A capital asset is transferred by a partner to his partnership firm by way of his capital contribution (or otherwise). It is treated a “transfer” and capital gain will be taxable in the hands of the partner. The amount recorded in the books of account is taken as full value of consideration. This rule is also applicable when a member transfers a capital assets to his association of persons or body of individuals.
X, Y and Z form a partnership firm. Soon after formation of the firm, X brings a house property as his capital contribution on August 20, 2018. On the date of transfer fair market value of the house is Rs. 20,00,000. However, the amount recorded in the books of firm is Rs. 18,00,000. The house was purchased by X in 2005-06 for Rs. 2,50,000. Find out the amount of capital gain.
Capital gain will be taxable in the hands of X for the assessment year 2019-20 –
|Full value of consideration (i.e., amount recorded in the books of account of the firm)
|Less: Indexed cost of acquisition (Rs. 2,50,000 × 280 ÷ 117)
|Long-term capital gain