Capital Gains Chapter- 12
2.5 Where the capital asset becomes the property of the person under a gift from a relative as
defined in section 85 (5), bequest, will, by succession, inheritance, devolution,
distribution of assets on dissolution of an AOP, or distribution of assets on liquidation
of a company the fair market value of the asset on the date of its transfer or acquisition
shall be treated to be the cost of the asset at the time of its disposal. [U/s 37(4A)] (Example
B attached) – omitted by Finance Act, 2022.
Provided that, if the capital asset acquired through gift is disposed of within two years of
acquisition and the Commissioner is satisfied that such gift arrangement is a part of tax
avoidance scheme, then the provisions of sub-section (3) of section 79 shall apply for the
purpose of determining the cost of asset in the hands of recipient of the gift.
However no gain or loss shall be recognized at the original dates when the capital asset
becomes the property of the person under a gift, bequest and will etc. [U/s 79] - omitted by
Finance Act, 2022.
Example A Following information has been provided by Mr Ali:
Rs.
Consideration received on sale of share of a private company 96,000
Purchase price of the shares 20,000
Expenses incurred on purchase of shares 2,000
Expenses incurred on sale of shares 3000
Required: Compute income chargeable to tax under the head “capital gains” assuming:
(a) Holding period of the shares is 8 months.
(b) Holding period of the shares is 15 months.
Solution: (a)
Rs.
Consideration received 96,000
Less: Cost of shares:
Purchase price 20 ,000
Expenses on purchase 2,000
Expenses on disposal 3,000
25,000
Gain on disposal of shares 71,000Solution: (b) Rs.
Actual capital gain as above = 71,000
Example B Mr Amir purchased 10,000 shares of a private limited company in tax year 201 5 for
Rs. 100,000. In tax year 20 23 he transferred 5,000 shares to his wife under an agreement to
live apart. Further he has gifted to his son 2,000 shares and sold remaining shares for
Rs.60,000. Compute taxable income of Mr. Amir under the head capital gain for tax year 20 23.Solution:
MR. AMIR
TAX YEAR 2023 Rs.Capital gains:
3 ,000 shares sold for Rs. 60,000 60,000
Less: cost of 3,000 shares sold (100,000 x 3,000 / 10,000) (30,000)
Total Taxable capital gain 3 0,000
Note: No gain or loss has been recognised on disposal of 5,000 shares to his wife under an
agreement to live apart and gift of 2,000 shares to his son.