The Income-tax Act, 1961 is the charging Statute of Income Tax in India.

It provides for levy,

administration, collection and recovery of Income Tax. Recently the Government of India has
brought out a draft statute called the "Direct Taxes Code" intended to replace the Income Tax
Act,1961 and the Wealth Tax Act, 1957. Public Commentary has been called for the Draft Bill.
[1]

The redrafted bill is supposed to be made public soon.

Scope of Total Income

1. Subject to the provisions of this Act, the total income of any previous year of a person who is a
resident includes all income from whatever source derived which(a) is received or is deemed
to be received in India in such year by or on behalf of such person ; or(b) accrues or arises or is
deemed to accrue or arise to him in India during such year ; or(c) accrues or arises to him
outside India during such year :Provided that, in the case of a person not ordinarily resident in
India within the meaning of sub-section (6) of section 6, the income which accrues or arises to
him outside India shall not be so included unless it is derived from a business controlled in or a
profession set up in India.(2) Subject to the provisions of this Act, the total income of any
previous year of a person who is a non-resident includes all income from whatever source
derived which(a) is received or is deemed to be received in India in such year by or on behalf
of such person ; or(b) accrues or arises or is deemed to accrue or arise to him in India during
such year.Income accruing or arising outside India shall not be deemed to be received in
India within the meaning of this section by reason only of the fact that it is taken into account in
a balance sheet prepared in India.
2. For the removal of doubts, it is hereby declared that income which has been included in the total

income of a person on the basis that it has accrued or arisen or is deemed to have accrued or
arisen to him shall not again be so included on the basis that it is received or deemed to be
received by him in What is CBDT Central Board for Direct Taxes is the important institution in
carrying out administration and planning of income tax. It issues circulars and clarifications
regarding difficulties arising in Income Tax.

There are 3 types of residents that we will explain here for your understanding.

Based on this, you will be able to determine your Residential Status.

Type-1: RESIDENT (ANY OF 1 OR 2)

1. If your stay in India is 182 days or more during previous year
2. If your stay in India is 60 days or more in Previous year and 365 days or more during 4 years
preceding to previous year.

BUT IN CASE

where a person leaves for employment or

where a resident who leaves India as a member of Crew of Indian ship or

where an Indian Citizen who is abroad comes to India for a visit

The period of stay would be 182 days instead of 60 days in the previous year as per above point #(2)

Type-2: NON RESIDENT

If a person does not satisfy any of [ (1) and (2) with exceptions} conditions then he will be NonResident (NRI).

Type-3: RESIDENT BUT NOT ORDINARILY RESIDENT

1. If your stay in India is 182 days or more during previous year
2. If your stay in India is 60 days or more in Previous year and 365 days or more during 4 years
preceding to previous year.

BUT IN CASE

where a person leaves for employment or

where a resident who leaves India as a member of Crew of Indian ship or

where an Indian Citizen who is abroad comes to India for a visit

The period of stay would be 182 days instead of 60 days as per point#(2)
AND

3. If you are a resident in India has been at least 2 out of 10 years preceding to previous year;
4. If your stay in India has been 730 days or more out of 7 years preceding to previous year.
If you satisfy any one from (1) & (2) and satisfy both (3) & (4) then your status will be Resident
and Ordinarily Resident (ROR);
If you satisfy any one from (1) & (2) and satisfy one or none from (3) & (4) then your status will
be Resident but Not Ordinarily Resident (RNOR).

S.N .
O

1
2
3
4
5
6

7
8

INCOMES

Resident
and
ordinary
resident
(ROR)
Income received in India whether accrued in Yes
India or outside India.
Income deemed to be received India whetherYes
accrued in India or outside India.
Income accruing or arising in India whether Yes
received in India or outside India.
Income deemed to accrue or arise in India
Yes
whether received in India or outside India.
Income received and accrued outside India Yes
from a business controlled in or a profession
setup in India.
Income received and accrued outside India Yes
or a profession set up outside India from a
business controlled from outside India or a
profession set up outside India.
Income (not being from a business
Yes
/profession) received and
accrued outsideIndia.
Income earned and received outside India in No
the year preceding to the relevant previous
year and remitted to India in the relevant
previous year.

Resident but Non

not ordinary resident
resident
(RNOR)
Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

Various sections in PGBP are briefly discussed below:

NATURE OF INCOME
Business,Vocation and Profession carried on by the assessee of whatsoever nature.
METHOD OF ACCOUNTING:
As Regularly Employed can be Cash Basis or Accrual Basis Subject to Provisions of Section 43B.
RENT, RATES, TAXES, INSURANCE FOR BUILDING ( Sec. 30):
Any rent, rates, taxes, insurance premium paid by the assessee during the previous year in respect of
the place for business purpose would be allowed as a deduction.
REPAIRS AND INSURANCE OF PLANT, MACHINARY, FURNITURE (Sec. 31):
Any amount spent on repairs, insurance or hire charges, etc. On Plant, machinery, furniture by a
business organisation is allowed as a deduction.
DEPRECIATION (Sec. 32):
Depreciation can be classified into 3 parts to deal in the subject of income tax

Normal Depreciation

Additional Depreciation

Depreciation on SLM basis in case of electricity companies

Normal depreciation is provided on block of assets method on WDV of the block as on every 31
March.

Block of assets means group of assets having same rate of depreciation and falling under a specific
class of assets. These assets are grouped together and depreciation is provided on the block as
illustrated in the coming points.
Computation of WDV of the block:WDV at the beginning of year: XXXX
Add:-Actual cost incurred on assets (Acquired during the year): XXXXX
Less:-Money Payable during the year (Which is sold): xxxxx
Depreciation at the prescribed %: XXXXX
Closing WDV:XXX
Depreciation is provided for whole year except when, Asset is Acquired and put to use during the year
for less than 180 days during the year , in this case the depreciation is limited to 50% of total
depreciation, but if same asset acquired during earlier years but put to use this year and usage period
less than 180 days during current year then depreciation for whole year.When all the assets of block
are sold, in such a case no depreciation is allowed and short term capital/gain or loss would be
attracted as per provisions of section 50 discussed in capital gains.PART OF BLOCK SOLD BUT
MONEY PAYABLE EXCEEDS WDV:- In such a case no depreciation is allowed and also short term
capital gain provision as per section 50 is attracted.
Take a look after Depreciation section in PGBP (Profits and Gains from Business or Profession):
ADDITIONAL DEPRECIATION :
Additional depreciation is only to manufacturing concerns. Additional depreciation on certain assets:
20% or 10% (for <180days). Only factory machinery and equipments.
Assets on which additional depreciation is not allowed:

Not second hand machinery

Not on ships, aircrafts and road transport vehicles

Not allowed on equipments installed in office

In case an enterprise is engaged in electricity business it has option to charge depreciation on SLM
basis but such an option is available once only and cant be changed
UNABSORBED DEPRECIATION:
There cannot be loss under business head due to depreciation.If such depreciation could not be set
off under business head then it can be set off from any other head except salary in the same year,
and if still it could not be set off it can be carried forward indefinitely to succeeding years for set off in
the similar manner.
License to operate telecommunication services:
Deduction in equal installments over Remaining useful life of licence on paid basis. If licence is sold,
WDV of licence is reduced by the amount of money recovered and remaining WDV is allowed as
deduction in equal instalments over remaining life of asset.If sold for price exceeding WDV, no
deduction is allowed in remaining years instead capital gain is charged as per capital gain provisions.
AMORTIZATION OF CERTAIN PRELIMINARY EXPENSES SEC 35D:
Company assessee: 5% of cost of project or 5% of cost of capital whichever is beneficial to the

assessee.
Others: 5% of cost of project
Before commencement of business: For setting up any Business
After setting up of business: Extension or setting up of new undertaking.List of specified
expenditure including documents like feasibility report, project report, market survey, engineering
services, legal charges , Drafting and printing of MOA and AOA, registration fees, issue of shares
and debentures, underwriting commission, expenditure on prospectus have to be submitted.
Deduction for amalgamation/ demerger and VRS
Quantum: -1/5 of expenditure in each successive year but it is to be noted that VRS is allowed only
when amount is actually paid which is not a case Amalgamation demerger.
Other Deductions in PGBP (Profits and Gains from Business or Profession)
OTHER DEDUCTIONS (section 36)

Insurance premium on stocks

Bonus or commission to employees: deduction subject to section 43B

Insurance on health of employees by any mode other than cash

Interest on borrowed capital, if for use of business

Discount on issue of zero coupon bonds to be allowed as deduction on pro-rata basis.

Employers contribution to recognized provident fund or approved superannuation fund

subject to section 43B

Employers contribution to approved gratuity fund subject to section 43B

Bad debts subject to conditions:

Income from sale recognized. If any amount has been subsequently recovered in respect of
above then it shall be taxable under business head even if business is discontinued.

Provision for bad and doubtful debts: NO deduction in general but deduction available to
Scheduled or non-scheduled cooperative banks Foreign banks or State Finance Corporation

STT paid : Deduction if income earned included in PGBP

GENERAL DEDUCTIONS UNDER SECTION 37(1) BASIC CONDITIONS FOR DEDUCTION:

Not of personal nature

Not of capital nature

Incurred during PY .
Wholly or exclusively for business or profession:

Remuneration to Employees

Payment of penalty/ damages of compensatory nature. Penalties paid to custom, sales tax
authorities, excise authorities, Income tax authorities not allowed.
Some Expenses not deductible in PGBP (Profits and Gains from Business or Profession) are briefly
discussed below:
EXPENSES NOT DEDUCTIBLE:
Section 40A (2):

AO may disallow payment made to relative if in his opinion it is excess of the market value.
Section 40A (3):
Any payment exceeding Rs. 20000 or Rs.35000( in case of payment to a transporter engaged in
plying,hiring, transporting etc.) in a day by a assessee will be allowed as a deduction only when
payment is made by a account payee cheque.
EXCEPTIONS:
This section is not applicable when

Payment is made to bank or financial institution,

Govt. Under required law

Payment on a Banking Holiday

Payment to employees not exceeding Rs.50,000 Payment in a village not served by a bank

Book Adjustment

Payment for purchase of agriculture produce, Poultry farm produce, Dairy items, cottage
industry(working without aid of power.
SALARY AND INTEREST ON CAPITAL TO PARTNERS (SECTION 40(b):
Interest, salary:
Deduction as per provisions in partnership deed.
Interest on capital:
Rate specified in partnership deed or 12% whichever is lower.
Salary:
Allowed only to working partners.It should be lower of amount specified in partnership deed or
following amount:-On First Rs.300,000 Of Book 90% of book profits or Rs.150,000 Profits whichever
is more
On Balance Of Book Profits 60% of book profits
DEDUCTION UNDER SECTION 43B:Section 43 B mentions some cases where deduction will be allowed only when amount is
actually paid by the assessee before due date of filing return.In all these cases deduction of the
expense is allowed on paid basis.However when expenditure is disallowed in one year, it will be
allowed as a deduction in the previous year in which such expenses are actually paid.

1.

Any sum payable by way of tax, cess, duty or fee under any law and by whatever name
called.

2.

Any sum payable by employer by way of contribution to provident fund or superannuation

fund or any other employee benefit fund.

3.

Any sum payable as bonus, commission to employees for services rendered.

4.

Any sum payable as interest on loan borrowed from public financial institution or state
financial institution.

5.

Any sum payable as interest on loan taken from scheduled bank including co-operative
societies.

6.

Any sum payable by employer in lieu of leave salary to employee.

MAINTENANCE OF BOOKS OF ACCOUNTS BY PERSONS CARRYING ON

BUSINESS OR PROFESSION (SECTION 44AA AND RULE 6F):
Assessee carrying on Business or profession other than the profession notified under the rule
6FIncome ExceedsRs. 120000 In Any Of 3 Preceding Previous Years or Likely to exceed Limit In
Case Of Newly Set Up Business Or ProfessionOrIf the turnover or sales or Gross Exceeds Rs.10
Lakhs .In Any Of 3 Preceding Previous Years Or Likely To Exceed Limit In Case Of Newly Set Up
Business Or Profession
RULE 6F
In the case of Assessee carrying on profession of law, Company Secretary, Accountancy, medicine,
architecture etcGross Recipts Exceeds Rs.150,000 In All 3 Preceding Previous Years Or Likely To
Exceed Limit In Case Of Newly Set Up Business
Specified Books:
Cash Book, Journal (If Accounts On Accrual Basis), Ledger Carbon Copy Of Receipts Exceeding Rs.
25 And Original Copy Of Expenditure Exceeding Rs.50If The Assessee Falling Under Section 44ad,
44ae, 44bb, 44bbb Or Any Other Section Of Presumptive Income, Declares His Income Lower Than
Specified In These Sections, He Is Required To Maintain Such Books As May Enable A.O. To
Compute His Income.
Sec.271A
Failing to keep, maintain or retain books of accounts u/s 44AA read with rule 6F,will be levied a
penalty of RS.250,000/COMPULSARY AUDIT OF ACCOUNTS UNDER SECTION 44AB
Business: In Case Gross Turnover Or Total Sales Exceeds Rs.1core
Profession: In Case Gross Receipts Exceeds Rs. 25 Lakhs.A Person Falling Under Section 44 AD
Declaring a Lower Income
Filing of Report of Audit:
An audit report duly verified by a CA on or before 30.09.yyyy of the relevant year has to be
submitted.Sec.271B
Failing to get accounts audited or furnish audit report required u/s44ABF, will be levied a penalty of
RS.150, 000/- or Equal to HALF OF TOTAL SALES which ever IS LESS
PRESUMPTIVE INCOME UNDER SECTION 44AD
(Business other than that of goods carriage):
This scheme is applicable to residents Individuals, HUF, Firm other than LLP. Carrying on any
business whose gross receipt from such business does not exceed Rs.1 Crore A sum equal to 8% of
gross receipt paid or payable to the assessee or such higher
sum as declared by the assessee in the return of income shall be deemed to be the income from such
business.
However for sum lower than this income, accounts have to be maintained and get audited.
All deductions under section 30 to 38 along with unabsorbed depreciation would be deemed to have
been allowed.
However salary and interest to partners to the limit specified in section 40(b) have to be allowed17
Presumptive Income notes in PGBP are briefly discussed below:

PRESUMPTIVE INCOME UNDER SECTION 44AE (Business of goods carriage):

Scheme is applicable to only those assesses who do not own more than 10 goods carriage at any
time during the previous year.
Profits and gains from such business would be deemed to be as under:For heavy goods vehicle :
Rs. 5000 For every month or part of month for which such vehicle is owned by assessee
For other vehicles:
Rs. 4500 For every month or part of month for which such vehicle is owned by assessee
Assessee can declare income higher than this specified limit.
However for sum lower than this income, accounts have to be maintained and get audited.
All deductions under section 30 to 38 along with unabsorbed depreciation would be deemed to have
been allowed.
However salary and interest to partners to the limit specified in section 40(b) have to be allowed.
PRESUMPTIVE INCOME UNDER SECTION 44BBA
(Non-residents Business of operating aircraft): -In this presume income to be 5% of the Fare and
freight:
Whether paid or payable in India or outside India for transportation of goods, passenger, livestock,
mail, etc. from any place in IndiaANDAmount received or deemed to be received in India for
transportation of goods, passenger, livestock, mail, etc. from any place outside India.
Maintain books of accounts as necessary for A.O. to compute his income. Get his Accounts audited
under section 44AB.

Capital Gain Tax

1. Capital Gain as defined u/s 45

Any profit or gain on transfer of a capital asset effected in the previous year (1)

Receipt of insurance amount for capital assets in the year of receipt damage due to
flood, riot, accident fire and action by enemy

(1A)

Any gain on transfer of capital assets by way of conversion in to stock in trade of

business at fair market price (2)

Any gain to beneficial owner in case of

Any gain on transfer on capital assets to firm or AOP (not Company &Co-operative

transfer of security by depository (2A)

society) at the price recorded in the books of accounts (3)

Any gain on distribution of capital assets on dissolution of firm or AOP at fair market
price (4)

Any gain on compulsory acquisition , consideration as determined / approved /

increased /decreased (5)

Difference on repurchasing of units sec. 80CCB (2) in the year in which repurchase
took place (6)

2. Taxation in special cases as under

Company liquidation Sec. 46

Distribution to share holders on liquidation of company taxed in the hands of share

holders.

Company purchasing its own shares -Sec. 46A*Purchase of its own shares by company , taxed in the hands of the shareholders
3. Transactions not transfer- Sec 47

HUF partitions

Gift, will or irrevocable trust except ESOP.

Transfer from holding to its 100% Indian subsidiary company except stock in trade.

Transfer to 100% Indian holding company by subsidiary except stock in trade.

Amalgamated Indian company in the scheme of amalgamation

Amalgamation for shares held in Indian company by foreign amalgamating company

provided 25% existing shareholders continue & no tax applicable in foreign country.

Amalgamation of banking company by central govt. by B.R. Act.

Demerger to Indian Company

Demerger of shares held in Indian company by foreign company . if existing the

shareholders continues.Business reorganisation from Co-operative bank to another Cooperative bank.

Any scheme of demerger / amalgamation.

Any transfer by non resident to non resident.

Any agriculture land before 1st march 1970.

Any Capital Assets of art, book etc. to university/museum/ art gallery etc. as notified.

Conversion of bonds etc. into shares or debentures.

Any transfer of membership to stock exchange in exchange of shares prior to 31st Dec.
1998.

Transfer of land of sick industrial unit.

Succession of firm by company with laid down condition.

Exchange of membership right and approved by SEBI.

Any firm transfer to LLP with laid down condition.

Succession of sole proprietorship by a company.

Any transfer of lending of security as per SEBI guideline.

Reverse mortgage.

4. Conditions of the above exemptions Sec 47A

8 yrs limitation for of holding & subsidiary company transfer.

3 yrs limitation for stock exchange membership transfer.

If other condition of transfer not complied with.

5. Mode of Computation Sec 48

From full value of consideration received/ accruing- deduction of

Exp. Wholly & exclusive for such transfer.

Cost of acquisition/ any improvement

Provision 1.- Calculation of Capital gain for non-resident -conversion of transaction value into
foreign currency & then conversion of capital gain in foreign currency into Indian
Provision 2.- Capital gain other than non resident- indexed cost of acquisition and indexed of
Any improvement will be adopted , Except bond or debenture (other than indexed bond by
govt.)
Provision3. In case of transfer share/debenture/warrants under ESOP, market value at the time
of transfer to be considered
Provision 4 . No deduction for STT.
Expl. Cost of acquisition- index of the year of first year of assets hold or year beginning April
1981 whichever is later.
Index cost of acquisition/improvement same proportion as it bears to the index of the year of sale
and first year of assets held.
6. cost of certain acquisition Sec 49
(1)Assets acquired due to
HUF partition

-Succession , inheritance devolution

-Any distribution on liquidation of company
Any transfer under trust
-Any other transferred under various clause of sec. 47.
-Individual property transferred to HUF
The cost of acquisition/ improvement will be with reference to the previous owner.
-Expl. Previous Owner Means the last previous owner of the capital asset who acquired
it by a mode of acquisition other than that referred above .
(2)Cost of amalgamating company in case of amalgamation .
(2A). in case of conversion into share or debenture cost of acquisition with reference to original
shares/debentures.
(2AA). Conversion to LLP, the cost of original security.
(2AB). In case of ESOP , market value at the time of issue.
(2C/2D/2E). In case of merger, book value of the demerged company as reduced by cost of
original shares ,also to apply for Co- operative banks.
(3)In case of holding & subsidiary company transactions cost of original acquisition.
(4) Any fair market value consider u/s 56, the same will be the cost of acquisition
Depreciable Assets Sec.50
(i)Any excess of full consideration over WDV of block of assets plus value of any assets
acquired during the year, to be consider capital gain.
(ii)If WDV value of block is nil due to transfer of all block assets, WDV at the beginning of the
year will be considered.
In case of depreciable assets -WDV will be the cost of acquisition. Sec. 50A
Slump sale Sec. 50B
Sale to be considered as long capital assets

Any undertaking if held not more than 36 month to be considered short term capital
assets

-Net worth will be taken as a cost of acquisition

-Net worth to be certified
Stamp Valuation -Sec. 50C(1)- In case of land and /or building , stamp valuation adopted or assessed or assessable
deemed to be full value of consideration.

(2)-where assessee claims stamp value exceeds FMV and such value not disputed in any
appeal the assessing officer may refer valuation to the valuation officer.
(3)- if valuation officer value higher, then stamp duty valuation shall be taken as a full value
If consideration not ascertainable FMV shall be taken as full value. Sec. 50D
Advance money received on any previous occasion to be deducted from the computation of
cost of acquisition. Sec. 51
Capital Gain Tax -EXEMPTIONS
Profit on sale of property used for residence Sec.54 (1)
-Transfer of long term building or lands appurtenant thereto and being residential house and
income chargeable under the head income from house property & assesse being individual or
HUF has purchased within the a period of one year before or two year after the date of transfer
or constructed within a period of 3 year one residential house in India , then Charge excess of
capital gain over the cost of purchase / construction and for sale of new assets within 3 years,
cost will be taken nil.
-No tax if capital gain equal or less than cost of purchase / constructed & cost of new assets to
be reduced by capital gain for sale within 3 years for calculation of capital gain.
(2) -the amount of capital gain not appropriated for purchase before one year or not utilized
Before filling the return the amount shall be deposited in accounts with such banks as specified
before due date of filing return and utilized as per scheme.
-The amount so deposited will be considered a cost of new assets together with other cost of
purchase / consideration if utilized.
If amount so deposited not utilized within the period specified (2/3 yrs) amount not utilized will
be taxable after expiring of 3yrs. and amount can be withdrawn the amount so deposited
Land used for agriculture purpose Sec. 54B

Transfer of land being used for agriculture purpose in two year immediately preceding by
assesses / his parents / HUF and purchased any other land being used for agriculture
purpose within two years, exemption in the same manner as laid dawn u/s 54.

Compulsory acquisition of land and building.- Sec. 54D-Transfer under compulsory acquisition of land or building or any right in L&B forming part of
any industrial undertaking and was being used for such undertaking in two years immediately
preceding and within 3 yrs purchased / constructed any other L&B for shifting or setting up
another industrial undertaking capital gain to be taxed as provided u/s 54.
Capital gain invested in certain bonds Sec. 54EC

Capital gain if invested within a period of 6 months with lock in period of 3 years in
specified bonds (infrastructure bonds) upto Rs 50 Lakhs in total

Capital gain invested in residential house.- Sec. 54F

(1) (a)Any capital gain on long term assets not being residential house of individual/HUF and
purchased before one year or after two year or constructed within 3 years one residential house
in India ,the capital gain will be taxed as under.
-If the cost of new assets is more than the net consideration of original assets no tax
-If the cost of new assets is less than the net consideration than tax same proportion of capital
gain as the cost of new assets bear to the net consideration of original assets.
(b) Income from such residential house (other than one owned on the date of
original assets) is chargeable under head income from house property.

transfer of

(2) if assesee purchase within 2 years or constructed within 3 years of original transfer a
residential house other than new assets whose income chargeable under income from house
property, exempt capital gain to be taxed in the year of purchased or construction.
(3) if new asset transferred within 3 years of it purchases/constructed capital gain exempted to
be
(4) procedure of bank deposited apply for net consideration.
Shifting of industrial undertaking from urban area Sec. 54G

Capital gain on capital assets being machinery or plant or building or land or any right in
L&B of industrial undertaking situated in an urban and transfer effected due to such
shifting to any area other than urban and assessee within one year before or 3 years
after of transfer purchased / acquired / constructed P&M , Land , building and incurred
other expenses specified for purpose of such shifting, than capital gain to be treated as
under

If capital gain in excess of the above cost, difference will be treated as capital gain.
-If capital gain is equal or less than the above cost capital gain nil.
-The lock in period of 3 years to be

considered for capital gain on transfer of new assets.

-Procedure of bank deposit of capital gain not utilized before filling of return apply in this case
also Shifting industrial undertaking from urban area to any special economic zone Sec. 54 GA(provision similar to 54G)
Sec. 54GB Capital gain of long term residential property include land & building by
individual /HUF and utilises net consideration in equity share of the eligible company before due
date of Filing return u/s 139(1) AND The company utilises this amount for new asset within one
year of subscription then Tax on capital gain will be proportionate if cost of new assets is lower
than net consideration or nil if cost of new assets is equal or higher than net consideration.
Eligible Company:

It is a new formed Indian company after 1st April of relevant previous year It is a
manufacturing company.

Assessees share investment or voting right, more than 50%.

it is a SME

New assets new plant & machinery

*Company may follow the procedure of bank deposit if not purchases new assets before due
date of filing the return.
In case of transfer by compulsory acquisition under any law, period of investment to be
reckoned from the date of the receipt of compensation. Sec. 54H
Cost of improvement:- Sec . 55 (1)

Goodwill/ right etc.

Before 1st April 1981

Expenses deductable under any head

NIL
-NIL
-NIL

(2) Cost of acquisition

(a)- Goodwill/right

In case of purchase

In other case

purchase price
NIL

(aa) In case of addition of securities

if issue without any cost

NIL

Issued with cost

actual cost

In case renouncement
with nil price
With cost

-NIL
-Actual cost price

(b) Any other capital assets

property acquired before 1st April 1981 actual cost of acquisition or FMV as on 1st

April 1981 at the option of assessee

In case of property distributed by company FMV on the date of distribution.

In case of share conversion etc. cost with reference to the cost of original
shares.
where cost of previous owner can not be ascertained FMV.
For ascertaining FMV , A.O. may refer to valuation officer if- Sec. 55A-

A.O. is of opinion that value claimed is at variance with the registered valuer valuation.

A.O. is of opinion that FMV exceed any certain %age or value an prescribed or it is
necessary to do so.

Capital Assets Sec. 2(14)

Property of any kind held by assessee but does not include
Stock in trade, consumable stores or raw material held for business.
Personal effects I e movable property include wearing apparels and furniture held for personal
use but exclude jewellery ,drawings, art work etc.
Agriculture land not situated within municipal area with population not less than 10,000 as per
preceding census and area within such distance not more than 2/6/8 K.M. from local limit of with
population more than 10,000/one lakh/ten lakhs
Gold bond(1977)/defence bond(1980)
Special deposit bond 1991 Gold deposit bond 1999
Short term capital assets Sec. 2(42A)

Capital assets held not more than 36 months

Securities listed in RSE or

units of equity oriented funds or units of UTI or Zero

coupon bonds held not more than 12 months.

Applicable Tax: Sec. 111A
Short term

Equity shares in a company, or units of business trust & sale subject to STT , tax @
15%.

In case of resident individual & HUF , total Income (excluding STCG) is below taxable
limit. STCG will be reduced to that extent .

Other short term gain , normal tax

Deduction under chapter VI-A & rebate u/s 88 from income excluding STCG.

Tax on LTCG Sec. 112

20 % for resident individual / HUF , domestic company and any other resident person

In case of resident individual & HUF benefit of deduction for income below taxable limit
available.

In case of non-resident( other than company ) or foreign company

 unlisted security @ 10% without index benefit.

Other assets ,tax @ 20% of capital gain with index benefit.

In case of listed securities ( other than a unit ) or Zero coupon bonds , LTCG tax limited
to 10 % Without index benefit

*Deduction of chapter VI-A and rebate u/s 88 from income excluding LTCG
LTCG on equity share in a company or unit of equity oriented funds and such transaction
subject to STT, fully exempted Sec. 10(38)
-Such gain to be considered for MAT (115JB).
- See more at: http://taxguru.in/income-tax/capital-gain-tax-income-tax-provisionslatest.html#sthash.fiPEZWVA.dpuf