Section 45(1A) - Capital Gains on Insurance Claims For Damage or Destruction of Capital Asset - Income Tax - Ready Reckoner - Income Tax

Section 45(1A) : Capital Gains on Insurance Claims For Damage or Destruction of Capital Asset Where insurance claim is received in respect of capital asset damaged or destroyed , as a result of Flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature, or Riot or civil disturbance or Accidental fire or explosion or Action by an enemy or action taken in combating an enemy then any profits or gains arising from such money or the FMV of other assets received from insurance company shall be deemed to be sales consideration for computing capital gains. Capital gains shall be taxable in the year of receipt of insurance claim. Full value of consideration - In order to compute capital gain, the 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 gain. NOTES: If no claim is received on destruction of capital asset, no capital gain shall arise. The cost of the asset destroyed shall be a capital loss i.e. dead loss which has no tax treatment. For the purposes of computing the nature of capital gains, the date of transfer of the capital asset destroyed should mean the date of destruction. The capital will arise in the previous year in which the money or other asset is received, but the indexation of cost shall be done till the year of damage or destruction. If stock insurance and on loss of stock insurance, compensation received, then this section not applicable as capital asset does not include stock in trade. SUMMARY OF SECTION Asset Destroyed :- Capital asset Due to Natural calamities, accidental fire, riots, action of enemy - Insurance Compensation taxable u/s 45(1A) Other causes like theft - Section 45(1A) not applicable. 2. Stock-in-trade - PGBP Income - section 45(1A) not applicable - taxable under PGBP.