DEDUCTION OF TAX AT SOURCE

192. (1) Any person responsible for paying any income chargeable under the head “Salaries” shall, at the
time of payment, deduct income-tax on the amount payable at the average rate of income-tax
computed on the basis of the [rates in force] for the financial year in which the payment
is made, on the estimated income of the assessee under this head for that financial year.
[(1A) Without prejudice to the provisions contained in sub-section (1), the
person responsible for paying any income in the nature of a perquisite which is
not provided for by way of monetary payment, referred to in clause (2) of section
, may pay, at his option, tax on the whole or part of such income without making
any deduction therefrom at the time when such tax was otherwise deductible
under the provisions of sub-section (1).
(1B) For the purpose of paying tax under sub-section (1A), tax shall be determined
at the average of income-tax computed on the basis of the rates in force
for the financial year, on the income chargeable under the head “Salaries”
including the income referred to in sub-section (1A), and the tax so payable shall
be construed as if it were, a tax deductible at source, from the income under the
head “Salaries” as per the provisions of sub-section (1), and shall be subject to the
provisions of this Chapter.]
[(2) Where, during the financial year, an assessee is employed simultaneously
under more than one employer, or where he has held successively employment
under more than one employer, he may furnish to the person responsible for
making the payment referred to in sub-section (1) (being one of the said
employers as the assessee may, having regard to the circumstances of his case,
choose), such details of the income under the head “Salaries” due or received by
him from the other employer or employers, the tax deducted at source therefrom
and such other particulars, in such form and verified in such manner as may be
prescribed, and thereupon the person responsible for making the payment
referred to above shall take into account the details so furnished for the purposes
of making the deduction under sub-section (1).]

[(2A) Where the assessee, being a Government servant or an employee in a [company, co-operative
society, local authority, university, institution, association
or body] is entitled to the relief under sub-section (1) of section 89, he may
furnish to the person responsible for making the payment referred to in subsection
(1), such particulars, in such form and verified in such manner as may be
prescribed, and thereupon the person responsible as aforesaid shall compute the
relief on the basis of such particulars and take it into account in making the
deduction under sub-section (1).]
[Explanation.—For the purposes of this sub-section, “University” means a
University established or incorporated by or under a Central, State or Provincial
Act, and includes an institution declared under section 3 of the University Grants
Commission Act, 1956 (3 of 1956), to be a University for the purposes of that Act.]
[(2B) Where an assessee who receives any income chargeable under the head
“Salaries” has, in addition, any income chargeable under any other head of
income (not being a loss under any such head other than the loss under the head
“Income from house property”) for the same financial year, he may send to the
person responsible for making the payment referred to in sub-section (1) the
particulars of—
(a) such other income and of any tax deducted thereon under any other
provision of this Chapter;
(b) the loss, if any, under the head “Income from house property”,
in such form and verified in such manner as may be prescribed86, and thereupon
the person responsible as aforesaid shall take—
(i) such other income and tax, if any, deducted thereon; and
(ii) the loss, if any, under the head “Income from house property”,
also into account for the purposes of making the deduction under subsection
(1) :
Provided that this sub-section shall not in any case have the effect of reducing
the tax deductible except where the loss under the head “Income from house
property” has been taken into account, from income under the head “Salaries”
below the amount that would be so deductible if the other income and the tax
deducted thereon had not been taken into account.]
[(2C) A person responsible for paying any income chargeable under the head
“Salaries” shall furnish to the person to whom such payment is made a statement
giving correct and complete particulars of perquisites or profits in lieu of salary
provided to him and the value thereof in such form and manner as may be
prescribed.]

(3) The person responsible for making the payment referred to in sub-section (1)
[or sub-section (1A)] [or sub-section (2) or sub-section (2A) or sub-section (2B)]
may, at the time of making any deduction, increase or reduce the amount to be
deducted under this section for the purpose of adjusting any excess or deficiency
arising out of any previous deduction or failure to deduct during the financial
year.
(4) The trustees of a recognised provident fund, or any person authorised by the
regulations of the fund to make payment of accumulated balances due to
employees, shall, in cases where sub-rule (1) of rule 9 of Part A of the Fourth
Schedule applies, at the time an accumulated balance due to an employee is paid,
make therefrom the deduction provided in rule 10 of Part A of the Fourth
Schedule.
(5) Where any contribution made by an employer, including interest on
such contributions, if any, in an approved superannuation fund is paid to the
employee, [tax] on the amount so paid shall be deducted by the trustees of the
fund to the extent provided in rule 6 of Part B of the Fourth Schedule.
(6) For the purposes of deduction of tax on salary payable in foreign currency,
the value in rupees of such salary shall be calculated at the prescribed rate of
exchange.

Dividends.
194. The principal officer of an Indian company or a company which has
made the prescribed arrangements for the declaration and payment of
dividends (including dividends on preference shares) within India, shall, before
making any payment in cash or before issuing any cheque or warrant in respect
of any dividend or before making any distribution or payment to a shareholder,
[who is resident in India,] of any dividend within the meaning of sub-clause (a)
or sub-clause (b) or sub-clause (c) or sub-clause (d) or sub-clause (e) of clause (22)
of section 2, deduct from the amount of such dividend, income-tax 24 at the
rates in force :
[Provided that no such deduction shall be made in the case of a shareholder,
being an individual, if—
(a) the dividend is paid by the company by an account payee cheque; and(b) the amount of such
dividend or, as the case may be, the aggregate of
the amounts of such dividend distributed or paid or likely to be
distributed or paid during the financial year by the company to the
shareholder, does not exceed [two thousand five hundred] rupees:
Provided further that the provisions of this section shall not apply to such income
credited or paid to—
(a) the Life Insurance Corporation of India established under the Life
Insurance Corporation Act, 1956 (31 of 1956), in respect of any shares
owned by it or in which it has full beneficial interest;
(b) the General Insurance Corporation of India (hereafter in this proviso
referred to as the Corporation) or to any of the four companies
(hereafter in this proviso referred to as such company), formed by
virtue of the schemes framed under sub-section (1) of section 16 of
the General Insurance Business (Nationalisation) Act, 1972 (57 of
1972), in respect of any shares owned by the Corporation or such
company or in which the Corporation or such company has full
beneficial interest;
(c) any other insurer in respect of any shares owned by it or in which it
has full beneficial interest :]
[Provided also that no such deduction shall be made in respect of any dividends
referred to in section 115-O.]

[Winnings from lottery or crossword puzzle.

194B. The person responsible for paying to any person any income by way
of winnings from any lottery or crossword puzzle [or card game
and other game of any sort] in an amount exceeding [five thousand rupees]
shall, at the time of payment thereof, deduct income-tax thereon at the rates in
force :

[Provided that in a case where the winnings are wholly in kind or partly
in cash and partly in kind but the part in cash is not sufficient to meet the liability
of deduction of tax in respect of whole of the winnings, the person responsible
for paying shall, before releasing the winnings, ensure that tax has been paid in
respect of the winnings.]
[Winnings from horse race.
194BB. Any person, being a bookmaker or a person to whom a licence has
been granted by the Government under any law for the time being in
force for horse racing in any race course or for arranging for wagering or
betting in any race course, who is responsible for paying to any person any
income by way of winnings from any horse race in an amount exceeding [two
thousand five hundred rupees] shall, at the time of payment thereof, deduct
income-tax thereon at the rates in force.
Capital gains.
45. [(1)] Any profits or gains arising from the transfer of a capital asset76
effected in the previous year shall, save as otherwise provided in sections
77[***] 78[54, 54B, 79[***] 80[81[54D, 82[54E, 83[54EA, 54EB,] 54F 84[, 54G and 54H]]]]],
be chargeable to income-tax under the head “Capital gains”, and shall be deemed
to be the income of the previous year in which the transfer took place.
[(1A) Notwithstanding anything contained in sub-section (1), where any person
receives at any time during any previous year any money or other assets under an insurance from an
insurer on account of damage to, or destruction of, any
capital asset, as a result of—
(i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of
nature; or
(ii) riot or civil disturbance; or
(iii) accidental fire or explosion; or
(iv) action by an enemy or action taken in combating an enemy (whether
with or without a declaration of war),
then, any profits or gains arising from receipt of such money or other assets shall
be chargeable to income-tax under the head “Capital gains” and shall be deemed
to be the income of such person of the previous year in which such money or
other asset was received and for the purposes of section 48, value of any money
or the fair market value of other assets on the date of such receipt shall be
deemed to be the full value of the consideration received or accruing as a result
of the transfer of such capital asset.
Explanation.—For the purposes of this sub-section, the expression “insurer” shall
have the meaning assigned to it in clause (9) of section 286 of the Insurance Act,
1938 (4 of 1938).]
[(2) Notwithstanding anything contained in sub-section (1), the profits or gains
arising from the transfer by way of conversion by the owner of a capital asset
into, or its treatment by him as stock-in-trade of a business carried on by him
shall be chargeable to income-tax as his income of the previous year in which
such stock-in-trade is sold or otherwise transferred by him and, for the purposes
of section 48, the fair market value of the asset on the date of such conversion
or treatment shall be deemed to be the full value of the consideration received
or accruing as a result of the transfer of the capital asset.]
[(2A) Where any person has had at any time during previous year any
beneficial interest in any securities, then, any profits or gains arising from
transfer made by the depository or participant of such beneficial interest in
respect of securities shall be chargeable to income-tax as the income of the
beneficial owner of the previous year in which such transfer took place and shall
not be regarded as income of the depository who is deemed to be the registered
owner of securities by virtue of sub-section (1) of section 10 of the Depositories
Act, 1996, and for the purposes of—
(i) section 48; and
(ii) proviso to clause (42A) of section 2,
the cost of acquisition and the period of holding of any securities shall be
determined on the basis of the first-in-first-out method.
Explanation.—For the purposes of this sub-section, the expressions “beneficial
owner”, “depository” and “security” shall have the meanings respectively
assigned to them in clauses (a), (e) and (l) of sub-section (1) of section 2 of the
Depositories Act, 1996.]
[(3) The profits or gains arising from the transfer of a capital asset by a person
to a firm or other association of persons or body of individuals (not being a
company or a co-operative society) in which he is or becomes a partner or
member, by way of capital contribution or otherwise, shall be chargeable to tax
as his income of the previous year in which such transfer takes place and, for the
purposes of section 48, the amount recorded in the books of account of the firm,
association or body as the value of the capital asset shall be deemed to be the full
value of the consideration received or accruing as a result of the transfer of the
capital asset.
(4) The profits or gains arising from the transfer of a capital asset by way of
distribution of capital assets on the dissolution of a firm or other association of
persons or body of individuals (not being a company or a co-operative society)
or otherwisE, shall be chargeable to tax as the income of the firm, association
or body, of the previous year in which the said transfer takes place and, for the
purposes of section 48, the fair market value of the asset on the date of such
transfer shall be deemed to be the full value of the consideration received or
accruing as a result of the transfer.]
(5) Notwithstanding anything contained in sub-section (1), where the capital
gain arises from the transfer of a capital asset, being a transfer by way of
compulsory acquisition under any law, or a transfer the consideration for which
was determined or approved by the Central Government or the Reserve Bank of
India, and the compensation or the consideration for such transfer is enhanced
or further enhanced by any court, Tribunal or other authority, the capital gain
shall be dealt with in the following manner, namely :—
(a) the capital gain computed with reference to the compensation awarded
in the first instance94 or, as the case may be, the consideration
determined or approved in the first instance by the Central Government
or the Reserve Bank of India shall be chargeable as 95[income
under the head “Capital gains” of the previous year in which such
compensation or part thereof, or such consideration or part thereof,
was first received]; and (b) the amount by which the compensation or consideration is enhanced
or further enhanced by the court, Tribunal or other authority shall be
deemed to be income chargeable under the head “Capital gains” of the
previous year in which such amount is received by the assessee;
[(c) where in the assessment for any year, the capital gain arising from the
transfer of a capital asset is computed by taking the compensation or
consideration referred to in clause (a) or, as the case may be,
enhanced compensation or consideration referred to in clause (b),
and subsequently such compensation or consideration is reduced by
any court, Tribunal or other authority, such assessed capital gain of
that year shall be recomputed by taking the compensation or consideration
as so reduced by such court, Tribunal or other authority to be
the full value of the consideration.]
Explanation.—For the purposes of this sub-section,—
(i) in relation to the amount referred to in clause (b), the cost of
acquisition and the cost of improvement shall be taken to be nil;
(ii) the provisions of this sub-section shall apply also in a case where the
transfer took place prior to the 1st day of April, 1988;
(iii) where by reason of the death of the person who made the transfer, or
for any other reason, the enhanced compensation or consideration is
received by any other person, the amount referred to in clause (b)
shall be deemed to be the income, chargeable to tax under the head
“Capital gains”, of such other person.]
[(6) Notwithstanding anything contained in sub-section (1), the difference
between the repurchase price of the units referred to in sub-section (2) of
section 80CCB and the capital value of such units shall be deemed to be the
capital gains arising to the assessee in the previous year in which such
repurchase takes place or the plan referred to in that section is terminated and
shall be taxed accordingly.
Explanation.—For the purposes of this sub-section, “capital value of such units”
means any amount invested by the assessee in the units referred to in sub-section
(2) of section 80CCB.]
Capital gains on distribution of assets by companies in liquidation.
46. (1) Notwithstanding anything contained in section 45, where the assets of
a company are distributed to its shareholders on its liquidation99, such
distribution shall not be regarded as a transfer by the company for the purposes
of section 45.
(2) Where a shareholder on the liquidation of a company receives any money or
other assets from the company, he shall be chargeable to income-tax under
the head “Capital gains”, in respect of the money so received or the market value
of the other assets on the date of distribution, as reduced by the amount assessed
as dividend within the meaning of sub-clause (c) of clause (22) of section 2 and
the sum so arrived at shall be deemed to be the full value of the consideration for
the purposes of section 48.
[Capital gains on purchase by company of its own shares or other specified
securities.
46A. Where a shareholder or a holder of other specified securities receives any
consideration from any company for purchase of its own shares or other
specified securities held by such shareholder or holder of other specified
securities, then, subject to the provisions of section 48, the difference between
the cost of acquisition and the value of consideration received by the shareholder
or the holder of other specified securities, as the case may be, shall be deemed
to be the capital gains arising to such shareholder or the holder of other specified
securities, as the case may be, in the year in which such shares or other specified
securities were purchased by the company.
Explanation.—For the purposes of this section, “specified securities” shall have
the meaning assigned to it in Explanation to section 77A2 of the Companies Act,
1956 (1 of 1956).]
Transactions not regarded as transfer.
47. Nothing contained in section 45 shall apply to the following transfers :—
(i) any distribution of capital assets4 on the total or partial partition of a
Hindu undivided family;
(iii) any transfer of a capital asset under a gift6 or will or an irrevocable
trust :
Provided that this clause shall not apply to transfer under a gift or
an irrevocable trust of a capital asset being shares, debentures or
warrants allotted by a company directly or indirectly to its employees
under [any Employees’ Stock Option Plan or Scheme of the company
offered to such employees in accordance with the guidelines issued
by the Central Government in this behalf];]
(iv) any transfer of a capital asset by a company to its subsidiary company,
if—
(a) the parent company or its nominees hold the whole of the share
capital of the subsidiary company, and
(b) the subsidiary company is an Indian company;
[(v) any transfer of a capital asset by a subsidiary company to the holding
company, if—
(a) the whole of the share capital of the subsidiary company is held
by the holding company, and
(b) the holding company is an Indian company :]
[Provided that nothing contained in clause (iv) or clause (v) shall
apply to the transfer of a capital asset made after the 29th day of
February, 1988, as stock-in-trade;]
[(vi) any transfer, in a scheme of amalgamation12, of a capital asset by the
amalgamating company to the amalgamated company if the amalgamated
company is an Indian company;]
[(via) any transfer, in a scheme of amalgamation12, of a capital asset being
a share or shares held in an Indian company, by the amalgamating
foreign company to the amalgamated foreign company, if—
(a) at least twenty-five per cent of the shareholders of the amalgamating
foreign company continue to remain shareholders of the
amalgamated foreign company, and
(b) such transfer does not attract tax on capital gains in the country,
in which the amalgamating company is incorporated;]
(viaa) any transfer, in a scheme of amalgamation of a banking company
with a banking institution sanctioned and brought into force by the
Central Government under sub-section (7) of section 45 of the
Banking Regulation Act, 1949 (10 of 1949), of a capital asset by the
banking company to the banking institution.
Explanation.—For the purposes of this clause,—
(i) “banking company” shall have the same meaning assigned to it
in clause (c) of section 515 of the Banking Regulation Act, 1949 (10
of 1949);
(ii) “banking institution” shall have the same meaning assigned to it
in sub-section (15) of section 4515 of the Banking Regulation Act,
1949 (10 of 1949);]
16[(vib) any transfer, in a demerger, of a capital asset by the demerged
company to the resulting company, if the resulting company is an
Indian company;
(vic) any transfer in a demerger, of a capital asset, being a share or shares
held in an Indian company, by the demerged foreign company to the
resulting foreign company, if—
[Mode of computation.
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”48 and “Indian currency”48 shall have the meanings
respectively assigned to them in section 2 of the Foreign Exchange
Regulation Act, 1973 (46 of 1973);
(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 Consumer Price Index for urban nonmanual
employees for the immediately preceding previous year to
such previous year, by notification50 in the Official Gazette, specify, in
this behalf.]]

Advance money received.

51. Where any capital asset was on any previous occasion the subject of
negotiations for its transfer, any advance or other money80 received and
retained by the assessee in respect of such negotiations shall be deducted from
the cost for which the asset was acquired or the written down value or the fair
market value, as the case may be, in computing the cost of acquisition.

Profit on sale of property used for residence.

54. [(1)] Subject to the provisions of sub-section (2), where, 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”
(hereafter in this section referred to as the original asset), and 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 following provisions of this
section, that is to say,—
(i) if the amount of the capital gain [is greater than the cost of [the
residential house] so purchased or constructed (hereafter in this
section referred to as the new asset)], 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; and 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 of the
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
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
reduced by the amount of the capital gain.
(2) 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 the new asset before the date of furnishing
the return of income under section 139, shall be deposited by him before
furnishing such return [such deposit being made in any case not later than the
due date applicable in the case of the assessee for furnishing the return of income
under sub-section (1) of section 139] in an account in any such bank or institution
as may be specified in, and utilised in accordance with, any scheme96 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 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 is not 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.
Relief of tax on capital gains in certain cases.
54A. [Omitted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1972. Original section
was inserted by the Finance Act, 1965, w.e.f. 1-4-1965. The Direct Tax Laws
(Amendment) Act, 1989 has deleted section 54A, dealing with relief of tax on
capital gains on transfer of property held under trust for charitable or religious
purposes or by certain institution, earlier inserted by the Direct Tax Laws
(Amendment) Act, 1987, w.e.f. 1-4-1989.]
[Capital gain on transfer of land used for agricultural purposes not to be charged
in certain cases.
54B. 1[(1)] 2[Subject to the provisions of sub-section (2), where the capital
gain arises] 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
3[(hereinafter referred to as the original asset)], 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 incometax
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, that is to
say,—
(i) if the amount of the capital gain is greater than the cost of the land so
purchased (hereinafter referred to as the new asset), 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;
and 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 of
the 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 gain arising from its transfer within a period of three
years of its purchase, the cost shall be reduced, by the amount of the
capital gain.]
[(2) The amount of the capital gain which is not utilised by the assessee for the
purchase of the new asset before the date of furnishing the return of income
under section 139, shall be deposited by him before furnishing such return [such
deposit being made in any case not later than the due date applicable in the case
of the assessee for furnishing the return of income under sub-section (1) of
section 139] 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 of subsection
(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 not utilised
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
with the scheme aforesaid.
Capital gain on transfer of jewellery held for personal use not to be charged in
certain cases.
[Capital gain on compulsory acquisition of lands and buildings not to be charged
in certain cases.
54D. [(1)] [Subject to the provisions of sub-section (2), where the capital
gain arises] from the transfer by way of compulsory acquisition under
any law of a capital asset, being land or building or any right in land or building, forming part of an
industrial undertaking belonging to the assessee which, in
the two years immediately preceding the date on which the transfer took place,
was being used by the assessee for the purposes of the business of the said
undertaking [(hereafter in this section referred to as the original asset)], and
the assessee has within a period of three years after that date purchased any
other land or building or any right in any other land or building or constructed
any other building for the purposes of shifting or re-establishing the said
undertaking or setting up another industrial undertaking, then, instead of the
capital gain being charged to income-tax as the 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, that is to say,—
(i) if the amount of the capital gain is greater than the cost of the land,
building or right so purchased or the building so constructed (such
land, building or right being hereafter in this section referred to as the
new asset), 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; and 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 of the
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
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
reduced by the amount of the capital gain.]
[(2) The amount of the capital gain which is not utilised by the assessee for the
purchase or construction of the new asset before the date of furnishing the
return of income under section 139, shall be deposited by him before furnishing
such return [such deposit being made in any case not later than the due date
applicable in the case of the assessee for furnishing the return of income under
sub-section (1) of section 139] in an account in any such bank or institution as
may be specified in, and utilised in accordance with, any scheme14 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 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 is not 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.
[Capital gain on transfer of capital assets not to be charged in certain cases.
54E. (1) Where the capital gain arises from the transfer of a [long-term
capital asset] 19[before the 1st day of April, 1992], (the capital asset so
transferred being hereafter in this section referred to as the original asset) and
the assessee has, within a period of six months after the date of such transfer,
invested or deposited the [whole or any part of the net consideration] in any
specified asset (such specified asset being hereafter in this section referred to as
the new asset), the capital gain shall be dealt with in accordance with the
following provisions of this section, that is to say,—
(a) 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;
(b) if the cost of the new asset is less than the [net consideration] in
respect 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 new asset bears to the 23[net consideration] shall not be charged
under section 45:
[Provided that in a case where the original asset is transferred after the 28th day
of February, 1983, the provisions of this sub-section shall not apply unless the
assessee has invested or deposited the whole or, as the case may be, any part of
the net consideration in the new asset by initially subscribing to such new asset:]
4[Extension of time for acquiring new asset or depositing or investing amount of
capital gain.
54H. Notwithstanding anything contained in sections 54, 54B, 54D 5[***]
6[, 54EC] and 54F, where the transfer of the original asset is by way
of compulsory acquisition under any law and the amount of compensation
awarded for such acquisition is not received by the assessee on the date of such
transfer, the period for acquiring the new asset by the assessee referred to in
those sections or, as the case may be, the period available to the assessee under
those sections for depositing or investing the amount of capital gain in relation
to such compensation as is not received on the date of the transfer, shall be
reckoned from the date of receipt of such compensation :
Provided that where the compensation in respect of transfer of the original asset
by way of compulsory acquisition under any law is received before the 1st day
of April, 1991, the aforesaid period or periods, if expired, shall extend up to the
31st day of December, 1991.]
Meaning of “adjusted”, “cost of improvement” and “cost of acquisition”.
55. (1) For the purposes of 8[sections 48 and 49],—
(a) 9[***]
10[(b) “cost of any improvement”,—
(1) in relation to a capital asset being goodwill of a business 11[or a
right to manufacture, produce or process any article or thing]
12[or right to carry on any business] shall be taken to be nil ; and 2) in relation to any other capital asset,
—]
(i) where the capital asset became the property of the previous
owner or the assessee before the 13[1st day of April, 14[1981]],
15[***] means all expenditure of a capital nature incurred in
making any additions or alterations to the capital asset on or
after the said date by the previous owner or the assessee, and
(ii) in any other case, means all expenditure of a capital nature
incurred in making any additions or alterations to the capital
asset by the assessee after it became his property, and, where
the capital asset became the property of the assessee by any
of the modes specified in 16[sub-section (1) of] section 49, by
the previous owner,
but does not include any expenditure which is deductible in
computing the income chargeable under the head “Interest on
securities”, “Income from house property”, “Profits and gains of
business or profession”, or “Income from other sources”, and the
expression “improvement” shall be construed accordingly.
17(2) 18[For the purposes of sections 48 and 49, “cost of acquisition”19,—
20[(a) in relation to a capital asset, being goodwill of a business 21[or a trade
mark or brand name associated with a business] 22[or a right to
manufacture, produce or process any article or thing] 23[or right to
carry on any business], tenancy rights, stage carriage permits or loom
hours,—
(i) in the case of acquisition of such asset by the assessee by
purchase from a previous owner, means the amount of the
purchase price ; and
(ii) in any other case [not being a case falling under sub-clauses (i) to
(iv) of sub-section (1) of section 49], shall be taken to be nil ;