (2) shall be treated as short-term capital gains and shall be computed as per sub-section (3).
For the purposes of sub-section (1), the capital asset shall be—
1. a unit of a Specified Mutual Fund acquired on or after the 1st April, 2023 or a Market Linked Debenture; or
2. an unlisted bond or an unlisted debenture which is transferred or redeemed or matures on or after the 23rd July, 2024.
For the purposes of sub-section (1), the short-term capital gains shall be computed as per the following formula:—
X = A – B – C
where,—
- X = short-term capital gains;
- A = full value of consideration received or accruing as a result of the transfer or redemption or maturity of the debenture or unit or bond;
- B = the cost of acquisition of the debenture or unit or bond; and
- C = the expenditure incurred wholly and exclusively in connection with such transfer or redemption or maturity.
In computing capital gains under sub-section (3), no deduction shall be allowed for any sum paid as securities transaction tax as per Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004).
For the purposes of this section,—
1. “Market Linked Debenture” means a security, by whatever name called, which has an underlying principal component in the form of a debt security and where the returns are linked to market returns on other underlying securities or indices, and include any security classified or regulated as a market linked debenture by the Securities and Exchange Board of India;
2. “Specified Mutual Fund” means a Mutual Fund, by whatever name called, which invests more than 65% of its total proceeds in debt and money market instruments or a fund which invests 65% or more of its total proceeds in units of such Mutual Fund, subject to the following:—
  1. the percentage of investment in debt and money market instruments or in units of a fund shall be computed with reference to the annual average of the daily closing figures;
  2. “debt and money market instruments” shall include any securities, by whatever name called, classified or regulated as debt and money market instruments by the Securities and Exchange Board of India.

Special provision for computation of capital gains in case of slump sale

Any profits or gains arising from the slump sale effected in the tax year shall be chargeable to income-tax as long-term capital gains and shall be deemed to be the income of the tax year in which the transfer took place, subject to the provisions of sub-section (2).
The profits and gains arising from a slump sale involving the transfer of a capital asset, being one or more undertakings or divisions owned and held by an assessee for thirty-six months or less, immediately before the date of its transfer, shall be treated as short-term capital gains.
In relation to capital assets, being an undertaking or division transferred by way of slump sale,—
1. the “net worth” of the undertaking or division shall be deemed to be the cost of acquisition and the cost of improvement for sections 72 and 73; and
2. the fair market value of the capital assets on the date of transfer, calculated in such manner, as may be prescribed, shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.
Every assessee, in the case of a slump sale, shall furnish in the prescribed form a report of an accountant, before the specified date referred to in section 63, and the report shall—
1. include the computation of the net worth of the undertaking or division; and
2. certify that the net worth has been correctly arrived at as per the provisions of this section.
For the purposes of this section,—
1. the “net worth” shall be the “aggregate value of total assets” of the undertaking or division, as reduced by the value of its liabilities as appearing in the books of account, and for computing net worth, any change in the value of assets due to revaluation shall be ignored;
2. the “aggregate value of total assets” shall—
  1. for depreciable assets, be the written down value of the block of assets determined under section 41(1)(c);
  2. for capital asset being goodwill of a business or profession, which was not acquired by the assessee by purchase from a previous owner, be nil;
  3. for capital assets for which the entire expenditure has been allowed or is allowable as a deduction under section 46, be nil; and
  4. for other assets, be the book value.

Special provision for full value of consideration in certain cases.

If the consideration received or accruing from the transfer of a capital asset, being land or building or both, is less than the stamp duty value, then, for the purposes of section 72, the stamp duty value shall be deemed to be the full value of the consideration received or accruing as a result of such transfer, subject to the following:—
1. the stamp duty value on the date of agreement may be taken as the full value of consideration, if—
  1. the date of the agreement fixing the consideration and the date of registration for the transfer of the capital asset are not the same; and
  2. part or full consideration is received on or before the date of the agreement in “specified banking or online mode” as defined in section 66(32);
2. if the stamp duty value does not exceed 110% of the consideration received or accruing from such transfer, such consideration shall be deemed to be the full value of the consideration for section 72.
Without prejudice to the provisions of sub-section (1), the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer, and the provisions of section 269(3) to (8), shall, with necessary modifications, apply in relation to such reference, where—
1. the assessee claims that the stamp duty value exceeds the fair market value of the property as on the date of transfer; and
2. the stamp duty value has not been disputed in any appeal or revision or no reference has been made before any other authority, court or the High Court.
If the value determined by the Valuation Officer on a reference made under sub-section (2) exceeds the stamp duty value, such stamp duty value shall be taken as the full value of consideration.

Special provision for full value of consideration for transfer of share other than quoted share

If the consideration received or accruing from the transfer of a capital asset, being share of a company other than a quoted share, is less than the fair market value of such share determined in the manner as may be prescribed, the value so determined shall be deemed to be the full value of consideration received or accruing as a result of such transfer for the purposes of section 72.
The provisions of sub-section (1) shall not apply to any consideration received or accruing as a result of transfer by such class of persons and subject to such conditions, as may be prescribed.
For the purposes of this section, the expression “quoted share” means the share quoted on any recognised stock exchange with regularity from time to time, where the quotation of such share is based on current transaction made in the ordinary course of business.

Fair market value deemed to be full value of consideration in certain cases.

If the consideration received or accruing from the transfer of a capital asset is not ascertainable or cannot be determined, its fair market value on the date of transfer shall be deemed to be the full value of consideration received or accruing as a result of such transfer for the purposes of computing income under the head “Capital gains”.

Advance money received

Where any capital asset was, on any previous occasion, the subject of negotiations for its transfer, any advance or other money received and retained by the assessee in respect of such negotiations—
1. shall be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition;
2. shall not be deducted from the said cost, where such advance or other money has been included in the total income of the assessee for any tax year as per the provisions of section 92(2)(h) of this Act or section 56(2)(ix) of the Income-tax Act, 1961 (43 of 1961).

Profit on sale of property used for residence

Where an individual or Hindu undivided family—
1. has long-term capital gains arising from the transfer of a capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property” (original asset); and
2. has within one year before or two years after the date of such transfer purchased, or has within three years after that date constructed, one residential house in India (new asset),
then, instead of the capital gain being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—
1. if the capital gains exceeds the cost of the new asset, such excess shall be charged under section 67, and for computing capital gains arising from the transfer of the new asset within three years of its purchase or construction, the cost shall be nil; or
2. if the capital gains is equal to or less than the cost of the new asset, no capital gains shall be charged under section 67 and for computing capital gains from the transfer of the new asset within three years of its purchase or construction, the cost shall be reduced by the amount of the capital gains.
If the capital gains referred to in sub-section (1) is not used by the assessee to purchase the new asset within one year before the date of transfer of the original asset, or is not utilised for the purchase or construction of the new asset before filing the return of income under section 263, then—
1. the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;
2. such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and
3. the proof of deposit shall be submitted along with such return.
For the purposes of sub-section (1), the amount, already utilised for purchasing or constructing the new asset, together with the deposited amount under sub-section (2) shall, subject to sub-section (7), be deemed to be the cost of the new asset.
If the amount deposited under sub-section (2) is not fully utilised for purchasing or constructing the new asset within the period specified in sub-section (1), then—
1. the unutilised amount shall be charged to tax under section 67 as the income of the tax year in which the period of three years from the date of the transfer of the original asset expires; and
2. the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).
If the capital gains under sub-section (1) does not exceed two crore rupees, the assessee may, at his option, purchase or construct two residential houses in India, and where such option has been exercised,—
1. for the purposes of sub-section (1)(b), “one residential house in India” shall be read as “two residential houses in India”; and
2. for the purposes of sub-sections (1)(b) and (2), “new asset” shall mean two residential houses in India.
If during any tax year, the assessee has exercised the option mentioned in sub-section (5), he shall not be entitled to exercise such option for the same tax year or any other tax year.
If the cost of new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of sub-section (1).
If the capital gains on the transfer of original asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of sub-section (2).

Capital gains on transfer of land used for agricultural purposes not to be charged in certain cases.

Where an assessee, being an individual or a Hindu undivided family,—
1. has capital gains arising from the transfer of a capital asset, being land, which was used by the assessee or his parent, or the Hindu undivided family for agricultural purposes (original asset), in two years immediately preceding the date of transfer; and
2. has, within two years after that date, purchased any other land for being used for agricultural purposes (new asset),
then, instead of the capital gains being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—
1. if the capital gains exceed the cost of the new asset, such excess shall be charged under section 67, and for computing any capital gains arising from the transfer of the new asset within three years of its purchase, the cost shall be nil; or
2. if the capital gains is equal to or less than the cost of the new asset, no capital gains shall be charged under section 67, and for computing any capital gains arising from the transfer of the new asset within three years of its purchase, the cost shall be reduced by the amount of the capital gains.
If the capital gains referred to in sub-section (1) is not utilised by the assessee to purchase the new asset before filing the return of income under section 263, then—
1. the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;
2. such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and
3. the proof of deposit shall be submitted along with such return.
For the purposes of sub-section (1), the amount already utilised for purchasing the new asset together with the deposited amount under sub-section (2), shall be deemed to be the cost of the new asset.
If the amount deposited under sub-section (2) is not fully utilised for purchase of the new asset within the period specified in sub-section (1), then—
1. the unutilised amount shall be charged under section 67 as the income of the tax year in which two years from the date of the transfer of the original asset expires; and
2. the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).

Capital gains on compulsory acquisition of lands and buildings not to be charged in certain cases.

Where an assessee has—
1. capital gains arising from the transfer by way of compulsory acquisition under any law, of a capital asset being land or building or any right in land or building, forming part of an industrial undertaking belonging to him, which was being used by the assessee for the business of the said undertaking in the two years immediately preceding the date of transfer (original asset); and
2. within three years after that date, purchased any other land or building or any right in any other land or building or constructed any other building for shifting or re-establishing the said undertaking or setting up another industrial undertaking (new asset),
then, instead of the capital gain being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—
1. if the capital gains exceeds the cost of new asset, such excess shall be charged under section 67, and for computing any capital gains arising from the transfer of the new asset within three years of its purchase or construction, the cost shall be nil; or
2. if the capital gains is equal to or less than the cost of new asset, no capital gains shall be charged under section 67 and for computing capital gains from the transfer of the new asset within three years of its purchase or construction, the cost shall be reduced by the amount of the capital gains.
If the capital gains referred to in sub-section (1) is not utilised by the assessee to purchase the new asset before filing the return of income under section 263, then—
1. the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;
2. such deposit shall be made before the filing of the return not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and
3. the proof of deposit shall be submitted along with such return.
For the purposes of sub-section (1), the amount already utilised for purchasing or constructing the new asset together with the deposited amount under sub-section (2), shall be deemed to be the cost of the new asset.
If the amount deposited under sub-section (2) is not fully utilised for the purchase or construction of the new asset within the period specified in sub-section (1), then—
1. the unutilised amount shall be charged under section 67 as the income of the tax year in which three years from the date of the transfer of the original asset expires; and
2. the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).

Capital gains not to be charged on investment in certain bonds

Where an assessee has—
1. long-term capital gains arising from the transfer of land or building, or both, (original asset); and
2. within six months after the date of such transfer, invested whole or part of the capital gains in a long-term specified asset (new asset),
then, the capital gains shall be dealt with as follows:—
1. if the capital gains exceed the investment in the new asset, the amount of capital gains as exceeds such investment shall be charged under section 67; or
2. if the capital gains are equal to or less than the investment in the new asset, the whole of such capital gains shall not be charged under section 67.
For the purposes of sub-section (1), investment made in the long-term specified asset from capital gain arising from transfer of one or more original asset shall not exceed fifty lakh rupees,—
1. during any tax year; or
2. in the year of transfer of the original asset or assets and in the subsequent tax year.
If the new asset is transferred or converted (otherwise than by transfer) into money within five years of its acquisition, the capital gains not charged under section 67 as per sub-section (1), shall be deemed to be income chargeable as long-term capital gains in the tax year of its transfer or conversion.
Any loan or advance taken on the security of the new asset shall be deemed to have converted the new asset into money on the date of such loan or advance.
Where the investment in the new asset has been taken into account for sub-section (1), no deduction under section 123 for any tax year shall be allowed for such investment.
For the purposes of sub-section (1), “long-term specified asset” means any bond, redeemable after five years and issued on or after the 1st April 2018, by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 2013 (18 of 2013), or any other bond as may be notified by the Central Government for the purposes of this section.

Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house.

If an individual or a Hindu undivided family has—
1. capital gains arising from the transfer of any long-term capital asset, not being a residential house (original asset); and
2. within one year before, or two years after, the date of such transfer, purchased, or has within three years after that date constructed, one residential house in India (new asset),
then, the capital gains shall be dealt with as follows:—
1. if the net consideration is more than the cost of the new asset, so much of the capital gains as bears to the whole of the capital gains, the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 67; or
2. if the net consideration is equal to or less than the cost of the new asset, no capital gains shall be charged under section 67.
If the net consideration referred to in sub-section (1) is not utilised by the assessee to purchase the new asset within one year before the date of transfer of the original asset, or is not utilised for the purchase or construction of the new asset before filing the return of income under section 263, then—
1. the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;
2. such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263; and
3. the proof of deposit shall be submitted along with such return.
For the purposes of sub-section (1), the amount already utilised for purchasing or constructing the new asset together with the deposited amount under sub-section (2) shall, subject to sub-section (8), be deemed to be the cost of the new asset.
If the amount deposited under sub-section (2) is not wholly or partly utilised for purchasing or constructing the new asset within the period specified in sub-section (1), then—
1. the amount determined as per the following formula shall be charged under section 67 as income of the tax year in which three years from the date of the transfer of the original asset expires:—
  
  X – Y,
  
  where,—
  X = the capital gains not charged under section 67 as per sub-section (1).
  Y = the capital gains that would not have been charged under section 67, if the cost of the new asset had been taken to be the amount actually utilised for purchase or construction of the new asset;
2. the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).
The provisions of sub-section (1) shall not apply, if—
1. the assessee—
  1. owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or
  2. purchases any residential house, other than the new asset, within one year of transfer of the original asset; or
  3. constructs any residential house, other than the new asset, within three years of transfer of the original asset; and
2. the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.
If the assessee purchases, within two years after the date of transfer of the original asset, or constructs, within three years after such date, any residential house, the income from which is chargeable under the head “Income from house property”, other than the new asset, the capital gains not charged under section 67 on the basis of cost of such new asset as per sub-section (1), shall be charged as long-term capital gains of the tax year in which such residential house is purchased or constructed.
If the new asset is transferred within three years from the date of purchase or its construction, the capital gains not charged under section 67 on the basis of cost of such new asset as per sub-section (1) shall be charged as long-term capital gains of the tax year in which such new asset is transferred.
If the cost of the new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of sub-section (1).
If the net consideration on the transfer of original asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of sub-section (2).
For the purposes of this section, “net consideration” means the full value of the consideration received or accruing as a result of the transfer of the original asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.

Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area

If the assessee has—
1. capital gains arising from the transfer of capital asset, being machinery or plant or building or land or any rights in building or land used for the business of an industrial undertaking situated in an urban area, effected in the case of shifting of an industrial undertaking situated in an urban area (original asset) to any area [other than an urban area (new area)]; and
2. within one year before or three years after the date of such transfer—
  1. purchased new machinery or plant for business of the industrial undertaking in the new area;
  2. acquired building or land or constructed building for his business in the said area;
  3. shifted the original asset and transferred the establishment of such undertaking to such area; and
  4. incurred expenses on such other purpose as specified in a scheme notified by the Central Government for this section,
then, instead of the capital gains being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—
1. if the cost and expenses incurred on all or any of the purposes mentioned in sub-clauses (i) to (iv), referred to as “new asset”,—
  1. is less than the capital gains, the difference shall be charged under section 67 as the income of the tax year; or
  2. is equal to or more than the capital gain, no capital gain shall be charged under section 67.
2. for computing any capital gain arising from transfer of the new asset within three years of its being purchased, acquired, constructed or transferred, the cost shall be nil in case of sub-clause (A)(II) or shall be reduced by the amount of the capital gain in case of sub-clause (A)(I).
If the capital gain is not used by the assessee for the new asset within one year before the date of transfer of the original asset, or before filing the return of income under section 263, then—
1. the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;
2. such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and
3. the proof of deposit shall be submitted along with such return.
For the purposes of sub-section (1), the amount already utilised for purchasing or constructing the new asset together with the deposited amount under sub-section (2) shall be deemed to be the cost of the new asset.
If the amount deposited under sub-section (2) is not wholly or partly utilised for the new asset within the period specified in sub-section (1), then—
1. the unutilised amount shall be charged under section 67 as the income of the tax year in which the period of three years from the date of the transfer of the original asset expires; and
2. the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).
For the purposes of this section, the expression “urban area” means any area within the limits of a municipal corporation or municipality, declared to be an urban area by the Central Government for the purposes of this section, having regard to—
1. the population;
2. concentration of industries; and
3. need for proper planning of the area and other relevant factors.

Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone

Irrespective of anything contained in section 87, if the assessee has—
1. capital gains arising from the transfer of a capital asset, being machinery or plant or building or land or any rights in building or land used for the business of an industrial undertaking situated in an urban area, effected in the course of or in consequence of shifting of such industrial undertaking (original asset) to any Special Economic Zone in any urban or any other area; and
2. has within one year before or three years after the date of such transfer—
  1. purchased machinery or plant for the business of the industrial undertaking in such Special Economic Zone;
  2. acquired building or land or constructed building for his business in such Special Economic Zone;
  3. shifted the original asset and transferred the establishment of such undertaking to such Special Economic Zone; and
  4. incurred expenses on such other purposes specified by a scheme notified by the Central Government in this behalf,
then, instead of capital gain being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—
1. if the cost and expenses incurred on all or any of the purposes mentioned in sub-clauses (i) to (iv), referred to as “new asset”,—
  1. is less than the capital gains, the difference shall be charged under section 67 as the income of the tax year; or
  2. is equal to or more than the capital gains, no capital gain shall be charged under section 67.
2. for computing any capital gain arising from transfer of the new asset within three years of its being purchased, acquired, constructed or transferred, the cost shall be nil in case of sub-clause (A)(II), or shall be reduced by the amount of the capital gain in case of sub-clause (A)(I).
If the capital gain referred to in sub-section (1) is not utilised by the assessee for the new asset within one year before the transfer of the original asset, or before filing the return of income under section 263, then—
1. the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;
2. such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and
3. the proof of deposit shall be submitted along with such return.
For the purposes of sub-section (1), the amount already utilised for purchasing or constructing the new asset together with the deposited amount under sub-section (2) shall be deemed to be the cost of the new asset.
If the amount deposited under sub-section (2) is not wholly or partly utilised for the new asset within the period specified in sub-section (1), then—
1. the unutilised amount shall be charged under section 67 as the income of the tax year in which the period of three years from the date of the transfer of the original asset expires; and
2. the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).
For the purpose of this section, the expression “urban area” shall have the meaning assigned to it in section 87.

Extension of time for acquiring new asset or depositing or investing amount of capital gains

Irrespective of anything contained in sections 82, 83, 84, 85 and 86—
1. if the transfer of the original asset mentioned in those sections is by way of compulsory acquisition under any law; and
2. if the compensation awarded for such acquisition is not received by the assessee on the date of transfer, then, the period available to him under those sections for acquisition of the new asset or investment or deposit of capital gain in specified bank or institution shall be reckoned from the date of receipt of compensation.

Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”

For the purposes of sections 72 and 73, “cost of improvement”,—
1. in relation to a capital asset being goodwill or any intangible asset of a business, or a right to manufacture, produce or process any article or thing, or right to carry on any business or profession, or any other right, shall be taken to be nil; and
2. in relation to any other capital asset,—
  1. if the capital asset became the property of the previous owner or the assessee before the 1st April, 2001, means all expenditure of a capital nature incurred on or after the said date in making any additions or alterations to the capital asset by the previous owner or the assessee; and
  2. in any other case, means all expenditure of a capital nature incurred in making any additions or alterations to the capital asset by the assessee after it became his property, and, where the capital asset became the property of the assessee by any of the modes specified in section 73 (Table: Sl. No. 1), by the previous owner.
For the purposes of sub-section (1)(b), the cost of improvement does not include any expenditure which is deductible in computing the income chargeable under the head “Income from house property”, “Profits and gains of business or profession” or “Income from other sources”.
For the purposes of sections 72 and 73, “cost of acquisition” of a capital asset (being goodwill of a business or profession, or a trade mark or brand name associated with a business or profession, or any other intangible asset, or a right to manufacture, produce or process any article or thing, or a right to carry on any business or profession, or tenancy rights, or stage carriage permits, or loom hours, or any other right) means—
1. the purchase price, if acquisition of such asset by the assessee is by purchase from the previous owner; and
2. the purchase price for the previous owner, in the case covered in section 73 (Table: Sl. No. 1), where such asset was acquired by purchase by the previous owner as defined in sub-section (2) of the said section; and
3. nil, in any other case.
For the purposes of sub-section (3)(a) or (b), if—
1. the capital asset is goodwill of a business or profession; and
2. the assessee has obtained a deduction on account of depreciation under section 32(1) of the Income-tax Act, 1961 (43 of 1961) in a tax year preceding the tax year commencing on the 1st April, 2020,
then the total amount of depreciation obtained before the tax year commencing on the 1st April, 2020 shall be reduced from the amount of purchase price.
For the purposes of sections 72 and 73, and subject to the provisions of sub-section (9)(a) and (b), “cost of acquisition” shall be as per sub-section (6), in a case where, by virtue of holding a capital asset, being a share or any other security, within the meaning of section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (herein referred to as the financial asset), the assessee—
1. becomes entitled to subscribe to any additional financial asset; or
2. is allotted any additional financial asset without any payment.
In a case referred to in sub-section (5), “cost of acquisition”, in relation to—
1. the original financial asset, on the basis of which the assessee becomes entitled to any additional financial asset, means the amount actually paid for acquiring the original financial asset;
2. any right to renounce the said entitlement to subscribe to the financial asset, when such right is renounced by the assessee in favour of any person, shall be taken to be nil in the case of such assessee;
3. the financial asset, to which the assessee has subscribed on the basis of the said entitlement, means the amount actually paid by him for acquiring such asset;
4. the financial asset allotted to the assessee without any payment and on the basis of holding of any other financial asset, shall be taken to be nil; and
5. any financial asset purchased by any person in whose favour the right to subscribe to such asset has been renounced, means the total amount of the purchase price paid by him to the person renouncing such right and the amount paid by him to the company or institution, for acquiring such financial asset.
For the purposes of sections 72 and 73, “cost of acquisition”, subject to sub-section (9)(a) and (b), in relation to a long-term capital asset, being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust referred to in section 198, acquired before the 1st February, 2018, shall be higher of—
1. the cost of acquisition of such asset; and
2. lower of—
  1. the fair market value of such asset; and
  2. the full value of consideration received or accruing as a result of the transfer of the capital asset.
For the purposes of sub-section (7),—
1. “Cost Inflation Index” shall have the meaning assigned to it in section 72(8)(a);
2. “fair market value” means,—
  1. in a case where the capital asset is listed on any recognised stock exchange as on the 31st January, 2018, the highest price of the capital asset quoted on such exchange on that date;
  2. in a case where there is no trading in such asset on such exchange on the 31st January, 2018, the highest price of such asset on such exchange on a date immediately preceding the 31st January, 2018 when such asset was traded on such exchange shall be the fair market value;
  3. if the capital asset is a unit which is not listed on a recognised stock exchange as on the 31st January, 2018, the net asset value of such unit as on that date;
  4. if the capital asset is an equity share in a company which is—
    1. not listed on a recognised stock exchange as on the 31st January, 2018 but listed on such exchange on the date of transfer;
    2. not listed on a recognised stock exchange as on the 31st January, 2018, or which became the property of the assessee in consideration of share which is not listed on such exchange as on the 31st January, 2018 by way of transaction not regarded as transfer mentioned in section 70, but listed on such exchange subsequent to the date of transfer (where such transfer is in respect of sale of unlisted equity shares under an offer for sale to the public included in an initial public offer);
    3. listed on a recognised stock exchange on the date of transfer and which became the property of the assessee in consideration of share which is not listed on such exchange as on the 31st January, 2018 by way of transaction not regarded as transfer mentioned in section 70,
    an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the tax year 2017-18 bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st April, 2001, whichever is later.
For the purposes of sections 72 and 73, cost of acquisition in relation to any other capital asset,—
1. if the capital asset became the property of the assessee before the 1st April, 2001, subject to sub-section (10), shall be the cost of acquisition of the asset to the assessee or its fair market value on the 1st April, 2001, at the option of the assessee;
2. if the capital asset became the property of the assessee by any of the modes specified in section 73 (Table: Sl. No. 1), and the capital asset became the property of the previous owner before the 1st April, 2001, subject to sub-section (10), shall be the cost of the capital asset to the previous owner or its fair market value on the 1st April, 2001, at the option of the assessee;
3. if the capital asset became the property of the assessee on the distribution of the capital assets of a company on its liquidation and the assessee has been assessed to income-tax under the head “Capital gains” in respect of that asset under section 68, means the fair market value of the asset on the date of distribution;
4. if the capital asset, being a share or a stock of a company, became the property of the assessee on—
  1. the consolidation and division of all or any of the share capital of the company into shares of larger amount than its existing shares; or
  2. the conversion of any shares of the company into stock; or
  3. the re-conversion of any stock of the company into shares; or
  4. the sub-division of any of the shares of the company into shares of smaller amount; or
  5. the conversion of one kind of shares of the company into another kind,
  means the cost of acquisition of the asset calculated with reference to the cost of acquisition of the shares or stock from which such asset is derived.
In case of a capital asset referred to in sub-section (9)(a) and (b), being land or building, or both, the fair market value of such asset on the 1st April, 2001 for the said sub-section (9)(a) and (b) shall not exceed the stamp duty value, wherever available, of such asset as on the 1st April, 2001.
If the cost for which the previous owner acquired the property cannot be ascertained, the cost of acquisition to the previous owner shall be the fair market value on the date on which the capital asset became the property of the previous owner.
For the purposes of sections 72 and 73, cost of acquisition in relation to a capital asset—
1. being equity share or shares allotted to a shareholder of a recognised stock exchange in India under a scheme for demutualisation or corporatisation approved by the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), shall be the cost of acquisition of his original membership of the exchange;
2. being trading or clearing rights of the recognised stock exchange acquired by a shareholder who has been allotted equity share or shares under such scheme of demutualisation or corporatisation, shall be deemed to be nil.

Reference to Valuation Officer

For ascertaining the fair market value of a capital asset for this Chapter, the Assessing Officer may refer the valuation of the capital asset to a Valuation Officer,—
1. if the value of the asset claimed by the assessee is as per the estimate by a registered valuer, but the Assessing Officer is of the opinion that the value so claimed is at variance with its fair market value;
2. in any other case, if the Assessing Officer is of the opinion that—
  1. the fair market value of the asset exceeds the value claimed by the assessee by more than the percentage of value of such asset or amount, as may be prescribed; or
  2. having regard to the nature of the asset and other relevant circumstances, it is necessary so to do.
The provisions of section 269(3) to (8) shall, with necessary modifications, apply in relation to such reference made under sub-section (1).

Income from other sources

Income of every kind which is not to be excluded from the total income under this Act, shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 13(a) to (d).
In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income-tax under the head “Income from other sources”:—
1. any dividend;
2. any winning from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature;
3. any sum received by the assessee from employees as contributions to any provident fund, superannuation fund, any fund set up under the Employees’ State Insurance Act, 1948 (34 of 1948), or any other fund for the welfare of such employees, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession”;
4. any sum received under a Keyman insurance policy, as defined in Schedule II (Note 1) including the bonus allocated on such policy, if such income is not chargeable to income-tax under the head “Profits and gains of business or profession” or under the head “Salaries”;
5. any income by way of interest on securities, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession”;
6. any income from machinery, plant or furniture belonging to the assessee and let on hire, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession”;
7. any income from letting on hire of machinery, plant or furniture, belonging to the assessee and also buildings, where the letting of the buildings is inseparable from the letting of such machinery, plant or furniture, if the income is not chargeable to income-tax under the head “Profits and gains of business or profession”;
8. any sum of money received as an advance or otherwise during negotiations for the transfer of a capital asset, if—
  1. such sum is forfeited; and
  2. the negotiations do not result in transfer of such capital asset;
9. any income by way of interest received on compensation or on enhanced compensation referred to in section 278(1);
10. any compensation or other payment, due to or received by any person, by whatever name called, in connection with the termination of his employment, or the modification of its terms and conditions;
11. any specified sum received by a unit holder from a business trust during the tax year with respect to a unit held by him at any time during such tax year, the computation of which shall be—
  specified sum = A – B – C (which shall be deemed to be zero, if the sum of B and C is greater than A), where—
  A = aggregate of the sum distributed by the business trust with respect to such unit, during the tax year or during any earlier tax year or years, to such unit holder, who holds such unit on the date of distribution of sum or to any other unit holder who held such unit at any time prior to the date of such distribution, which is—
  1. not in the nature of income referred to in Schedule V (Table: Sl. No. 3 or 4); and
  2. not chargeable to tax under section 223(2);
  B = amount at which such unit was issued by the business trust;
  C = amount charged to tax under this clause in any earlier tax year.
12. where any sum, including bonus allocated, is received, during a tax year, under a life insurance policy, other than—
  1. sums received under a unit linked insurance policy; or
  2. income referred to in clause (d),
  and such sum is not to be excluded from the total income of that tax year under Schedule II (Table: Sl. No. 2), the sum exceeding the aggregate of the premium paid, during the term of such life insurance policy, and not claimed as a deduction under this Act, computed in such manner, as may be prescribed;
13. where any person receives in any tax year, from any person or persons—
  1. any sum of money without consideration, the total of which exceeds ₹50,000, the whole of such sum;
  2. any immovable property—
    1. without consideration, the stamp duty value of which exceeds ₹50,000, the stamp duty value of such property;
    2. for a consideration, the stamp duty value of such property that exceeds such consideration, if this excess amount is more than the higher of the following amounts:—
      1. ₹50,000; or
      2. 10% of the consideration.
  3. any property, other than immovable property,—
    1. without consideration, the aggregate fair market value of which exceeds ₹50,000, the whole of the aggregate fair market value of such property;
    2. for a consideration which is less than the aggregate fair market value of the property by an amount exceeding ₹50,000, the aggregate fair market value of such property as exceeds such consideration.
The provisions of sub-section (2)(m) shall not apply to any sum of money or any property received—
1. from any relative; or
2. on the occasion of marriage of the individual; or
3. under a will or by way of inheritance; or
4. in contemplation of death of the payer or donor; or
5. from any local authority as defined in Schedule III (Note 6); or
6. from or by any registered non-profit organisation as defined in section 355(g), except when received by any person referred to in section 355(h); or
7. by way of a transaction not regarded as transfer under section 70(1)(a), (c), (d), (e), (f), (g), (i), (j), (k), (l), (n), (o), (t), (u), (v) or (w); or
8. from an individual by a trust created or established solely for the benefit of relative of the individual; or
9. from such class of persons and subject to such conditions, as may be prescribed.
For the purposes of sub-section (2)(m)(ii),—
1. if the date of agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of agreement shall apply, provided the consideration, in whole or in part, has been paid in specified banking or online mode as defined in section 66(32) on or before the date of agreement for transfer of such immovable property;
2. if the stamp duty value of immovable property is disputed by the assessee on the grounds mentioned in section 78(2), the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of sections 78(2) and 288(1) (Table: Sl. No. 8) shall, as far as may be, apply to the stamp duty value of such property as they apply for valuation of capital asset under those sections.
For the purposes of this section,—
1. “assessable” shall have the meaning assigned to it in section 2(105);
2. “card game and other game of any sort” includes any game show, an entertainment programme on television or electronic mode, where people compete to win prizes or any similar game;
3. “fair market value” of a property, other than an immovable property, means the value determined by such method as may be prescribed;
4. “jewellery” shall have the meaning assigned to it in section 2(22);
5. “lottery” includes winnings from prizes awarded by draw of lots, by chance, or in any other manner under any scheme or arrangement by whatever name called;
6. “property” means the following capital asset of the assessee:—
  1. immovable property being land or building or both;
  2. shares and securities;
  3. jewellery;
  4. archaeological collections;
  5. drawings;
  6. paintings;
  7. sculptures;
  8. any work of art;
  9. bullion; or
  10. virtual digital asset.
7. “relative” means—
  1. in case of an individual—
    1. spouse;
    2. brother or sister;
    3. brother or sister of the spouse;
    4. brother or sister of either of the parents;
    5. any lineal ascendant (maternal as well as paternal) or descendant;
    6. any lineal ascendant (maternal as well as paternal) or descendant of the spouse;
    7. spouse of the person referred to in items (B) to (F); and
  2. for a Hindu undivided family, any member thereof.
8. “unit linked insurance policy” shall have the meaning assigned to it in Schedule II (Note 1).

Deductions

The income chargeable under the head “Income from other sources” shall be computed after making the following deductions:—
1. for interest on securities, any reasonable sum paid as commission or remuneration to a banker or any other person for the purpose of realising such interest on behalf of the assessee;
2. for income of the nature referred to in section 92(2)(c), so far as may be, an amount as per section 29(1)(e);
3. for income of the nature referred to in section 92(2)(f) and (g), so far as may be, an amount as per section 28(1)(a), (b), (d), section 33, and subject to the provisions of section 28(2);
4. for income in the nature of family pension (a regular monthly amount payable by the employer to a family member of an employee upon the death of such employee),—
  1. an amount equal to one-third of such income or ₹25,000, whichever is less, where income-tax is computed under section 202(1); and
  2. an amount equal to one-third of such income or ₹15,000, whichever is less, in any other case.
5. any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for making or earning such income;
6. for income of the nature referred to in section 92(2)(i), an amount equal to 50% of such income and no other deduction shall be allowed under this section;
7. for income in the nature of commutation of pension received from a fund as specified in Schedule VII (Table: Sl. No. 3), the entire amount;
8. for income in the nature of gratuity as referred in section 19(2)(g), received on the death of the employee, the entire amount.

Amounts not deductible

Irrespective of anything contained in section 93, the following amounts shall not be deductible in computing the income of any assessee chargeable under the head “Income from other sources”:—
1. any personal expenses of the assessee; or
2. any interest chargeable under this Act, payable outside India, on which tax has not been paid or deducted under Chapter XIX-B; or
3. any payment chargeable under the head “Salaries”, if it is payable outside India, unless tax has been paid or deducted under Chapter XIX-B.
The provisions of sections 29, 35(b)(i), and 36 shall apply in computing the income chargeable under the head “Income from other sources” as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.
For an assessee, being a foreign company, the provisions of section 59 shall apply in computing the income chargeable under the head “Income from other sources”, as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.
In computing the income from winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort, or from gambling or betting of any form or nature, no deduction for any expenditure or allowance related to such income shall be allowed under this Act.
Sub-section (4) shall not apply in computing the income of an assessee, being the owner of horses maintained for running in horse races, from the activity of owning and maintaining such horses.
For the purposes of this section, the expression “horse race” means a horse race upon which wagering or betting may be lawfully made.

Profits chargeable to tax

The provisions of section 38(1), (2), (3) and (4) shall apply in computing the income of an assessee under section 92, as they apply in computing the income of an assessee under the head “Profits and gains of business or profession”.

ITA Chapter 4 P4

Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents.

Maintenance of books of account

Tax audit

Special provision for computing deductions in case of business reorganisation of co-operative banks.

Interpretation for purposes of section 64

Interpretation

Capital gains.

Capital gains on distribution of assets by companies in liquidation.

Capital gains on purchase by company of its own shares or other specified securities.

Transactions not regarded as transfer

Withdrawal of exemption in certain cases

Mode of computation of capital gains

Cost with reference to certain modes of acquisition

Special provision for computation of capital gains in case of depreciable assets.

Special provision for cost of acquisition in case of depreciable asset

Special provision for computation of capital gains in case of Market Linked Debenture.

Special provision for computation of capital gains in case of slump sale

Special provision for full value of consideration in certain cases.

Special provision for full value of consideration for transfer of share other than quoted share

Fair market value deemed to be full value of consideration in certain cases.

Advance money received

Profit on sale of property used for residence

Capital gains on transfer of land used for agricultural purposes not to be charged in certain cases.

Capital gains on compulsory acquisition of lands and buildings not to be charged in certain cases.

Capital gains not to be charged on investment in certain bonds

Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house.

Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area

Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone

Extension of time for acquiring new asset or depositing or investing amount of capital gains

Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”

Reference to Valuation Officer

Income from other sources

Deductions

Amounts not deductible

Profits chargeable to tax

start business

COMPLIANCE

other services

ITA Chapter 4 P4

Special provision for computation of income on presumptive basis in respect of certain business activities of certain non-residents.

Maintenance of books of account

Tax audit

Special provision for computing deductions in case of business reorganisation of co-operative banks.

Interpretation for purposes of section 64

Interpretation

Capital gains.

Capital gains on distribution of assets by companies in liquidation.

Capital gains on purchase by company of its own shares or other specified securities.

Transactions not regarded as transfer

Withdrawal of exemption in certain cases

Mode of computation of capital gains

Cost with reference to certain modes of acquisition

Special provision for computation of capital gains in case of depreciable assets.

Special provision for cost of acquisition in case of depreciable asset

Special provision for computation of capital gains in case of Market Linked Debenture.

Special provision for computation of capital gains in case of slump sale

Special provision for full value of consideration in certain cases.

Special provision for full value of consideration for transfer of share other than quoted share

Fair market value deemed to be full value of consideration in certain cases.

Advance money received

Profit on sale of property used for residence

Capital gains on transfer of land used for agricultural purposes not to be charged in certain cases.

Capital gains on compulsory acquisition of lands and buildings not to be charged in certain cases.

Capital gains not to be charged on investment in certain bonds

Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house.

Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area

Exemption of capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any Special Economic Zone

Extension of time for acquiring new asset or depositing or investing amount of capital gains

Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”

Reference to Valuation Officer

Income from other sources

Deductions

Amounts not deductible

Profits chargeable to tax

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