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What is Mode of computation? Section 48 of Income Tax Act 1961

Mode of computation is defined under section 48 of Income Tax Act 1961. Provisions under this section are:

Section 48 of Income Tax Act "Mode of computation"

Section 48. The income chargeable under the head "Capital gains" shall be computed, by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset the following amounts, namely :-

(i) expenditure incurred wholly and exclusively in connection with such transfer;

(ii) the cost of acquisition of the asset and the cost of any improvement thereto:

Provided that in the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures, and the capital gains so computed in such foreign currency shall be reconverted into Indian currency, so, however, that the aforesaid manner of computation of capital gains shall be applicable in respect of capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or debentures of, an Indian company :

 

Provided further that where long-term capital gain arises from the transfer of a long-term capital asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the words "cost of acquisition" and "cost of any improvement", the words "indexed cost of acquisition" and "indexed cost of any improvement" had respectively been substituted:

Provided also that nothing contained in the second proviso shall apply to the long-term capital gain arising from the transfer of a long-term capital asset being bond or debenture other than capital indexed bonds issued by the Government :

Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer shall be deemed to be the full value of consideration received or accruing as a result of transfer for the purposes of this section :

Provided also that no deduction shall be allowed in computing the income chargeable under the head "Capital gains" in respect of any sum paid on account of securities transaction tax under Chapter VII of the Finance (No. 2) Act, 2004.

Explanation.-For the purposes of this section,-

(i) "foreign currency" and "Indian currency" shall have the meanings respectively assigned to them in section 2 of 95[the Foreign Exchange Management Act, 1999 (42 of 1999)];

(ii) the conversion of Indian currency into foreign currency and the reconversion of foreign currency into Indian currency shall be at the rate of exchange prescribed in this behalf;

(iii) "indexed cost of acquisition" means an amount which bears to the cost of acquisition the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on the 1st day of April, 1981, whichever is later;

(iv) "indexed cost of any improvement" means an amount which bears to the cost of improvement the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place;

(v) "Cost Inflation Index", in relation to a previous year, means such Index as the Central Government may, having regard to seventy-five per cent of average rise in the 96[Consumer Price Index for urban non-manual employees] for the immediately preceding previous year to such previous year, by notification97 in the Official Gazette, specify, in this behalf.

   
 

Income Tax Act 1961

What is Capital gains? Section 45 of Income Tax Act 1961

What is Capital gains on distribution of assets by companies in liquidation? What is Capital gains on purchase by company of its own shares or other specified securities? Section 46 and 46a of Income Tax Act 1961

What are the Transactions not regarded as transfer? Section 47 of Income Tax Act 1961

What is Withdrawal of exemption in certain cases? Section 47A of Income Tax Act 1961

What is Mode of computation? Section 48 of Income Tax Act 1961

What is Cost with reference to certain modes of acquisition? Section 49 of Income Tax Act 1961

What is Special provision for computation of capital gains in case of depreciable assets? Section 50 of Income Tax Act 1961

What is Special provision for cost of acquisition in case of depreciable asset? What is Special provision for computation of capital gains in case of slump sale? Section 50A and 50B of Income Tax Act 1961

What is Special provision for full value of consideration in certain cases? Section 50C of Income Tax Act 1961

What is Fair market value deemed to be full value of consideration in certain cases Advance money received? Section 50D and 51 of Income Tax Act 1961

 

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