Objectives & Agenda : To analyse and interpret the provisions of the Income-tax Act relating to computation and chargeability of Capital Gains. In this Webinar, we will discuss the basics of Capital Gains starting from the Charging Provision. We will understand the meaning of capital asset, meaning of transfer, the types of capital gains, how to compute capital gains and how it arises in specified cases. Finally, the Webinar will touch upon relevant Judicial Precedents.

1. Understanding Income-tax –
Capital Gains – Part I
CA. Divakar Vijayasarathy

2. Credits and Acknowledgments
V Thirumal
CA Jugal Gala

3. Legends used in the Presentation
AOP Association of Person
BOI Body of Individuals
CII Cost Inflation Index
ESOP Employees Stock Option Plan
FII Foreign Institutional Investors
GDR Global Depository Receipts
HUF Hindu Undivided Family
JDA Joint Development Agreement
IFSC International Financial Services Centre
PY Previous Year
RBI Reserve Bank of India
RDB Rupee Denominated Bond
REIT Real Estate Investment Trust
SEBI Securities Exchange Board of India
TT Telegraphic Transfer

4. Presentation Schema
Charging Section
Meaning of Capital
Asset
Types of Capital
Assets
Short-term Capital
Asset – Sec 2(42A)
Period of Holding in
Certain Cases –
Explanation 1 to Sec
2(42A)
Long Term Capital
Asset - Sec 2(29A)
Types of Capital
Gains
Transfer – Sec 2(47)
Mode of
Computation – Sec
48
Cost of
Improvement and
Cost of Acquisition –
Sec 55
Indexed Cost of
Improvement and
Acquisition – (iii) and (iv) of
Explanation to Sec 48
Capital Gains in
Specific Cases - Sec
45(1A) to Sec 45(6)

5. Sections Covered
Sec Description
Basics
2(14) Definition of Capital Asset
2(29A) Definition of Long-term Capital Asset
2(29B) Definition of Long-term Capital Gain
2(42A) Definition of Short-term Capital Asset
2(42B) Definition of Short-term Capital Gain
45 Charging Section
48 Mode of computation
55 Meaning of "cost of improvement" and "cost of acquisition"
(iii) and (iv) of Explanation to Sec 48 Indexed Cost of Acquisition and Improvement
Rates of Taxation
111A Taxation of Short Term Capital Gains
112 Taxation of Long Term Capital Gains
Capital Gains in Specific Cases
45(1A) Insurance Compensation on Destruction of Capital Assets
45(2) Conversion of Capital Asset into Stock-in-trade
45(3) and 45(4) Transfer of Capital Assets from Partner/Member to Firm/AOP/BOI and vice versa
45(5) Compulsory Acquisition of Capital Asset
45(5A) Taxation of Joint Development Agreements
45(6) Capital Gains on Repurchase of Units mentioned in Sec 80CCB

6. Basics

7. Charging Section – Sec 45(1)
There must be a capital asset
Such capital asset must be transferred
Such transfer should have happened during the PY
Such transfer shall not be exempted under Sec 54 to 54GB
Receipt of consideration by the assessee is not a pre-condition for charging capital gains to taxation
Whether an asset is a capital asset or not, shall be seen on the date of transfer and not on date of acquisition

8. Capital Asset – Sec 2(14)
Any property of any kind – whether or not
connected to business or profession
Any securities held by Foreign Institutional
Investors (FII) in accordance with SEBI regulations
Excludes
Stock in trade (other than
securities of FII), consumable
stores or raw materials held
for the purposes of his
business or profession
Personal Effects - movable property
(including wearing apparel and
furniture) held for personal use
Exclusions
- Jewellery
- archaeological collections
- drawings
- paintings
- Sculptures or
- any work of art.
Agricultural Land
in India
• Gold Bonds,
• Special Bearer bonds and
• Gold Deposit Bonds
Issued by the Central Govt
means
"property" includes and shall be deemed to have always included any rights in or in relation to
an Indian company, including rights of management or control or any other rights whatsoever
the Distance from municipal/
cantonment/notified area limits Population
Within 2 kms 10,001 to 1,00,000
Within 6 kms 1,00,001 to 10,00,000
Within 8 kms 10,00,001 and more
Not being a land situated in
jurisdiction of a municipality or a cantonment
board having population of 10,000 or more
or, when measured aerially

9. Relevant Definitions Jewellery
• ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals,
whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;
• precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel
Foreign Institutional Investor (FII)
such investor specified by Central Govt., through notification in Official Gazette
Population
population according to the last preceding census of which the relevant figures have been published before the 1st day of the PY
Securities
• shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature
in or of any incorporated company or other body corporate
• derivative
• units or any other instrument issued by any collective investment scheme to the investors in such schemes
• receipt or other security, issued by a securitisation company or reconstruction company to any qualified
institutional buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of
an undivided right, title or interest in the financial asset involved in securitisation
• units or any other such instrument issued to the investors under any mutual fund scheme
• Government securities
• such other instruments as may be declared by the Central Government to be securities and
• rights or interest in securities
means
shall mean
shall include
includes

10. Types of Capital Asset
Types of Capital Assets
Short-term Capital Asset [Sec 2(42A)] Long-term Capital Asset [Sec 2(29A)]

11. Short-term Capital Asset – Sec 2(42A)
List of Assets When short term capital asset
• Listed securities (other than units)
• Listed shares
• Units of equity-oriented fund
• Unit of the Unit Trust of India
• Zero Coupon Bonds
Held for 1 day to 12 months
• Unlisted share of a company
• Land
• Building
• Land and Building
Held for 1 day to 24 months
Any other asset Held for 1 day to 36 months
Date of sale shall not be included as part of the period of holding of the asset

12. Relevant Definitions
Equity oriented fund means a fund—
(i) where the investible funds are invested by way of equity shares in domestic companies
to the extent of more than sixty-five per cent of the total proceeds of such fund; and
(ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D):
Provided that the percentage of equity share holding of the fund shall be computed with
reference to the annual average of the monthly averages of the opening and closing
figures
Zero coupon bond means a bond —
(a) issued by any infrastructure capital company or infrastructure capital fund or public sector company or
scheduled bank on or after the 1st day of June, 2005;
(b) in respect of which no payment and benefit is received or receivable before maturity or redemption
from infrastructure capital company or infrastructure capital fund or public sector company or scheduled
bank; and
(c) which the Central Government may, by notification in the Official Gazette, specify in this behalf.

13. Period of Holding in Certain Cases – Explanation 1
to Sec 2(42A) In determining the period for which any capital asset is held by the assessee:
Situation Capital asset Remarks
Liquidation Share held in a company in liquidation
Exclude the period subsequent to the date
on which the company goes into liquidation
Distribution of assets on partition of HUF,
Gift, will, inheritance, transfer under
revocable or irrevocable trust, etc.
Capital asset which becomes the property of
the assessee in the circumstances
mentioned in Section 49(1) and where the
cost of acquisition of asset is deemed to be
the cost at which previous owner acquired
the property including the cost of
improvement incurred by previous owner
Include the period for which the asset was
held by the previous owner of the property.
Note: "Previous owner of the property" in
relation to 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
Explanation to Section 49(1).
Amalgamation
Shares in an Indian company, which becomes
the property of the assessee during the
course of amalgamation referred to in
Section 47(vii)
Include the period for which the share or
shares in the amalgamating company were
held by the assessee.
Rights issue
Share or any other security (i.e. a financial
asset) subscribed to by the assessee on the
basis of his right to subscribe to such
financial asset or subscribed to by the person
in whose favour the assessee has renounced
his right to subscribe to such financial asset.
Period shall be reckoned from the date of
allotment of such financial asset (rights
instrument).

14. Contd.
Right to subscribe
Right to subscribe to any financial asset, which is
renounced in favour of any other person
Period shall be reckoned from the date of the offer of
such right by the company or institution, as the case
may be, making such offer
Bonus issue
A financial asset, allotted without any payment and on
the basis of holding of any other financial asset
Period shall be reckoned from the date of the
allotment of such financial asset
Demerger
Shares in an Indian company, which becomes the
property of the assessee in consideration of a demerger
Include the period for which the shares held in the
demerged company were held by the assessee
Corporatisation or
demutualisation as
specified under Section
47(xiii)
Trading or clearing rights of a recognised stock exchange
in India Include the period for which the person was a
member of the recognised stock exchange in India
immediately prior to such demutualisation or
corporatization
Equity shares in a company allotted pursuant to
demutualisation or corporatisation of a recognised stock
exchange in India
ESOP issue
Specified security or sweat equity shares allotted or
transferred, directly or indirectly, by the employer free of
cost or at concessional rate to his employees (including
former employee or employees)
Period shall be reckoned from the date of allotment
or transfer of such specified security or sweat equity
shares
Formation of Business
Trust (REITs, etc.)
Unit of a business trust, allotted pursuant to transfer of
shares as referred to Section 47(xvii)
Include the period for which the shares were held by
the assessee

15. Consolidating schemes of a
Mutual Fund
Units, which becomes the property of the
assessee in consideration of a transfer referred to
in Section 47(xviii) and Section 47 (xix)
Include the period for which the units in the consolidating
scheme of the mutual fund were held by the assessee
Redemption of GDR
Shares of a company, which is acquired by the
non-resident assessee on redemption of Global
Depository Receipts (GDR) referred to in Section
115AC (1)(b)
Period shall be reckoned from the date on which a request
for such redemption was made.
Conversion of instruments –
Rule 8AA
Share or debenture of a company, which becomes
the property of the assessee in the circumstances
mentioned in Section 47(x)
Include the period for which the bond, debenture,
debenture-stock or deposit certificate, as the case may be,
was held by the assessee prior to the conversion
Conversion of preference
shares to equity shares
Equity shares in a company, which becomes the
property of the assessee in consideration of a
transfer referred to in clause (xb) of Section 47
Include period for which preference shares were held by
the assessee
Asset declared under
Income Declaration
Scheme, 2016 –
Rule 8AA
Immovable property
Period shall be reckoned from the date on which such
property is acquired if the date of acquisition is evidenced
by a deed registered with any authority of a State
Government
Any other asset
Period of holding shall be reckoned from the 1st day of
June, 2016
Contd.

16. shall mean the securities as defined above, and where employees' stock option has been granted
under any plan or scheme thereof, including the securities offered under such plan or scheme
Specified
security
Sweat equity
shares
means equity shares issued by a company to its employees or directors at a discount or for
consideration other than cash for providing know-how or making available rights in the nature of
intellectual property rights or value additions, by whatever name called
means an Infrastructure Investment Trust (InvIT) or Real Estate Investment Trust
(REIT) incorporated under the regulations of SEBI and the units of which are
required to be listed on recognised stock exchange
Business
Trust
Relevant Definitions
means the succession of a recognised stock exchange, being a body of individuals or a society registered
under the Societies Registration Act, 1860 (21 of 1860), by another stock exchange, being a company
incorporated for the purpose of assisting, regulating or controlling the business of buying, selling or
dealing in securities carried on by such individuals or society.
means the segregation of ownership and management from the trading rights of the members of a
recognised stock exchange in accordance with a scheme approved by the SEBI
Corporatisation
Demutualisation

17. Long Term Capital Asset - Sec 2(29A)
Long-term capital asset means a capital asset which is not a short-term capital asset
List of Assets When long term capital asset
• Listed securities (other than units)
• Listed shares
• Units of equity-oriented fund
• Unit of the Unit Trust of India
• Zero Coupon Bonds
Held for more than 12 months
• Unlisted share of a company
• Land
• Building
• Land and Building
Held for more than 24 months
- Any other asset Held for more than 36 months

18. Types of Capital Gains
Short term capital gains Long term capital gains
Section 2(42B) Section 2(29B)
"Short-term capital gain" means capital gain arising
from the transfer of a short-term capital asset
"Long-term capital gain" means capital gain arising
from the transfer of a long-term capital asset

19. Transfer – Sec 2(47)
"transfer", in relation to a capital asset, includes,
the sale, exchange or relinquishment of the asset
the extinguishment of any rights therein
the compulsory acquisition thereof under any law
in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a
business carried on by him, such conversion or treatment
the maturity or redemption of a zero coupon bond
any transaction involving the allowing of the possession of any immovable property to be taken or retained in part
performance of a contract of the nature referred to in Sec 53A of the Transfer of Property Act, 1882
any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company
or other association of persons or by way of any agreement or any arrangement or in any other manner
whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property
• "transfer" includes and shall be deemed to have always included disposing of or parting with an asset or
any interest therein, or creating any interest in any asset
• in any manner whatsoever, directly or indirectly, absolutely or conditionally, voluntarily or involuntarily, by
way of an agreement (whether entered into in India or outside India) or otherwise,
• notwithstanding that such transfer of rights has been characterised as being effected or dependent upon or
flowing from the transfer of a share or shares of a company registered or incorporated outside India

20. Contd.
(i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred
together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also.
Land, building, part of a building, machinery, plant, furniture, fittings and other things also include any rights therein.
(ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant,
furniture, fittings or other things therein) which has been constructed or which is to be constructed, accruing or arising from any
transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association
of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or
lease of such land, building or part of a building
• Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf
from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and
• the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the
transferee, being already in possession, continues in possession in part performance of the contract and has done some act
in furtherance of the contract, and
• the transferee has performed or is willing to perform his part of the contract, then,
• notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an
instrument of transfer, that the transfer has not been completed in the manner prescribed thereof by the law for the time
being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee
and persons claiming under him any right in respect of the property of which the transferee has taken or continued in
possession, other than a right expressly provided by the terms of the contract
• However, nothing in this Section shall affect the rights of a transferee for consideration who has no notice of the contract or
of the part performance thereof.
Immovable Property means
Part performance of a contract under Section 53A of Transfer of Property Act 1882

21. Mode of Computation – Sec 48
Particulars Amount
Full Value of Consideration received/receivable *****
Less: Expenses on transfer *****
Net Sale Consideration (A) *****
Less: Cost/Indexed cost of acquisition *****
Cost/Indexed cost of improvement *****
Total cost (B) ****
Short Term/Long Term Capital Gain/Loss (A-B) ****
Less: Exemption under Section 54 to 54G & Section 10 Series *****
Taxable Capital gains *****
This section provides the computational mechanism to compute income under the head capital gains
Indexed cost of acquisition and indexed cost of improvement are applicable only in the case of long-term capital assets
• As per Section 47(iii), any transfer of capital asset under a gift, will or irrevocable trust shall be exempt except for transfer of
shares, debentures or warrants under a gift or irrevocable trust, which were allotted by company to its employees under
Employees Stock Options Plan (ESOPs) or Employee Stock Options Scheme (ESOSs).
• As per 6th proviso to Section 48, on transfer of such unexempted shares, debentures or warrants, for the purpose of calculating
capital gains, the full value of consideration shall be the market value

22. Contd. Full Value of Consideration
• Full value of consideration means the consideration received or entitled to be received by the transferor
towards the transfer of the capital asset.
• It may not always be similar to market value of the asset on the date of transfer.
• The legislation has used the expression full value of consideration instead of merely saying consideration
because the transfer for the purpose of Section 45(1) includes not merely sale, but also other modes of transfer
such as exchange, relinquishment of the asset, extinguishment of rights in the capital asset, etc.
• In a case of transfer, where the consideration is not in money, the value placed by the parties in the transaction
will have to be taken as the consideration.
Any expenditure incurred wholly and exclusively in connection with the transfer
shall be allowed as deduction in computing the taxable capital gains of an assessee.
The most common illustrative list of expenses on transfer includes: Brokerage, Legal fees and Commission
Expenses on transfer
Cost of Acquisition
• Cost of acquisition refers to the price paid by the assessee to acquire capital asset
• Cost shall include all expenses incurred directly or indirectly to acquire a capital asset
Cost of Improvement
Any capital expenditure incurred in making additions or alterations to the capital asset shall be treated as improvement cost
Securities Transaction Tax (STT) paid will not be allowed as deduction as expenses on transfer while calculating capital gains

23. Cost of Improvement and Cost of Acquisition – Sec 55
Cost of improvement for any capital asset (excluding intangible assets) Cost of improvement
The capital asset is acquired by assessee or previous owner, on or before
01.04.2001
Expenditure incurred after 01.04.2001 will
only be considered. Improvement cost
incurred prior to 01.04.2001 will not be
considered
The capital asset is acquired after 01.04.2001 Actual improvement expenditure
 Improvement expenditure shall not include any amount deductible against any other heads of income
 Improvement expenditure incurred before 01.04.2001 shall not be considered since the same would be included as part of
the fair market value of the property as at 01.04.2001
Any Capital asset(other than intangible assets) Cost of acquisition
 Asset acquired by the assessee before 01.04.2001.
 Asset acquired by the assessee through modes specified
under Section 49(1) and previous owner had acquired the
asset before 01.04.2001
Fair market value on 01.04.2001
or
actual cost, whichever is higher
Asset acquired by the assessee after 01.04.2001 Actual cost to the assessee
Assessee acquired the asset through modes specified under
Section 49(1) where the previous owner had acquired the asset
after 01.04.2001
Actual cost to the previous owner
Where cost to the previous owner cannot be ascertained Fair market value on the date of acquisition by the previous owner

24. Contd.
Special provisions in case of Intangible Assets
Asset Cost of improvement Cost of acquisition
1. Goodwill of a business Improvement cost shall be nil If the assets are purchased - actual cost of acquisition
If the assets are acquired by modes specified under
Section 49(1)(i) to (iv) – Cost to previous owner
In any other case –Nil
2. Right to manufacture, produce or process
any article or thing
3. Right to carry on business or profession
4. Tenancy rights Actual improvement
expenditure5. Trade mark or brand name of a business
6. Stage carriage permits
7. Loom hours

25. Contd.
Cost of acquisition for certain capital assets
Types of capital asset Cost of Acquisition
Original securities, on the basis of which, additional
securities are received
Actual cost paid to acquire the original securities
Rights Subscribed in respect of any securities Actual cost paid to acquire the rights
Rights renounced in respect of any securities Nil
Bonus in respect of any securities Nil
It shall be noted that in case the assets specified above were acquired before 01.04.2001, the cost of acquisition
shall be the cost of acquisition of the asset to the assessee/the previous owner in case of acquisition under Section
49(1) or the fair market value of asset on the 01.04.2001, at the option of the assessee
Shares allotted under scheme of corporatisation or
demutualisation
Cost of acquisition of the original membership in the
recognised stock exchange before such corporatisation
or demutualisation
Consolidation and division of shares, conversion of
shares into stock and re-conversion, sub-division of
shares, conversion of one kind of shares to another
Cost of acquisition shall be with reference to the cost
of acquisition of shares from which such asset is
derived.

26. Indexed Cost of Improvement and Acquisition –
(iii) and (iv) of Explanation to Sec 48
Cost Inflation Index is the value notified by the Central Government on a yearly basis to indicate the effect of inflation.
In order to factor the effect of inflation and to make the purchase and sale prices of capital assets comparable, we have the concept of Cost of
Inflation Index (CII).
The factor of inflation keeps the prices of commodities rising and depreciates the value of purchasing power of money over a period of time.
Where a long-term capital asset is sold after being held for a certain period of time, it would be unfair to the assessee to compare the sale
consideration with the original cost as the value of money at the time of purchase vis-a-vis at the time of sale cannot be practically compared.
Calculation of indexed cost of acquisition or indexed cost of improvement
Particulars Capital asset acquired by the assessee
before 01.04.2001
Capital asset acquired after 01.04.2011
Indexed cost of acquisition Cost of acquisition *CII of the year of
transfer/CII of financial year 2001-02
Cost of acquisition * CII of the year of transfer/CII
of the previous year in which the asset was firstly
acquired
Indexed cost of improvement Cost of improvement * CII of the year of transfer/CII of the year in which improvement expenditure was
incurred

27. Contd.
Financial Year Cost Inflation Index Financial Year Cost Inflation Index
2001-02 100 2010-11 167
2002-03 105 2011-12 184
2003-04 109 2012-13 200
2004-05 113 2013-14 220
2005-06 117 2014-15 240
2006-07 122 2015-16 254
2007-08 129 2016-17 264
2008-09 137 2017-18 272
2009-10 148 2018-19 280
2019-20 289
Cost Inflation Index (CII)
Benefit of indexation shall not be applicable to long-term
capital asset, being a bond or debenture except for:—
• Capital indexed bonds issued by the Government; or
• Sovereign Gold Bond issued by the Reserve Bank of
India under the Sovereign Gold Bond Scheme, 2015

28. Rates of Taxation

29. Tax on Short-term Capital Gains in Certain Cases -
Sec 111A
Short term capital assets Rate of taxation
 equity share in a company or
 a unit of an equity-oriented fund or
 a unit of a business trust
(transaction must be subject to STT)
15% (Both for
residents and
non-residents)
Other short-term capital assets Normal slab rates
IFSC shall mean an International Services Centre which is approved by Central Government
Recognised Stock Exchange mean a stock exchange, recognized by Central Government, which fulfils the conditions
as prescribed and notified by the Central Government.
STT Condition shall not apply to a transaction undertaken on a recognised stock exchange located in any International
Financial Services Centre (IFSC) and where the consideration for such transaction is paid or payable in foreign currency
The benefit of Basic exemption limit shall be available to short term capital gains, for both residents as well as non-residents,
and only the amount exceeding basic exemption limit (if not adjusted towards other income) shall be chargeable to tax
Benefit of Sec 88 [Rebate on life insurance premia, contribution to provident fund, etc.], shall not be available to tax on short term capital
gains

30. Assessee Type of asset Rate of tax
Resident All long term capital assets 20%
Non-Resident
Securities which are subject to taxation as per 1st Proviso
to Section 48
20% without indexation
Unlisted securities or shares of a company in which public
are not substantially interested (which are not subject to
taxation as per 1st proviso to Section 48)
10% without indexation
Listed securities (other than units) or zero coupon bonds 10% without indexation
Any other long term capital asset 20% with indexation
Tax on Long-term Capital Gains – Sec 112
The benefit of Basic exemption limit shall be available to long term capital gains, for both residents as well as non-residents,
and only the amount exceeding basic exemption limit (if not adjusted towards other income) shall be chargeable to tax
Benefit of Sec 88 [Rebate on life insurance premia, contribution to provident fund, etc.], shall not be available to tax on short term capital
gains
Tax on long term capital gains from specified assets — Section 112A shall be discussed in subsequent webinars

31. Capital Gains in Specific Cases

32. Insurance Compensation on Destruction of Capital
Assets - Sec 45(1A)
Particulars Remarks
Applicable asset Any capital asset
Applicable assessee Any assessee
Event for taxation
Destruction of, any capital asset, as a result of—
(i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or
(ii) riot or civil disturbance; or
(iii) accidental fire or explosion; or
(iv) action by an enemy or action taken in combating an enemy (whether with or
without a declaration of war)
Year of transfer
Year of destruction (indexation shall be restricted till this year irrespective of the
year of receipt of compensation)
Year of chargeability Year of receipt of compensation
Sale consideration
Insurance compensation from insurer + Fair market value of assets received along
with insurance compensation
Period of holding Date of acquisition till the date of destruction

33. Contd. Insurer
(a) any individual or unincorporated body of individuals or body corporate incorporated under the law of any country, other
than India, carrying on insurance business, not being a person specified in sub-clause (c) of this clause, which—
(i) carries on that business in India, or
(ii) has his or its principal place of business or is domiciled in India, or
(iii) with the object of obtaining insurance business, employs a representative, or maintains a place of business, in India;
(b) any body corporate, not being a person specified in sub-clause (c) of this clause, carrying on the business of insurance,
which is a body corporate incorporated under any law for the time being in force in India; or stands to any such body
corporate in the relation of a subsidiary company within the meaning of the Indian Companies Act, 1913, as defined by sub-
section (2) of section 2 of that Act, and
(c) any person who in India has a standing contract with underwriters who are members of the Society of Lloyd's whereby
such person is authorised within the terms of such contract to issue protection notes, cover notes, or other documents
granting insurance cover to others on behalf of the underwriters, but does not include a principal agent, chief agent, special
agent or an insurance agent or a provident society.

34. Conversion of Capital Asset into Stock-in-trade — Sec 45(2)
Particulars Remarks
Applicable asset Any capital asset
Applicable assessee Any assessee
Event for taxation Conversion of a capital asset into stock in trade
Year of transfer Year of conversion (indexation shall be restricted till this year
irrespective of the year of actual sale)
Year of chargeability Year of actual sale of the converted asset
Sale consideration Fair market value of the asset converted as on conversion date
Period of holding Date of acquisition till the date of conversion
Capital gains Fair market value on conversion date (-) cost/indexed cost of
acquisition (-) cost/indexed cost of improvement
Business income Actual sale consideration (-) fair market value on conversion date (-)
any other business expense

35. Transfer of Beneficial Interest in Securities — Sec 45(2A)
Profits and gains arising from transfer made by depository or
participant of such beneficial interest in respect of securities
Where, any person had beneficial interest in any securities during the previous year,
shall be charged to capital gains tax in the hands of the beneficial owner in the year of transfer and not in
the hands of the depository who is registered owner as per Section 10(1) of the Depositories Act, 1996.
Beneficial owner A person whose name is recorded as such with a depository.
Depository A company formed and registered under the Companies Act, 1956 (1 of 1956) and which has been granted a certificate
of registration under SEBI Act, 1992
Security Such security as may be specified by the Board;
According to SEBI (Depositories and Participants) Regulations, 1996, the following securities shall be eligible for being
held in dematerialised form in a depository: —
(a)shares, scrips, stocks, bonds, debentures, debenture stock, Indian Depository Receipts or other marketable securities
of a like nature in or of any incorporated company or other body corporate;
(b) units of mutual funds, rights under collective investment schemes and venture capital funds, commercial paper,
certificates of deposit, securitised debt, money market instruments, Government securities and unlisted securities
shall also be similarly eligible for being held in dematerialised form in a depository;
(c)any other security as may be specified by the Board from time to time, by way of a notification in the Official Gazette
and subject to such conditions as it may deem fit to impose.
The cost of acquisition and the period of holding of any securities shall be determined on the basis of the first-in-first-out (FIFO) method

36. Transfer of Capital Asset by a Member / Partner to Firm /
AOP / BOI as Capital Contribution or Otherwise – Sec 45(3)
Particulars Remarks
Applicable asset Capital asset transferred by a partner/member
Applicable assessee
a partner or member of a firm/AOP/BOI (not being a company or a
co-operative society)
Event for taxation transfer of a capital asset by way of capital contribution or otherwise
Year of chargeability PY in which such transfer takes place
Sale consideration
Amount recorded in the books of the firm/AOP/BOI as value of capital
asset shall be regarded as the full value of consideration
Capital Gains Amount recorded in books - Cost/Indexed cost of acquisition

37. Transfer of Capital Asset on Distribution in the Event of
Dissolution of a Firm / AOP / BOI – Sec 45(4)
Particulars Remarks
Applicable asset Capital asset distributed to partner or member
Applicable assessee Firm/AOP/BOI (not being a company or co-operative society)
Event for taxation Distribution of capital assets on the dissolution of firm/AOP/BOI
Year of chargeability PY in which such transfer takes place
Sale consideration
Fair market value of the assets distributed, on the date of transfer, shall be deemed
to be the full value of consideration
Period of holding
Capital Gains Fair market value of assets distributed - Cost/Indexed cost of acquisition
Cost of Acquisition
Cost of acquisition in the hands of the firm/AOP/BOI shall be the book value of the
assets standing in the books of accounts as on the date of transfer

38. Compulsory Acquisition of Capital Asset — Sec 45(5)
Particulars Initial compensation Enhanced compensation (enhancement by court,
Tribunal or any authority)
Year of Chargeability Financial year in which whole or part of the
consideration is received
Entire consideration is taxable even if only a part of
it has been received.
Taxable in the year of receipt only to the extent
received.
Compensation received in pursuance of an interim
order of a court, Tribunal or other authority shall be
chargeable in the PY in which the final order is made
Cost of Acquisition and
Improvement
Actual or indexed cost of acquisition as per regular
provisions
Nil.
However expenses for receiving the amount shall be
deductible
Nature of Capital gains Depends on period of holding of capital asset Depends on how initial compensation was taxed i.e. if
initial compensation was taxed as long term capital
gains, enhanced compensation will also be long term
capital gains and vice versa.
Transfer by way of compulsory acquisition under any law, or a transfer the
consideration for which was determined or approved by the Central Govt or the RBI

39. Contd.
Particulars Initial compensation Enhanced compensation (enhancement by court,
Tribunal or any authority)
Subsequent Reduction in
Compensation
Recompute capital gains and file rectification under section 154 read with section 155 (16).
Recomputation shall be done for the year of receipt of initial or enhanced compensation.
Period of 4 years under section 154 shall be reckoned from the end of the financial year in which the order
reducing the compensation was passed.
Indexation Indexation shall be done till the year in which the
property is compulsorily acquired
Not Applicable
Where by reason of the death of the person who made the transfer, or for any other reason, the enhanced compensation
or consideration is received by any other person, it shall be chargeable to tax as capital gains of that person

40. Taxation on Joint Development Agreements — Sec 45(5A)
Particulars Remarks
Applicable Assessee Individual or an HUF
Eligible income Capital gains arising from transfer of land and/or building under Specified Agreement (JDA)
Year of taxation
PY in which the certificate of completion for the whole or part of the project is issued by the competent
authority
Certificate of
completion
 Upon completion of construction, it is mandatory for the developer or the owner of a stand-alone
property to get a completion certificate from the local authority
 This certificate is awarded only if the authorities inspect and are satisfied that the project/building
has been constructed according to the approved building plan and mandatory standards have been
maintained
 This certificate is crucial to ensure the supply of basic amenities such as water, electricity and
drainage system. The builder cannot give the possession to the buyer unless the completion
certificate is obtained
• Joint Development Agreement (“JDA”) is a popular mechanism where property owned by a land owner is developed by a
builder and the resultant flats developed are shared between the developer and the land owner in a pre-agreed proportion.
• The moment JDA is executed and possession is transferred, it becomes an event of transfer.
• Such transfer gives rise to capital gains.

41. Contd.
means the value adopted or assessed or assessable by any authority of the Government for the purpose of
payment of stamp duty in respect of an immovable property being land or building or both
Stamp duty value
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
Specified agreement
means the authority empowered to approve the building plan by or under any law for the time being in force
Competent Authority
Sale consideration
Stamp duty value on the date of issue of said certificate of assessee’s share in land or building or both in
the project (+) consideration received in cash
Event of violation
Where the assessee transfers his share in the project on or before the date of issue of said certificate of
completion, capital gains shall be deemed to be the income of the financial year in which such transfer
takes place.
Further, regular computation provisions (other than Section 45(5A)) shall apply for the purpose of
calculating capital gains

42. Capital Gains on Repurchase of Units mentioned in
Section 80CCB - Sec 45(6)
Particulars Remarks
Applicable Asset Units referred under Section 80CCB are as follows:
• Units of mutual fund registered under the SEBI Act, 1992 or a mutual fund set up by a public
sector bank or a public financial institution or authorised by RBI subject to conditions laid down
by the Central Government; or
• Units on Unit Trust of India established under the Unit Trust of India Act, 1963.
Event of Transfer Repurchase of Units by the Assessee or when plan is terminated
Capital Gains Repurchase price of the units (-) Capital Value of such units
Capital value of such units means any amount invested by the assessee in the units

43. Thank You
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