Section 48 - Mode of computation - Income-tax Act, 1961

1 [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: 13 [ Provided that the cost of acquisition of the asset or the cost of improvement thereto shall not include the deductions claimed on the amount of interest under clause (b) of section 24 or under the provisions of Chapter VIA. Explanation 1. For the removal of doubt, it is hereby clarified that the cost of acquisition of a unit of a business trust shall be reduced and shall be deemed to have always been reduced by any sum received by a unit holder from the business trust with respect to such unit, which is not in the nature of income as referred to in clause (23FC) or clause (23FCA) of section 10 and which is not chargeable to tax under clause (xii) of sub-section (2) of section 56 and under sub-section (2) of section 115UA. Explanation 2. For the purposes of Explanation 1, it is clarified that where transaction of transfer of a unit is not considered as transfer under section 47 and cost of acquisition of such unit is determined under section 49, sum received with respect to such unit before such transaction as well as after such transaction shall be reduced from the cost of acquisition under the said Explanation; ] 12 [ (iii) in case of value of any money or capital asset received by a specified person from a specified entity referred to in sub-section (4) of section 45, the amount chargeable to income-tax as income of such specified entity under that sub-section which is attributable to the capital asset being transferred by the specified entity, calculated in the prescribed manner: ] 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 14 [ (which takes place before the 23rd day of July, 2024) ] 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 provi so, 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: 11 [ Provided also that nothing contained in the first and second provisos shall apply to the capital gains arising from the transfer of a long-term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust referred to in section 112A:] 8 [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 a bond or debenture other than- (a) capital indexed bonds issued by the Government; or (b) Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015: Provided also that in case of an assessee being a non-resident, any gains arising on account of appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of an Indian company 9 [ held ] by him, shall be ignored for the purposes of computation of full value of consideration under this section:] 3 [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 :] 4 [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 the 7 [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 begin ning on the 10 [ 1st day of April, 2001 ], 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; 5 [ ( 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 6 [Consumer Price Index (Urban)] for the immediately preceding previous year to such previous year, by notification in the Official Gazette, specify, in this behalf .]] ******************** Notes :- 1. Substituted by the Finance Act, 1992, w.e.f. 1-4-1993. Prior to substitution, section 48, was amended by the Finance Act, 1987, w.e.f. 1-4-1988, the Direct Tax Laws (Second Amendment) Act, 1989, w.e.f. 1-4-1990, the Finance Act, 1989, w.e.f. 1-4-1990 and the Finance (No. 2) Act, 1991, w.e.f. 1-4-1992. 2. Inserted by the Finance Act, 1997, w.e.f. 1-4-1998. 3. Inserted by the Finance Act, 2000, w.e.f. 1-4-2001. 4. Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-4-2005. 5. Substituted by the Finance Act, 2000, w.r.e.f. 1-4-1993. Prior to its substitution, clause (v) of Explanation, read as under : '(v) Cost Inflation Index for any 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 non-manual employees for that year, by notification in the Official Gazette, specify in this behalf.' 6. Substituted vide THE FINANCE (No. 2) ACT, 2014 w.e.f. 1st day of April, 2016 , before it was read as, Consumer Price Index for urban non-manual employees 7. Substituted for Foreign Exchange Regulation Act, 1973 (46 of 1973) vide Finance Act, 2013, w.e.f. 1-4-2013 8. Substituted vide THE FINANCE ACT, 2016 w.e.f. 1st day of April, 2017 before it was read as, 2 [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: ] 9. Substitued vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2018. before it was read as, subscribed 10. Substitued vide THE FINANCE ACT, 2017 w.e.f. 1st day of April, 2018. before it was read as, 1st day of April, 1981 11. Inserted vide THE FINANCE ACT, 2018 w.e.f. 1st day of April, 2018 12. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-04-2021 13. Inserted vide THE FINANCE ACT, 2023 dated 31-03-2023 w.e.f. 01-04-2024 14. Inserted vide Section 20 of the Finance (No. 2) Act, 2024 dated 16-08-2024 w.e.f. 23-07-2024