Section 49 - Cost with reference to certain modes of acquisition - Income-tax Act, 1961

Cost with reference to certain modes of acquisition. 49. 1 [ (1) ] Where the capital asset became the property of the assessee- (i) on any distribution of assets on the total or partial partition of a Hindu undivided family; (ii) under a gift or will; (iii) (a) by succession, inheritance or devolution, or 2 [ (b) on any distribution of assets on the dissolution of a firm, body of individuals, or other association of persons, where such dissolution had taken place at any time before the 1st day of April, 1987, or ] (c) on any distribution of assets on the liquida tion of a company, or (d) under a transfer to a revocable or an irrevo cable trust, or (e) under any such transfer as is referred to in clause (iv) 3 [ or clause (v) ] 4 [ or clause (vi) ] 5 [ or clause (via) ] 28 [or clause (viaa) or clause (viab) or clause (vib) 32 [ or clause (vic) ] or clause (vica) or clause (vicb) or clause (vicc)] or 40 [ clause (viiac) or clause (viiad) or clause (viiae) or clause (viiaf) or ] 26 [ clause (xiii) or clause (xiiib) or clause (xiv) of section 47 ]] of section 47; 8 [ (iv) such assessee being a Hindu undivided family, by the mode referred to in sub-section (2) of section 64 at any time after the 31st day of December, 1969, ] the cost of acquisition of the asset shall be deemed to be the cost for which the previous owner of the property acquired it, as increased by the cost of any improvement of the assets incurred or borne by the previous owner or the assessee, as the case may be. 9 [ Explanation .-In this 10 [ sub-section ] the expression previous owner of the property in relation to any capital asset owned by an assessee means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in clause (i) or clause (ii) or clause (iii) 11 [ or clause (iv) ] of this 12 [ sub-section ].] 13 [ (2) Where the capital asset being a share or shares in an amalgamated company which is an Indian company became the property of the assessee in consideration of a transfer referred to in clause (vii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the amalgamating company .] 19 [(2A) Where the capital asset, being a share or debenture of a company, became the property of the assessee in consideration of a transfer referred to in clause (x) or clause (xa) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-stock, bond or deposit certificate in relation to which such asset is acquired by the assessee.] 15 [ (2AA) Where the capital gain arises from the transfer of specified security or sweat equity shares referred to in sub-clause (vi) of clause (2) of section 17, the cost of acquisition of such security or shares shall be the fair market value which has been taken into account for the purposes of the said sub-clause. ] 24 [ (2AAA) Where the capital asset being rights of a partner referred to in section 42 of the Limited Liability Partnership Act, 2008 (6 of 2009) became the property of the assessee on conversion as referred to in clause(xiiib) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share or shares in the company immediately before its conversion. ] 20 [(2AB) Where the capital gain arises from the transfer of specified security or sweat equity shares, the cost of acquisition of such security or shares shall be the fair market value which has been taken into account while computing the value of fringe benefits under clause (ba) of sub-section (1) of section 115WC.] 29 [(2ABB) Where the capital asset, being share or shares of a company, is acqired by a non-resident assessee on redemption of Global Depository Receipts referred to in clause (b) of sub-section (1) of section 115AC held by such assessee, the cost of acqisition of the share or shares shall be the price of such share or shares prevailing on any recognised stock exchange on the date on which a request for such redemption was made. Explanation .-For the purposes of this sub-section, recognised stock exchange shall have the meaning assigned to it in clause (ii) of the Explanation 1 to sub-section (5) of section 43.] 27 [(2AC) Where the capital asset, being a unit of a business trust, became the property of the assessee in consideration of a transfer as referred to in clause (xvii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the share referred to in the said clause.] 30 [(2AD) Where the capital asset, being a unit or units in a consolidated scheme of a mutual fund, became the property of the assessee in consideration of a transfer referred to in clause (xviii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the unit or units in the consolidating scheme of the mutual fund.] 33 [(2AE) Where the capital asset, being equity share of a company, became the property of the assessee in consideration of a transfer referred to in clause (xb) of section 47, the cost of acquisition of the asset shall be deemed to be that part of the cost of the preference share in relation to which such asset is acquired by the assessee. ] 34 [(2AF) Where the capital asset, being a unit or units in a consolidated plan of a mutual fund scheme, became the property of the assessee in consideration of a transfer referred to in clause (xix) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the unit or units in the consolidating plan of the scheme of the mutual fund. ] 39 [ (2AG) The cost of acquisition of a unit or units in the segregated portfolio shall be the amount which bears, to the cost of acquisition of a unit or units held by the assessee in the total portfolio, the same proportion as the net asset value of the asset transferred to the segregated portfolio bears to the net asset value of the total portfolio immediately before the segregation of portfolios. (2AH) The cost of the acquisition of the original units held by the unit holder in the main portfolio shall be deemed to have been reduced by the amount as so arrived at under sub-section (2AG). 41 [ (2AI) Where the capital asset, being shares as referred to in clause (xx) of section 47, became the property of the assessee, the cost of acquisition of such asset shall be deemed to be the cost of acquisition to it of the interest in the joint venture referred to in the said clause. ] Explanation . For the purposes of sub-section (2AG) and sub-section (2AH), the expressions main portfolio , segregated portfolio and total portfolio shall have the meanings respectively assigned to them in the circular No. SEBI/HO/IMD/DF2/CIR/P/2018/160, dated the 28th December, 2018, issued by the Securities and Exchange Board of India under section 11 of the Securities and Exchange Board of India Act, 1992. .( 15 of 1992.) ] 16 [ (2B) 17 [ *** ] (2C) The cost of acquisition of the shares in the resulting company shall be the amount which bears to the cost of acquisition of shares held by the assessee in the demerged company the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger. (2D) The cost of acquisition of the original shares held by the shareholder in the demerged company shall be deemed to have been reduced by the amount as so arrived at under sub-section (2C) .] 21 [(2E) The provisions of sub-section (2), sub-section (2C) and sub-section (2D) shall, as far as may be, also apply in relation to business reorganization of a co-operative bank as referred to in section 44DB.] Explanation .-For the purposes of this section, net worth shall mean the aggregate of the paid up share capital and general reserves as appearing in the books of account of the demerged company immediately before the demerger. ] 18 [ (3) Notwithstanding anything contained in sub-section (1), where the capital gain arising from the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47 is deemed to be income chargeable under the head Capital gains by virtue of the provisions contained in section 47A, the cost of acquisition of such asset to the transferee-company shall be the cost for which such asset was acquired by it. ] 22 [ (4) Where the capital gain arises from the transfer of a property, the value of which has been subject to income-tax under clause (vii) 25 [ or clause (viia) ] 35 [ or clause (x) ] of sub-section (2) of section 56, the cost of acquisition of such property shall be deemed to be the value which has been taken into account for the purposes of the said clause (vii) 25 [ or clause (viia) ] . 35 [ or clause (x) ] ] 31 [(5) Where the capital gain arises from the transfer of an asset declared under the Income Declaration Scheme, 2016, and the tax, surcharge and penalty have been paid in accordance with the provisions of the Scheme on the fair market value of the asset as on the date of commencement of the Scheme, the cost of acquisition of the asset shall be deemed to be the fair market value of the asset which has been taken into account for the purposes of the said Scheme. ] 36 [(6) Where the capital gain arises from the transfer of a specified capital asset referred to in clause (c) of the Explanation to clause (37A) of section 10, which has been transferred after the expiry of two years from the end of the financial year in which the possession of such asset was handed over to the assessee, the cost of acquisition of such specified capital asset shall be deemed to be its stamp duty value as on the last day of the second financial year after the end of the financial year in which the possession of the said specified capital asset was handed over to the assessee. Explanation . For the purposes of this sub-section, stamp duty value means the value adopted or assessed or assessable by any authority of the State Government for the purpose of payment of stamp duty in respect of an immovable property. (7) Where the capital gain arises from the transfer of a capital asset, being share in the project, in the form of land or building or both, referred to in sub-section (5A) of section 45, not being the capital asset referred to in the proviso to the said sub-section, the cost of acquisition of such asset, shall be the amount which is deemed as full value of consideration in that sub-section.] 37 [(8) Where the capital gain arises from the transfer of an asset, being the asset held by a trust or an institution in respect of which accreted income has been computed and the tax has been paid thereon in accordance with the provisions of Chapter XII-EB, the cost of acquisition of such asset shall be deemed to be the fair market value of the asset which has been taken into account for computation of accreted income as on the specified date referred to in sub-section (2) of section 115TD. ] 38 [(9) Where the capital gain arises from the transfer of a capital asset referred to in clause (via) of section 28, the cost of acquisition of such asset shall be deemed to be the fair market value which has been taken into account for the purposes of the said clause.] 42 [ (10) Where the capital asset, being (i) an Electronic Gold Receipt issued by a Vault Manager, became the property of the person as consideration of a transfer, referred to in clause (viid) of section 47, the cost of acquisition of the asset for the purposes of the said transfer, shall be deemed to be the cost of gold in the hands of the person in whose name Electronic Gold Receipt is issued; (ii) gold released against an Electronic Gold Receipt, which became the property of the person as consideration for a transfer, referred to in clause (viid) of section 47, the cost of acquisition of the asset for the purposes of the said transfer shall be deemed to be the cost of the Electronic Gold Receipt in the hands of such person. ] ********************* Notes :- 1. Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 2. Substituted by the Finance Act, 1987, w.e.f. 1-4-1988. 3. Inserted by the Finance Act, 1965, w.e.f. 1-4-1965. 4. Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 5. Inserted by the Finance Act, 1992. w.e.f. 1-4-1993. 6. Inserted by the Finance Act, 2005, w.e.f. 1-4-2005. 7. I nserted by the Finance Act, 2007, w.e.f. 1-4-2008. 8. Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 9. Inserted by the Finance Act, 1965, w.e.f. 1-4-1965. 10. Substituted for section by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 11. Inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1-4-1976. 12. Substituted for section by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 13. Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 14. Inserted by the Finance (No. 2) Act, 1991, w.r.e.f. 1-4-1962. 15. Substituted vide Finance (No. 2) Act, 2009, w.e.f. 1-4-2010, before it wasInserted by the Finance Act, 2001, w.e.f. 1-4-2001. as, (2AA) Where the capital gain arises from the transfer of the shares, debentures or warrants, the value of which has been taken into account while computing the value of perquisite under clause (2) of section 17, the cost of acquisition of such shares, debentures or warrants shall be the value under that clause. 16. Sub-sections (2B), (2C) and (2D) inserted by the Finance Act, 1999, w.e.f. 1-4-2000. 17. Omitted by the Finance Act, 2000, w.e.f. 1-4-2001. Prior to its omission, sub-section (2B), as inserted by the Finance Act, 1999, w.e.f. 1-4-2000, read as under : (2B) Where the capital gain arises from the transfer of the specified security referred to in sub-clause (iiia) of clause (2) of section 17, the cost of acquisition of such specified security shall be the fair market value on the date of exercise of option. 18. Inserted by the Taxation Laws (Amendment) Act, 1984, w.e.f. 1-4-1985. 19. Substituted by the Finance Act, 2008, w.e.f. 1-4-2008. Prior to substitutuioon it was read as under : 14 [ (2A) Where the capital asset, being a share or debenture in a company, became the property of the assessee in consideration of a transfer referred to in clause (x) of section 47, the cost of acquisition of the asset to the assessee shall be deemed to be that part of the cost of debenture, debenture-stock or deposit certificates in relation to which such asset is acquired by the assessee. ] 20. Inserted by the Finance Act, 2007, w.e.f. 1-4-2008. 21. Inserted by the Finance Act, 2007, w.e.f. 1-4-2008. 22. Inserted vide Finance (No. 2) Act, 2009, w.e.f. 1-10-2009 23. in sub-section (1), in clause (iii), in sub-clause (e), for the words, brackets, figures and letters clause (vicb) of section 47 , the words, brackets, figures and letters clause (vicb) or clause (xiiib) of section 47 has been substituted vide Finance Act, 2010 w.e.f. the 1st day of April, 2011. 24. After sub-section (2AA) sub-section (2AAA) has been inserted vide Finance Act, 2010 w.e.f. the 1 st day of April, 2011. 25. In sub-section (4), after the word, brackets and figures clause (vii) , at both the places where they occur, the words, brackets, figures and letter or clause (viia) has been inserted vide Finance Act, 2010 w. e. f. the 1st day of June, 2010. 26. Substituted vide Finance Act, 2012, w.e.f. 01-04-1999, before it was read as:- clause (xiiib) of section 47 27. Inserted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of April, 2015 28. Substituted vide THE FINANCE ACT, 2015 w.e.f. 1st day of April, 2016, before it was read as, 6 [ or clause (viaa) ] 7 [ or clause (vica) or 23 [ clause (vicb) 29. Inserted vide THE FINANCE ACT, 2015 w.e.f. 1st day of April, 2016 30. Inserted vide THE FINANCE ACT, 2015 w.e.f. 1st day of April, 2016 31. Inserted vide THE FINANCE ACT, 2016 w.e.f. 1st day of April, 2017 32. Inserted vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2018 33. Inserted vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2018 34. Inserted vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2017. 35. Inserted vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2017 36. Inserted vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2018 37. Inserted vide THE FINANCE ACT, 2017 w.e.f. 1st day of June, 2016 38. Inserted vide THE FINANCE ACT, 2018 w.e.f. 1st day of April, 2019 39. Inserted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 40. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-04-2022 41. Inserted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2023 42. Inserted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2024