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What is transfer,Not Transfer,capital Gain - Taxation
What is transfer
1. the sale, exchange or relinquishment of the asset. (Tenancy rights)
2. the extinguishment of any rights therein. Extinguishment covers destruction of the assets. e.g. Termination of a lease; Redemption of preference shares/debentures.
3. the compulsory acquisition of the asset by the Govt.
4. Conversion of asset into stock-in-trade.
5. Possession of any immovable property in part performance of a contract.
Date of possession : 1-1-2017 Date of registration : 1-4-2017 YOC : 16-17
6. any transaction which has the effect of transferring, or enabling the enjoyment of, any immovable property. [It is by becoming a member in a co-operative society, company or other association of persons]
7. Maturity or redemption of zero coupon bond.
Note : The capital gain arises only on “transfer” of a capital asset i.e. where there is no ‘transfer’ there is no capital gain.
E SRCC (Asset) or E : Exchange sale relinquishment conversion compulsory acquisition or extinguishment of any rights therein.
What is “not transfer”
1. Transfer of assets under a gift or will or inheritance.
2. Refer extra topics.
Note 1: Since the above said transactions are not treated as transfer, hence, no capital gain arises.
P1: X owns 1,000 partly paid-up shares in a company. These shares have been forfeited by the company for non-payment of call money. X wants to claim Rs 8,000 (i.e., amount paid at the time of application and allotment) as short-term capital loss. Is the claim of X tenable ?
Hint: Yes. Forfeiture of shares amounts to transfer u/s 2(47). Transfer in relation to capital asset includes extinguishment of any rights therein. In the above question since X’s rights in the shares has extinguished, therefore X is entitled to claim short term capital loss of Rs 8,000. If there is a forfeiture of application money shares do not come into existence. There do not exists capital assets. Therefore no loss arises under the head capital gain.
Computation of Capital Gain
Full value of consideration | xxx | |
(-) Cost of Acquisition (COA) | (xxx) | |
(-) Cost of Improvement (COI) | (xxx) | |
(-) Expenses on transfer | (xxx) | |
Capital Gain |
| xxx |
Note 1: In case of transfer of long term capital asset, indexed cost of acquisition and indexed cost of improvement shall be subtracted.
Explanation of formula for indexation
1. Indexed cost of acquisition
2. Indexed cost of improvement
Note 1: Indexation is available only on long term capital asset.
Note 2: Indexation is not available in case of long term capital asset being bonds or debentures. [Proviso 3 to section 48]. However indexation benefit is available in case of Sovereign Gold Bond.
Note 2: Indexation is not available in case of long term capital asset being bonds or debentures. [Proviso 3 to section 48]. However indexation benefit is available in case of Sovereign Gold Bond.
Full vaLue of consideration
1. Full value of consideration means amount received or receivable on transfer of capital asset. It does not mean market value. Where the consideration is received in installment in different years, the entire value of consideration is taken into account in computing capital gain since capital gain is taxable in the year of transfer. (YOC = YOT)
If consideration is received in kind, then full value of consideration is fair market value of the asset exchanged.
2. Section 50C. Full value of consideration in case of transfer of immovable property
Where the consideration on transfer of land or building is less than the value adopted or assessed or assessable by any stamp valuation authority for the purpose of payment of stamp duty, the value so adopted shall be deemed to be the full value of the consideration.
In other words, full value of consideration is higher of sale consideration or value adopted by the Stamp Valuation Authority (Circle Rate).
Note : Similar provisions has been added in Section 43CA under the PGBP chapter.
The document What is transfer,Not Transfer,capital Gain - Taxation | Income Tax for assessment (Inter Level) is a part of the Taxation Course Income Tax for assessment (Inter Level).
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FAQs on What is transfer,Not Transfer,capital Gain - Taxation - Income Tax for assessment (Inter Level)
| 1. What is a transfer in terms of taxation? |  |
Ans. In taxation, a transfer refers to the act of moving ownership or rights of an asset, property, or financial instrument from one person or entity to another. This can include sales, gifts, inheritances, or any other disposal of property.
| 2. What is considered as not a transfer for taxation purposes? | |
Ans. Not every transaction or movement of property is considered a transfer for taxation purposes. For example, if property is transferred between spouses, it is often exempt from taxation. Similarly, transfers made to charitable organizations or government bodies may also be exempt.
| 3. What is capital gain in taxation? | |
Ans. Capital gain in taxation refers to the profit or gain realized from the sale or disposal of a capital asset, such as stocks, bonds, real estate, or other investments. It is calculated as the difference between the selling price of the asset and its original purchase price.
| 4. How is capital gain taxed? | |
Ans. Capital gains are usually subject to taxation, and the tax rate can vary depending on the jurisdiction and the holding period of the asset. In many countries, capital gains are categorized as either short-term or long-term, with different tax rates applied to each. Short-term gains, typically from assets held for less than a year, are often subject to higher tax rates than long-term gains.
| 5. Are there any exemptions or deductions available for capital gains tax? | |
Ans. Yes, there are often exemptions or deductions available for capital gains tax. Many jurisdictions provide a certain level of tax-free capital gains, typically for small-scale transactions. Additionally, specific types of investments, such as those made in certain government-approved funds or qualified small business stocks, may qualify for preferential tax treatment or exemptions. It is important to consult tax laws and regulations specific to your jurisdiction for accurate information on exemptions and deductions.
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Nov 16, 2024 Last updated |
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