The following deductions from the value of the consideration for which the sale, etc. is made are allowed in computing the amount of taxable long-term capital gains:
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expenditure incurred wholly and exclusively in connection with such transfer; and
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the cost of acquisition of the asset and the cost of any improvement thereon.
In respect of a long-term capital asset acquired before 1 April, 1981, the assessee is allowed the option to substitute its market value on 1 April, 1981 in place of the cost of acquisition. Further, such cost of acquisition is to be substituted by the “Indexed cost of Acquisition” based on the notified Cost Inflation Index for the year of transfer and the year of acquisition or 1 April 1981, whichever is later. However, from A.Y. 1998-99, as per the new 3rd proviso in Section 48, this facility of Cost Inflation Index is not available on bonds and debentures. The notified Cost Inflation Index for the financial years 1981-82 to 2010- 2011 is 100, 109, 116, 125, 133, 140, 150, 161, 172, 182, 199,223,244, 259, 281, 305, 331, 351, 389, 406, 426, 447, 463, 480, 497, 519, 551, 582, 632 and 711 respectively. Similarly, the cost of improvement can also be indexed by the Cost Inflation Index.
In the case of a capital asset received under a gift or will, etc. the cost to the previous owner is to be considered. The cost of acquisition in case of goodwill, bonus shares, tenancy rights, trade marks, brand names, etc. under Section 55 would be deemed to be nil.
A special facility is allowed to a non-resident. It is provided by the first proviso to Section 48 that in the case of a non-resident assessee, capital gains arising from the transfer of a capital asset being shares in or debentures of Indian companies shall be computed 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. The capital gains so computed in such foreign currency, would then be reconverted into Indian currency, so however, that the aforesaid manner of computation of capital gains would be applicable in respect of capital gains accruing or arising from every reinvestment thereafter, in, and sale of, shares in, or debentures of an Indian company.
As mentioned earlier, it is also provided that the provisions of Cost Inflation Index will not be applicable to the NRIs in the above case. Likewise, the advantage of Cost Inflation Index is also not available in respect of computation of long-term capital gains relating to bonds or debentures other than Capital Index Bonds issued by the Government. Under the fourth proviso to Section 48 from the A.Y. 200 1-2002, it was provided that where shares, debentures or warrant referred to in the proviso to clause (iii) of Section 47 are transferred under a gift, or will or an irrevocable trust, the market value on the date of such transfer would be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of Section 48. |
