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COMPARISON OF DTC,

2010 WITH IT ACT, 1961

CAPITAL GAINS

eMBA Finance Group

8

Ekta Jaisingh 12025

Manan Bhayani 12053Pooja Mittal 12085

Vrajesh Thakker

12161

Zinal Vora 12164

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CAPITAL GAINS

Any profit or gains arising from the transfer of capital assetsis taxable under the head capital gains in the previous year inwhich the transfer has taken place.

Conditions

There should be a capital asset.

The capital asset should be transferred by the assessee.

Such transfer should take place during the previous year.

The profits or gains should arise as a result of this transfer.

Such profit or gain should not be exempted from tax undersections 54, 54B, 54D, 54EC, 54F and 54G & 54GA.

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SECTION 54Profit on sale of property used

for residence.

IT ACT, 1961

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In the case of an assessee being an individual or a Hindu

undivided family, the capital gain arises from the transfer of a long-

term capital asset being buildings or lands appurtenant thereto, and

being a residential house, the income of which is chargeable under

the head Income from house property.

The assessee has within a period of

one year before or

two years after the date on which the transfer took place purchased,

or has within a period of three years after that date constructed, a

residential house, then,

instead of the capital gain being charged to income-tax as income

of the previous year in which the transfer took place, it shall be dealt

with in accordance with the provisions of this section.

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(i) if the amount of the capital gain is greater than the cost of the

residential house so purchased or constructed, then

the difference between the amount of the capital gain and the cost

of the new asset shall be charged under section 45 as the income

of the previous year; For the purpose of computing in respect of the new asset any

capital gain arising from its transfer within a period of three years of

its purchase or construction, as the case may be, the cost shall be

nil; or

(ii) if the amount of the capital gain is equal to or less than the cost ofthe new asset, then

the capital gain shall not be charged under section 45;

For the purpose of computing in respect of the new asset any capital

gain arising from its transfer within a period of three years of its

purchase or construction, as the case may be, the cost shall be

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The amount of the capital gain which is not appropriated by the

assessee

towards the purchase of the new asset made within one year before

the date on which the transfer of the original asset took place,

or which is not utilised by him for the purchase or construction of thenew asset before the date of furnishing the return of income under

section 139,

shall be deposited by him before furnishing such return in an

account in any such bank or institution as may be specified in, and

utilised in accordance with, any scheme which the CentralGovernment may, by notification in the Official Gazette, frame in this

behalf.

Such return shall be accompanied by proof of such deposit.

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For the purposes of sub-section (1), the amount, if any, already

utilised by the assessee for the purchase or construction of the new

asset together with the amount so deposited shall be deemed to be

the cost of the new asset :

Provided that if the amount deposited under this sub-section isnot utilised wholly or partly for the purchase or construction of the

new asset within the period specified in sub-section (1), then,

(i) the amount not so utilised shall be charged under section 45 as

the income of the previous year in which the period of three years

from the date of the transfer of the original asset expires; and (ii) the assessee shall be entitled to withdraw such amount in

accordance with the scheme aforesaid.

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Section 54 B

Capital gain on transfer of land used foragricultural purposes not to be charged in

certain cases.

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From the transfer of a capital asset being land which,

In the two years immediately preceding the date on which the transfer took

place, was being used by the assessee or a parent of his for agricultural

purposes,

and the assessee has, within a period of two years after that date,

purchased any other land for being used for agricultural purposes, then,

instead of the capital gain being charged to income tax as income of the

previous year in which the transfer took place, it shall be dealt with in

accordance with the following provisions of this section,

(i) if the amount of the capital gain is greater than the cost of the land sopurchased, the difference between the amount of the capital gain and the

cost of the new asset shall be charged under section 45 as the income of

the previous year;

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For the purpose of computing in respect of the new

asset any capital gain arising from its transfer within a

period of three years of its purchase, the cost shall be

nil; or

(ii) if the amount of the capital gain is equal to or less

than the cost ofthe new asset, the capital gain shall not

be charged under section 45; and for the purpose of

computing in respect of the new asset any capital gainarising from its transfer within a period of three years of

its purchase, the cost shall be reduced, by the amount of

the capital gain.

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The amount of the capital gain which is not utilised by the assessee for thepurchase of the new asset before the date of furnishing the return of income

under section 139, shall be deposited by him before furnishing such in an

account in any such bank or institution as may be specified in, and utilised in

accordance with, any scheme which the Central Government may, by

notification in the Official Gazette, frame in this behalf and such return shall

be accompanied by proof of such deposit; and, for the purposes ofsubsection (1), the amount, if any, already utilised by the assessee for the

purchase of the new asset together with the amount so deposited shall be

deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is notutilised wholly or partly for the purchase of the new asset within the period

specified in sub-section (1), then,

(i) the amount not so utilised shall be charged under section 45 as the

income of the previous year in which the period of two years from the date

of the transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw such amount in accordance

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Long term capital gain

exemption

u/s 54 u/s 54B

a. Who can claim exemption Individual/HUF Individual

b. Eligible assets sold A residential

House property

(minimum holding

period 3 year)

Agriculture land

which has

been used by

assessee himself

or by his parents

for agriculture

purposes duringlast 2 yrs of

transfer

c. Assets to be acquired for

exemption

Residential house

property

Another agriculture

land

(urban or rural)

d. Time limit for acquiring the new

assets

Purchase :1 year

back or 2 years

forward,

Construction: 3years forward

2 yrs forward

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Long term capital gain

exemption

u/s 54 u/s 54B

e. Exemption Amount Investment in

the new assetsor capital gain,

which ever is

lower

Investment in

the agricultureland or capital

gain, which ever

is lower

f. Whether "Capital gain

deposit account scheme"

applicable

Yes Yes

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SECTION 54D: CAPITAL GAIN ON

COMPULSORY ACQUISITION OF LANDS AND

BUILDINGS NOT TO BE CHARGED IN CERTAIN

AREAS.Any Capital Gain arising to an individual out ofcompulsory acquisition of L&B under any law ofCapital Asset shall be exempt to an extent such capital

gain is invested in

1.Purchase of another residential property within 1year or 2 years after the due date of transfer of the

property sold and/or

2.Construction of residential house property within aperiod of 3 years from the date of transfer

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Provided that the new asset purchased orreconstructed is not transferred within a period of 3

years from the date of acquisition.

If the new asset is sold within a period of 3 yearsfrom the date of its acquistion then:

Cost of acquisition of this asset shall be reduced by

the amount of capital gain.

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QUANTUM OF DEDUCTION

Capital Gain will be charged in accordance with

the following provisions:

1.If the entire amount is equal to or less than thecost of new house, then the entire capital Gain

shall be exempt.

2.If the amount of capital gain is greater than the

cost of the house then the cost of the new house

shall be allowed as an exemption

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SCHEME

An alternative form of deposit given by the IT ACT.

Under the scheme

1.The amount of the capital gain must be

invested in the CGAC before the due date offurnishing the return.

2.Such a proof must be attached with the IT

return

3.If default, it will be treated as long term capitalgain in the 3rd year from the date of sale.

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SECTION 54E:CAPITAL GAIN ON

TRANSFER OF CAPITAL ASSETS NOT TO

BE CHARGED IN CERTAIN CASESWhole or part of net consideration is invested or deposited

by the assessee in specified assets within a period of sixmonths afterthe date of transfer(1st day of April 1992)

1.If the entire amount of net consideration is less than the

cost of new asset, then the entire capital Gain shall beexempt.

2.If the amount of net consideration is greater than the cost

of new asset then the cost of the new asset shall be allowedas an exemption

Providedoriginal asset transferred after 28th February 1983

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SPECIFIED ASSETS

a) Where original asset is transferred before 1stMarch 1979

b) Where original asset is transferred after 28th

February 1979

c) Where original asset is transferred after 28thFebruary 1983

d) Where the original asset is transferred after the

31st March 1986.

e) Where the original asset is transferred after 31stmarch 1989.

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RELIEF OF ROLLOVER OF

INVESTMENT ASSETAny Long term Capital Gain arising to an individualor HUF out of rollover of any original investment

asset shall be exempt based on computation by a

formula.

The deduction computed shall not exceed the

amount of capital gain arising from transfer of

investment asset.

Any amount withdrawn from the account under

CGDS shall be utilised within a period of one month

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FORMULA DETAILSDeduction was as follows:

A * B+C+DE

A=Amount if capital gains arising out fromtransfer of original investment asset

B=the amount invested for purchase orconstruction of new asset-1 year duration

C=the amount invested for purchase orconstruction of new asset-6 months

D-Amount invested in the capital gain depositscheme framed by government.

E-Net consideration

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IT ACT, 1961 DTC, 2010

It complies investment in capital assets It complies investment assets

The new asset shall not be transferred

within three years from the end of the

financial year in which the asset is

acquired

The new asset shall not be transferred

within one year from the end of the

financial year in which the asset is

acquired

Original asset usage must be 2 years Original asset usage must be atleast 1

year

Quantum of deduction method -2

conditions

Quantum of deduction based on a

formula.

DIFFERENCES BETWEEN PROVISIONS OF IT

ACT, 1961 AND DTC, 2010

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SEC 54 EA

Capital gain on transfer oflong-term capital assets not

to be charged in the caseof investment inspecified

securities

When the capital gain arises from the transfer of

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When the capital gain arises from the transfer of

long term capital asset, capital gain should be dealt

with in accordance of following provision

If the cost of the specified securities is not less than thenet consideration in respect of the original asset, thewhole of such capital gain shall not be charged under

section 45

If the cost of the specified securities is less than the netconsideration in respect of the original asset, so much ofthe capital gain as bears to the whole of the capital gain

the same proportion as the cost of acquisition of thespecified securities bears to the net consideration shallnot be charged under section 45.

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Where the specified securities are transferred

or converted into money

Securities are transferred or converted within the periodof three years from the date of acquisition.

The amount of capital gain arising from the transfer ofthe original asset not charged under section 45.

It shall be deemed to be income chargeable under thehead ofCapitalGain relating to long-term capital assets

of the previous year in which the specified securities are

transferred or converted into money

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Where the cost of the specified securities has been taken into

account a rebate with reference to such cost shall not be

allowed under section 88

For the purposes of this section

Cost, in relation to any specified securities, means the

amount invested in such specified securities out of the net

consideration received or accruing as a result of the transfer

of the original asset .

Net consideration, in relation to the transfer of a capital

asset, means the full value of the consideration received or

accruing as a result of the transfer of the capital asset as

reduced by the expenditure incurred wholly and exclusively in

connection with such transfer.

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SEC -54EB

Capital gain on transfer of long-term capital assets not to be

charged in certain cases.

Where the capital gain arises from the transfer of a

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Where the capital gain arises from the transfer of a

long-term capital asset should be dealt with in

accordance of following provision

If the cost of the long-term specified asset is not less than the

capital gain arising from the transfer of the original asset, the

whole of such capital gain shall not be charged u/s 45

If the cost of the long-term specified asset is less than the

capital gain arising from the transfer of the original asset, so

much of the capital gain as bears to the whole of the capital

gain the same proportion as the cost of acquisition of the

long-term specified asset bears to the whole of the capitalgain, shall not be charged under section 45.

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Where the long-term specified asset is transferred or

converted into money

Specified asset are transferred or converted within the

period of seven years from the date of acquisition.

The amount of capital gain arising from the transfer ofthe original asset not charged under section 45.

It shall be deemed to be income chargeable under the

head of Capital Gain relating to long-term capital assets

of the previous year in which the specified securities are

transferred or converted into money

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Where the cost of the long-term specified asset

has been taken into account

Where the cost of the long-term specified asset has

been taken into account, a deduction from the

amount of income-tax with reference to such cost

shall not be allowed under section 88.

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54EC:-CAPITAL GAIN NOT TO BE

CHARGED ON INVESTMENT IN

CERTAIN BONDS.Where the capital gain arises from the transfer of a long-

term capital asset and the assessee has at any time within

a period of six months after the date of such transfer,

invested the whole or any part of capital gains in the long-term specified asset.

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QUANTUM OF DEDUCTIONS:-

a) If the cost of the long-term specified asset is not less than the capital

gain arising from the transfer of the original asset, the wholeof such

capital gain shall not be charged under section 45 ;

b) If the cost of the long-term specified asset is less than the capital gain

arising from the transfer the original asset, so much of the capital gain

as bears to the whole of the capital gain the same proportion as the

cost of acquisition of the long-term specified asset bears to the whole

of the capital gain, shall not be charged under section 45

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(2) Where the long-term specified asset is transferred or converted(otherwise than by transfer) into money at any time within a period of

three years from the date of its acquisition then :-

The amount of capital gains arising from the transfer of the originalasset not charged under section 45 on the basis of the cost of such

long term specified asset as provided in clause (a) or, as the case may

be, clause (b) of sub-section(1) shall be deemed to be the income

chargeable under the head Capital gains relating to long-term capital

asset of the previous year in which the long-term specified asset istransferred or converted (otherwise than by transfer)into money

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3) Where the cost of the long-term specified asset has been taken

into account for the purposes of clause (a) or clause (b) of sub-

section (1),

(a) a deduction from the amount of income-tax with reference to such

cost shall not be allowed under section 88 for any assessment

year ending before the 1st day of April, 2006

(b) a deduction from the income with reference to such cost shall not

be allowed under section 80C for any assessment year beginning

on or after the 1st day of April, 2006.

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Long-term capital asset for this sec 54EC

Making any investment on or after the 1st day of April, 2007

means any bond, redeemable after three years and issued on or

after the 1st day of April, 2007 by the National Highways Authority

of India constituted under section 3 of the National Highways

Authority of India Act, 1988(68 of 1988) or by the RuralElectrification Corporation Limited, a company formed and

registered under the Companies Act, 1956

TRANSFER OF CERTAIN CAPITAL

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TRANSFER OF CERTAIN CAPITAL

ASSETS NOT TO BE CHARGED IN CASE

OF

INVESTMENT IN RESIDENTIAL HOUSEAny Capital Gain arising to an individual or HUF

arising out of transfer of Long term capital asset shall be

exempt to an extent such capital gain is invested in

1.Purchase of another residential house within 1 year or

2 years after the due date of transfer of the property

sold and/or

2.Construction of residential house property within a

period of 3 years from the date of transfer

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CONDITIONSa) The assessee owns more than one residential house, other

than the new asset, on the date of transfer of the original

asset; or

purchases any residential house, other than the new asset,

within a period of one year after the date of transfer of the

original asset; orconstructs any residential house, other than the new asset,

within a period of three years after the date of transfer of the

original asset; and

b) the income from such residential house, other than the one

residential house owned on the date of transfer of the original

asset, is chargeable under the head Income from house

property.

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Quantum of Deduction

If the cost of the new asset is not less than the net consideration in

respect of the original asset, the whole of such capital gain shall not

be charged under section 45

If the cost of the new asset is less than the net consideration inrespect of the original asset, so much of the capital gain as bears to

the whole of the capital gain the same proportion as the cost of the

new asset bears to the net consideration, shall not be charged

under section 45.

TRANSFER OF ASSETS IN CASES OF SHIFTING OF

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TRANSFER OF ASSETS IN CASES OF SHIFTING OF

INDUSTRIAL

UNDERTAKING FROM URBAN AREA.

Any Capital Gain arising out of transfer of capital asset for the purpose of

the business of an industrial undertaking situated in an urban area shallbe exempt to an extent such capital gain is invested (within a period of 1

year or before 3)

a)purchased new machinery or plant for the purposes of business of theindustrial undertaking in the area to which the said undertaking is shifted ;

b) acquired building or land or constructed building for the purposes of his

business in the said area ;

c) shifted the original asset and transferred the establishment of such

undertaking to such area; andd) incurred expenses on such other purpose as may be specified in a

scheme framed by the Central Government for the purposes of this

section

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QUANTUM OF DEDUCTION

If the amount of the capital gain is greater than the cost and

expenses

incurred in relation to all or any of the purposes mentioned in

clauses

(a) to (d), then difference between the amount of the capital gain and the cost of

the new asset shall be charged under section 45 as the income

of the previous year ;

For the purpose of computing in respect of the new asset any

capital gain arising from its transfer within a period of three yearsof its being purchased, acquired, constructed or transferred, as

the case may be, the cost shall be nil ; or

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If the amount of the capital gain is equal to,or less than, the cost of the new asset, then

The capital gain shall not be charged under

section 45 ; and For the purpose of computing in respect of

the new asset any capital gain arising fromits transfer within a period of three years of

its being purchased, acquired, constructed ortransferred, as the case may be, the costshall be reduced by the amount of the capitalgain.

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SEC 54 ED

Capital gain on transfer ofcertain listed securities or

unit not to be charged incertain cases.

Where the capital gain arises from the

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Where the capital gain arises from the

transfer of a long-term capital asset, being

listed securities or unit

If the cost of the specified equity shares is not lessthan the capital gain arising from the transfer of theoriginal asset, the whole of such capital gain shall notbe charged under section 45

If the cost of the specified equity shares is less thanthe capital gain arising from the transfer of the originalasset, so much of the capital gain as bears to the

whole of the capital gain the same proportion as thecost of the specified equity shares acquired bears tothe whole of the capital gain shall not be chargedunder section 45.

Explanation For the purposes of

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Explanation.For the purposes of

this sub-section,

Eligible issue of capital means an issue of

equity shares which satisfies the following

conditions, namely:

The issue is made by a public companyformed and registered in India;

The shares forming part of the issue are

offered for subscription to the public;

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Listed securities shall have the same

meaning.

Unit shall have the meaning assigned to it in

clause

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Where the specified equity shares are sold orotherwise transferred within a period of one yearfrom the date of their acquisition, the amount ofcapital gain arising from the transfer of the original

asset not charged under section 45 on the basisof the cost of such specified equity shares.

Shall be deemed to be the income chargeable

under the head Capital gains relating to long-term capital assets of the previous year in whichsuch equity shares are sold or otherwisetransferred.

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SEC 54 H

Extension of time for acquiring

new asset or depositing or

investing amount of

capital gain.

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Where the transfer of the original asset is by way ofcompulsory acquisition under any law .

The amount of compensation awarded for such acquisition isnot received by the assessee on the date of such transfer.

The period for acquiring the new asset by the assesseereferred to in those sections or, as the case may be, the periodavailable to the assessee under those sections for depositingor investing

The amount of capital gain in relation to such compensationas is not received on the date of the transfer, shall bereckoned from the date of receipt of such compensation.

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THANK YOU