1. Capital gains Arrangement of sections By CA CMA CS Melam Ram Pavan Kumar rampavankumar@yahoo.com

2. Arrangement of Sections - Definitions SectionDefinition 2(1B)Amalgamation 2(14)Capital asset 2(19AA)Demerger 2(19AAA)Demerged company 2(22B)Fair market value 2(29A)Long term capital asset 2(29B)Long term capital gain 2(41A)Resulting company 2(42A)Short term capital asset 2(42B)Short term capital gain 2(42C)Slump sale 2(47)Transfer 2(48)Zero coupon bonds

3. Arrangement of Sections - Exemptions SectionExempted income 10(33)Capital gains on transfer of units of Unit Scheme 1964 exempt if transfer takes place on or after 01- 04-2002 10(36)Exemption of Long term capital gain on transfer of “eligible equity share” if the shares are acquired between 01-03-2003 and 28-02-2004 and held for 12 months or more. 10(37)Exemption of capital gains to an individual or HUF on compensation received on compulsory acquisition of non-rural agricultural land. 10(38)Income from transfer of a long term capital asset being equity share, equity oriented fund or a unit of a business trust and security transaction tax has been paid on its transfer.

4. Arrangement of Sections – Charge of capital gains SectionCharge of capital gain income during the previous year [Sec. 3] 45(1) - of transfer [Sec. 2(47)] of capital asset [Sec. 2(14)]; 45(1A) - in which receipt of insurance compensation or other asset in relation or damage to or destruction of, any capital asset [Sec. 2(14)] as a result of flood, typhoon, hurricane, cyclone, earthquake, fire, or explosion etc.; 45(2) - in which sale of stock-in-trade. However transfer [Sec. 2(47)] of capital asset [Sec. 2(14)] takes in the previous year [Sec. 3] of conversion or treatment as stock-in-trade. Note: charge of capital gains postpones till sale of stock-in-trade; 45(2A) - in hands of beneficial owner for transfer [Sec. 2(47)] of beneficial interest in any security being capital asset [Sec. 2(14)] by depositary or beneficial owner; 45(3) - in which transfer [Sec. 2(47)] of capital asset [Sec. 2(14)] by a person to a firm or other association of persons (AOP) or body of individuals (BOI) in which he becomes partner or member, by way of capital contribution or otherwise; 45(4) - in which transfer [Sec. 2(47)] of capital asset [Sec. 2(14)] by way of distribution of capital assets on the dissolution of a firm, AOP or BOI or otherwise;

5. Arrangement of Sections – Charge of capital gains SectionCharge of capital gain income during the previous year [Sec. 3] 45(5)-in which receipt of compensation in first instance for transfer [Sec. 2(47)] of capital asset [Sec. 2(14)] by way of compulsory acquisition under any law; -in which receipt of enhanced or further compensation; 45(6)- in which repurchase of units or termination of units plan referred to u/s 80CCB(2) takes place.

6. Arrangement of Sections – Other provisions in Chapter IV- E SectionProvision 46(1) & 46(2) Distribution of money / assets to its shareholder by a company in liquidation shall not be regarded as transfer [Sec. 2(47)] by the company and chargeable in the hands shareholder receiving such money / assets; 46ACapital gains in the hands of shareholder or holder of other specified securities on buy back of such shares or other securities;

7. Arrangement of Sections – Other provisions in Chapter IV- E SectionTransactions not regarded as transfer – Section 47 47(i)Any distribution of capital assets on the total or partial partition of Hindu Undivided Family; 47(iii)Any transfer of capital assets under a gift or will or an irrevocable trust; 47(iv)Any transfer of capital asset by company to its 100% Indian subsidiary; 47(v)Any transfer of capital asset by a 100% subsidiary company to its Indian holding company; 47(vi)Any transfer of capital asset in a scheme of amalgamation by amalgamating company to the amalgamated Indian company; 47(via)Any transfer of capital asset being share or shares held in a Indian company, in a scheme of amalgamation by amalgamating foreign company to the amalgamated foreign company subject to conditions; 47(viab)Any transfer of capital asset, in a scheme of amalgamation, being share or shares of a foreign company, referred to in explanation 5 to section 9(1)(i), which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, by amalgamating foreign company to the amalgamated foreign company subject to conditions;

8. Arrangement of Sections – Other provisions in Chapter IV- E SectionTransactions not regarded as transfer – Section 47 47(vib)Any transfer of capital asset, in a demerger, by demerged company to resulting Indian company; 47(vic)Any transfer of capital asset being share or shares held in Indian company, in a demerger, by demerged foreign company to resulting foreign company subject to conditions; 47(vica)Any transfer in a business reorganization, of a capital asset by the predecessor co-operative bank to the successor co-operative bank; 47(vicb)Any transfer by shareholder, in a business reorganization of a capital asset being a share or shares held by him in the predecessor co-operative bank if the transfer is made in consideration of th allotment to him of any share or shares in the successor co-operative bank; 47(vicc)Any transfer of capital asset being share or shares held in a foreign company, referred to in explanation 5 to section 9(1)(i), which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, in a demerger, by demerged foreign company to resulting foreign company subject to conditions; 47(vid)Any transfer or issue of shares by the resulting company, in a scheme of demerger to the shareholders of the demerged company if the transfer is made in consideration of demerger of the undertaking; 47(vii)Any transfer of share or shares by a shareholder of a amalgamating company in consideration of allotment of share or shares to him in the Amalgamated Indian Company;

9. Arrangement of Sections – Other provisions in Chapter IV- E SectionTransactions not regarded as transfer – Section 47 47(viia)Any transfer of a capital asset, being bonds or GDR made outside India by a non-resident to another non-resident; 47(viii)Any transfer of agricultural land in India effected before 01-03-1970; 47(ix)Any transfer of capital asset, being 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 public museum or institution as may be notified by the Central Government of the Official Gezette; 47(x)Any transfer by way of conversion of bonds or debentures or debenture stock or deposit certificates in any form, of a company into shares or debentures of that company; 47(xa)Any transfer by way of conversion of bonds referred to in section 115AC(1)(a) into shares or debentures of any company; 47(xi)Any transfer made on or before 31-12-1998 by a person (not being a company) of a capital asset being membership of a recognized stock exchange to a company in exchange of shares allotted by that company to the transferor;

10. Arrangement of Sections – Other provisions in Chapter IV- E SectionTransactions not regarded as transfer – Section 47 47(xii)Any transfer of a capital asset, being land of a sick industrial company, made under a scheme prepared and sanctioned under section 18 of Sick Industrial Companies (Special Provisions) Act, 1985 where such sick industrial company is being managed by its workers’ co-operative; 47(xiii)Any transfer 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 subject to conditions; 47(xiiia)Any transfer of a capital asset being a membership right held by a member of a recognized stock exchange in India for acquisition of shares and trading or clearing rights acquired by such member in accordance with scheme for demutualization or corporatization which is approved by SEBI; 47(xiiib)Any transfer of a capital asset or intangible asset by a private company or unlisted public company to a limited liability partnership (LLP) or any transfer of share or shares held in the company by a shareholder as a result of conversion of the company into a LLP subject to conditions; 47(xiv)Any sale of proprietary concern or otherwise any transfer of a capital asset or intangible asset to a company as a result of succession of the sole proprietary business by a company in the business carried on, subject to conditions;

11. Arrangement of Sections – Other provisions in Chapter IV- E SectionTransactions not regarded as transfer – Section 47 47(xv)Any transfer in a scheme for lending of any securities under an agreement or arrangement, which the assessee has entered into with the borrower of such securities and which is subject to the guidelines issue by SEBI or RBI 47(xvi)Any transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by the Central Government; 47(xvii)Any 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; 47(xviii)Any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating scheme of a mutual fund, made inconsideration of the allotment to him of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund;

12. Arrangement of Sections – Other provisions in Chapter IV- E SectionProvision 47AWithdrawal of exemption in case of certain clauses referred to in section 47; 48Mode of computation of capital gains; 49Cost with reference to certain modes of acquisition of capital asset such as partition, will, gift, etc.; 50Special provisions for computation of capital gains in case of transfer of depreciable assets; 50BSpecial provision for computation of capital gains in case of slump sale; 50CSpecial provision for full value of consideration in case of land or building or both; 50DFair market value deemed to be full value of consideration in certain cases; 51Treatment of advance money received was forfeited;

13. Arrangement of Sections – Deductions in Chapter IV- E SectionNature of deduction from capital gains in respect of - 54profit on sale of house property used for residence; 54Btransfer of land (non-rural land) used for agricultural purposes; 54DCompulsory acquisition of land and buildings forming part of an industrial undertaking; 54ECTransfer of long term capital asset if such capital gain is invested in specified bonds of NHAI & REC; 54EDTransfer certain listed securities or units if such capital gain is invested in equity share of eligible issue of capital; 54FTransfer of long term capital asset other than a residential property if such capital gain is invested in a residential house; 54GTransfer of certain capital assets in pursuance of shifting of industrial undertaking from urban area if such capital gain is invested in certain manner; 54GATransfer of assets in cases of shifting of industrial undertaking from urban area to any SEZ; 5GBTransfer of residential property if invested in a new manufacturing SME company; 54HExtension of time limit for acquiring new asset or depositing or investing amount of capital gain, in case of compulsory acquisition;

14. Arrangement of Sections – Set off and carry forward of losses SectionSet off and carry forward of losses 70Intra head set off of losses; 71Inter head set off of losses; 74Carry forward and set off of capital losses

15. Arrangement of Sections – Certain measures SectionCertain measures 94(7)Measures to curb creation of losses via dividend stripping 94(8)Measures to curb creation of losses via bonus stripping

16. Arrangement of Sections – Rates of taxes SectionSpecial rates of taxes 111AShort term capital gain on transfer of listed equity shares and units of equity oriented funds; 112Long term capital gain; 115ABLong term capital gain arising from transfer of units purchased in foreign currency by Overseas Financial Organization; 115ACLong term capital gain arising to a non-resident from transfer of bonds or GDRs of an Indian Company purchased in foreign currency under notified scheme; 115ADIncome from securities or capital gains of FIIs; 115DIncome from transfer securities other than units of FIIs; 115ELong term capital gain of a NRI from transfer of specified assets and other assets; 115FExemption of capital gains on transfer of foreign exchange assets if the net sale consideration is invested in specified assets; 115VNCapital gains on transfer of tonnage tax assets.