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Transactions Not regarded as ‘Transfer’ for Computing Capital Gain [Section 46 and 47]

The meaning of transfer is given in section 2(47), whereas transactions not regarded as transfer are covered u/ss 46 and 47. In many transactions although there is a transfer, but these are not considered to be transfer for purposes of capital gains. Some of the relevant transactions which are not regarded as transfer are:

For the purpose of section 45, the following transactions are not regarded as transfers (in other words, in the following cases, there is no Capital Gain)—

  1. Distribution of assets in kind by a company to its shareholders on its liquidation [Section 46(1)].

  2. Any distribution of capital assets in kind by a Hindu undivided family to its members at the time of total or partial partition [Section 47(i)].

  3. Any transfer of capital asset under a gift or a will or an irrevocable trust [Section 47(iii)].

  4. Transfer of capital asset between holding company and its 100% subsidiary company, if the transfereecompany is an Indian company [Section 47(iv)].

  5. Transfer of capital asset in the scheme of amalgamation / demerger, if the transferee-company is an Indian company [Section 47(vi)].

  6. Transfer of shares in amalgamating company / demerged company in lieu of allotment of shares in amalgamated company / resulting company in the above case [Section 47(vib)].

  7. Transfer of capital asset in a scheme of amalgamation of a banking company with a banking institution.

  8. Transfer of shares in an Indian company held by a foreign company to another foreign company in a scheme of amalgamation / demerger of the two foreign companies, if a few conditions are satisfied.

  9. Transfer of a capital asset by a non-resident of foreign currency convertible bonds or Global Depository Receipts to another non-resident if the transfer is made outside India and if a few conditions are satisfied.

  10. Transfer by an individual of Sovereign Gold Bond (issued by RBI under the Sovereign Gold Bond Scheme, 2015) by way of redemption.

  11. Transfer of any work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print, to the Government or a University or the National Museum, National Art Gallery, National Archives or any other notified public museum or institution.

  12. Any transfer by way of conversion of bonds or debentures, debenture-stock or deposit certificate in any form, of a company into shares or debentures of that company.

  13. Transfer by way of conversion of preference shares of a company into equity shares of that company.

  14. Land transferred by a sick industrial company, if a few conditions are satisfied.

  15. Transfer of a capital asset by a private company/unlisted public company to a limited liability partnership in the case of conversion of company into LLP, if a few conditions are satisfied.

  16. Transfer of capital assets at the time of conversion of a firm/sole proprietary concern in a company, if a few conditions are satisfied.

  17. Any transfer involved in a scheme for lending of any securities, if a few conditions are satisfied.

  18. Any transfer of capital asset in a reverse mortgage.

  19. Transfer of a capital asset (being a Government security carrying periodic payment of interest) made outside India through an intermediary dealing in settlement of securities by a non-resident to another nonresident.

  20. Transfer of a capital asset (being share of a special purpose vehicle) to a business trust in exchange of units allotted by that trust to the transferor.

  21. Any transfer by a unitholder of units held by him in the consolidating scheme of a mutual fund, made in consideration of the allotment to him of units in the consolidated scheme of the mutual fund, if the consolidation is of two or more schemes of equity oriented fund or of two or more schemes of a fund other than equity oriented fund.

  22. Transfer by a unitholder of units held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of units, in the consolidated plan of that scheme of the mutual fund.

  23. Transfer, 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.

  24. Transfer of capital asset [being bonds/GDR referred to in section 115AC(1) or rupee denominated bond of an Indian company or derivative] made by a non-resident on a recognised stock exchange located in any International Financial Services Centre and where the consideration is paid/payable in foreign currency.

If the aforesaid conditions are satisfied, then the transaction is not treated as “transfer”.

Related Topics....Under the head 'Capital Gain'

Capital Assets, Capital Gain & Transfer of Capital Assets for Taxation of 'Capital Gain'
Types of Capital Assets for Computing ‘Capital Gain’
Computation Of ‘Period Of Holding of an Asset' for Computing Gapital Gain [Explanation 1(i) to Section 2(42A)]
Transfer Of A Capital Asset [Section 2(47)] for Computing Capital Gain
Transactions Not regarded as ‘Transfer’ for Computing Capital Gain [Section 46 and 47]
Method of Computing Capital Gain [Section 48]
Deemed Cost of Acquisition of Asset for Computing Capital Gain
[Section 55(2)] : Cost of Acquisiton of Assets for Computation of Capital Gain
Capital Gains Accounts Scheme, 1988.
Types of Capital Gain
Tax on Long-Term Capital Gain in certain Cases (Section 112A)
Exemption of Capital Gains under Section 10 and 115JG

Exemption of Capital Gains under Sections 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GB anf 54H

(Section 54) : Exemption of Capital Gains from the Transfer of Residential House Property
(Section 54B) : Exemption of Capital Gain on Transfer of Land used for Agricultural Purposes
(Section 54D) : Exemption of Capital Gains on Compulsory Acquisition Of Land And Buildings forming part of Industrial Undertaking
(Section-54EC) : Exemption of Capital Gain on Transfer of any Long Term Capital Asset on the basis of Investment in certain Bonds
(Section 54EE) : Capital Gain not to be charged on Investment in Units of a Specified Fund
[Section 54F] : Exemption of Capital Gain on Transfer Of Long-Term Capital Assets other than a House Property
[Section 54G] : Capital Gain on Shifting of Industrial Undertaking from Urban Areas to Non-Urban Areas :
[Section 54GA] : Exemption of Capital Gain on transfer of assets in case of shifting of Industrial Undertaking from an urban area to any Special Economic Zone (SEZ)
(Section 54GB) : Exemption of Long term Capital Gain Tax on Transfer of Residential Property if Net Consideration is Invested in the Equity Shares of a new Start-up SME Company :
(Section 54H) : Extension of time limit for acquiring new Asset or Depositing or Investing amount of Capital Gain, in case of Compulsory Acquisition :

Capital Gain in various Special Cases - How to Find Out or Calculate

  1. Capital Gain from Zero Coupon Bonds

  2. Capital Gain in case of amount Received from an Insurer on account of Damage or Destruction of any Capital Asset [Section 45(1A)]:

  3. Capital Gain in the case of Transfer of Depreciable Assets [Section 50] -

  4. Capital Gain on Conversion of Capital Asset into Stock-in-Trade [Section 45(2)]-

  5. Capital Gain on Transfer of Capital Asset by a Partner/Memeber to a Firm/AOP/BOI as Capital contribution [Section 45(3)]-

  6. Capital Gain on Distribution of Capital Assets by a Firm, AOP/BOI to Partners at the time of Dissolution [Section 45(4)]-

  7. Capital Gain on Compulsory Acquisition of a Capital Asset [Section 45(5)]-

  8. Computation of Capital Gains in case of Joint Development Agreement [Section 45(5A)] [W.e.f. A.Y. 2018-19]

  9. Capital Gain on Conversion of Debentures / Bonds into Shares [Section 47(x), 49(2A) and rule 8AA] :

  10. Capital Gain on Transfer of Shares / Debentures in the hands of Non-Residents (Proviso 1 to Section 48 and Rule 115A) :

  11. Capital Gain on Transfer of Self-Generated Capital Assets :

  12. Capital Gain on Transfer of Bonus Shares -

  13. Capital Gain on Transfer of Right Entitlement -

  14. Capital Gain on Transfer of Securities in Demat Form -

  15. Capital Gains on Distribution of Assets by Companies in Liquidation [Section 46]:

  16. Computation of Capital Gains in the case of Transfer of Land and Building or in Real Estate Transactions [Section 50C] -

  17. Capital Gains on Purchase by Company of its Own Shares or Other Specified Securities [Section 46A]:

  18. Capital Gain on Sale of Land and Building to be computed separately in case of Building Constructed by the Assessee:




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