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TMI BlogInterpretations of key terms related to capital gains "adjusted," "cost of improvement," and "cost of acquisition" in Clause 90 of Income Tax bill 2025 vs. Section 55 of Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... in determining the taxable amount on capital gains, affecting both individual and corporate taxpayers. Understanding these provisions is essential for legal practitioners, tax professionals, and taxpayers alike, as they directly influence the computation of capital gains and, consequently, tax liabilities. This commentary aims to provide a detailed analysis of Clause 90, compare it with Section 55, and discuss the implications of potential changes introduced by the Income Tax Bill, 2025. Objective and Purpose The primary objective of Clause 90 in the Income Tax Bill, 2025, is to update and clarify the definitions of "cost of improvement" and "cost of acquisition" concerning capital assets, thereby aligning them with contemporary economic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases the cost of acquisition on the purchase price. Notably, both provisions state that if the cost cannot be determined, it is deemed to be nil, ensuring clarity in cases where historical cost data is unavailable. Special Considerations for Financial Assets Both Clause 90(5) and Section 55(2)(aa) address scenarios involving financial assets, such as shares and securities. They provide specific rules for determining the cost of acquisition when additional financial assets are allotted or subscribed to, ensuring that taxpayers are not unfairly taxed on gains that do not reflect real economic gains. These provisions highlight the complexity of modern financial instruments and the need for precise legal frameworks to address them. Fair Mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recent legal developments, such as the consideration of FMV for assets acquired before 2018. These changes reflect an effort to modernize the tax code, ensuring it remains relevant in a rapidly evolving economic landscape. Conclusion In conclusion, Clause 90 of the Income Tax Bill, 2025, and Section 55 of the Income Tax Act, 1961, play vital roles in the taxation of capital gains. By defining key terms such as "cost of improvement" and "cost of acquisition," these provisions provide a framework for calculating taxable gains on capital assets. The updates in the 2025 Bill demonstrate a commitment to aligning tax laws with contemporary economic conditions, addressing the complexities of modern financial instruments, and ensuring fair tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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