COMPUTATION OF CAPITAL GAINS
Posted on 06-05-2016
COMPUTATION OF CAPITAL GAINS (Sec.48)
Capital gain is computed by deducting from the full value of consideration, for the transfer of a capital asset, the following:-
(a) Cost of acquisition of the asset(COA):- In case of Long Term Capital Gains, the cost of acquisition is indexed by a factor which is equal to the ratio of the cost inflation index of the year of transfer to the cost inflation index of the year of acquisition of the asset. Normally, the cost of acquisition is the cost that a person has incurred to acquire the capital asset. However, in certain cases, it is taken as following:
(i) When the capital asset becomes a property of an assessee under a gift or will or by succession or inheritance or on partition of Hindu Undivided Family or on distribution of assets, or dissolution of a firm, or liquidation of a company, the COA shall be the cost for which the previous owner acquired it, as increased by the cost of improvement till the date of acquisition of the asset by the assessee. (ii) When shares in an amalgamated Indian company had become the property of the assessee in a scheme of amalgamation, the COA shall be the cost of acquisition of shares in the amalgamating company.
(iii) Where the capital asset is goodwill of a business, tenancy right, stage carriage permits or loom hours the COA is the purchase price paid, if any or else nil.
(iv) The COA of rights shares is the amount which is paid by the subscriber to get them. In case of bonus shares, the COA is nil.