Capital Gains exemptions from Tax under section 10 - Income Tax - Ready Reckoner - Income Tax

Capital Gain Exempt from Tax In the following cases, capital gains are not chargeable to tax. Conversely, in the cases given below if assets are transferred at loss, such capital loss is not taken into consideration. 1. Section 10(33) - Capital gain on transfer of units u/s 64 - Long-term or short-term capital gain arising on transfer of units of Unit Scheme, 1964 which is transferred on or after 1-4-2002. Means any gain arising from the redemption of units is exempt under Income Tax Act. Any capital loss on transfer of such units shall not be allowed to be set off or carried forward. 2. Section 10(36) - LTCG on eligible equity shares shall be exempt if these shares are acquired on or after 1.3.2003 but before 1.3.2004 and held for a period of 12 months. 3. Section 10(37) - Capital gain on compulsory acquisition of urban agriculture land - Exemption is available if the following conditions are cumulatively satisfied: Assessee being an Individual or HUF transfers the agricultural land situated in urban area used for agricultural purposes by such HUF or individual or a parent if the individual during the period of two years immediately preceding the date of transfer and the transfer takes place by way of compulsory acquisition under any law. NOTES:- Capital Gains computed with reference to original compensation as well as enhanced compensation are exempt. Capital gains whether long term or short term are exempt. If such urban agricultural land is held as stock in trade then section 10(37) shall not be applicable and it shall be taxed under business head. 4. Section 10(37A) - Tax Incentive for development of Capital of Andhra Pradesh - An assessee being individual or HUF who was the owner of such land as on 2nd June, 2014, and had transferred such land under land pooling scheme, then for such assessee capital gains arising from following transfer shall not be chargeable to tax:- Transfer of capital asset being land or building or both under land pooling scheme Sale of Land Pooling Ownership Certificates by the assessee received in lieu of land transferred under the scheme Sale of reconstituted plot or land by the assessee within 2 years from the end of the FY in which the possession was handed over 5. Section 10(38) - Long term capital gain in case of specified securities covered by transaction tax. - Any income 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 units of a business trust shall be exempt provided such transaction of sale is chargeable to STT An exemption from tax on capital gains to the income arising from transaction undertaken in foreign currency on a recognised stock exchange located in an International Financial Services Centre shall be allowed even though the STT is not paid in respect of such transactions Provisions relating to exemption of LTCG tax on equity shares, etc. rationalized [Third proviso to Section 10(38) inserted by FA, 2017 w.e.f. A.Y. 2018-19] Nothing contained in this clause shall apply to any income arising from the transfer of long term capital asset, being an equity share in a company, if the transaction of acquisition, other than the acquisition notified by the Central Government in this behalf, of such equity share is entered into on or after 1st October, 2004 and such transaction is not chargeable to STT. Provisions relating to income arising from the transfer of 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 [ Fourth proviso to Section 10(38) inserted by FA, 2018 w.e.f. A.Y. 1-4-2019] Nothing contained in this clause shall apply to any income arising from the transfer of 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, made on or after the 1st day of April, 2018. 6. Compensation Received u/s 96 of RFCTLARR Act, 2013 Capital gain arise out of any award/agreement under right to fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, is exempt from tax. ( Circular No. 36/2016 dated 25.10.2016) 7. Capital Gain Exemption under section 115JG(1) The capital gains which arising from conversion of Indian branch of a foreign bank into an Indian subsidiary shall not be chargeable to tax in the assessment year relevant to the previous year in which such conversion takes place. [ Section 115JG(1)(i) ] Condition for availing exemption - Exemption u/s 115JG is available only if the condition as prescribed by Notification No. 85/2018 date 06.12.2018. (a) the Indian branch amalgamates with the Indian subsidiary company in accordance with the scheme of amalgamation approved by the shareholders of the foreign company and the Indian subsidiary company and sanctioned by the Reserve Bank of India. (b) all the assets and liabilities of the Indian branch immediately before conversion shall become the assets and liabilities of the Indian subsidiary company; (c) the asset and liabilities of the Indian branch are transferred to the Indian subsidiary company at values appearing in the books of account of the Indian branch immediately before its conversion. Explanation.- For determining the value of the assets for the purposes of this clause, any change in the value of assets consequent to their revaluation shall be ignored; ​​​​​​​ (d) the foreign bank referred to in section 115JG(1) of the Act or its nominee shall hold the whole of the share capital of the Indian subsidiary company during the period beginning from the date of conversion and ending on the last day of the previous year in which the conversion took place and continue to hold the share of Indian subsidiary company carrying not less than fifty-one per cent. of the voting power for a period of five years immediately succeeding the said previous year; (e) the foreign company referred to in section 115JG(1) of the Act does not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by way of allotment of shares in the Indian subsidiary company; Notes: Exemption is available for all assessees whether resident or non-resident, FIIs etc. Exemption is available if shares/ units held as capital assets and not as stock in trade. STT is paid on sale of equity shares or units of business trust on stock exchange. STT is paid on sale of unit of equity oriented fund on stock exchange or directly to the mutual fund. STT is paid on sale of unlisted equity shares by holders (promoters) of such shares under the offer for sale to public included in initial public offer (IPO) and where such shares are subsequently listed on a stock exchange. Long term capital loss referred to in Section.10(38) cannot be set off or carried forward.