There Are 3 Types of Residents That We Will Explain Here for Your Understanding

8/16/2019 There Are 3 Types of Residents That We Will Explain Here for Your Understanding

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The Income-tax Act, 1961 is the charging Statute of Income Tax in India. It provides for levy,

administration, collection and recovery of Income Tax. Recently the Government of India has

brought out a draft statute called the "Direct Taxes ode" intended to replace the Income Tax

!ct,#$ and the %ealth Tax !ct, #&'. (ublic ommentary has been called for the Draft )ill.

*+ The redrafted bill is supposed to be made public soon.

Scope of Total Income

. Subect to the provisions of this !ct, the total income of any previous year of a person -ho is a

resident includes all income from -hatever source derived -hich/a0 is received or is deemed

to be received in India in such year by or on behalf of such person 1 or/b0 accrues or arises or is

deemed to accrue or arise to him in India during such year 1 or/c0 accrues or arises to him

outside India during such year 2(rovided that, in the case of a person not ordinarily resident in

India -ithin the meaning of sub3section /$0 of section $, the income -hich accrues or arises to

him outside India shall not be so included unless it is derived from a business controlled in or a

profession set up in India./40 Subect to the provisions of this !ct, the total income of any

previous year of a person -ho is a non3resident includes all income from -hatever source

derived -hich/a0 is received or is deemed to be received in India in such year by or on behalf

of such person 1 or/b0 accrues or arises or is deemed to accrue or arise to him in India during

such year.Income accruing or arising outside India shall not be deemed to be received in

India -ithin the meaning of this section by reason only of the fact that it is ta5en into account in

a balance sheet prepared in India.

4. 6or the removal of doubts, it is hereby declared that income -hich has been included in the total

income of a person on the basis that it has accrued or arisen or is deemed to have accrued or

arisen to him shall not again be so included on the basis that it is received or deemed to be

received by him in %hat is )DT entral )oard for Direct Taxes is the important institution in

carrying out administration and planning of income tax. It issues circulars and clarifications

regarding difficulties arising in Income Tax.

There are 7 types of residents that -e -ill explain here for your understanding.

)ased on this, you -ill be able to determine your Residential Status.

Type-1: RESIDENT (ANY OF 1 OR 2)

. If your stay in India is 84 days or more during previous year

4. If your stay in India is $9 days or more in (revious year and 7$& days or more during : years

preceding to previous year.

https://en.wikipedia.org/wiki/The_Income-tax_Act,_1961#cite_note-1https://en.wikipedia.org/wiki/The_Income-tax_Act,_1961#cite_note-1


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BUT IN CASE

• where a person leaves for employment or

• where a resident who leaves India as a member of Crew of Indian ship or

• where an Indian Citizen who is abroad comes to India for a visit

The period of stay -ould be 84 days instead of $9 days in the previous year as per above point ;/40

Type-2: NON RESIDENT

If a person does not satisfy any of * /0 and /40 -ith exceptions< conditions then he -ill be =on3

Resident /=RI0.

Type-3: RESIDENT BUT NOT ORDINARILY RESIDENT

. If your stay in India is 84 days or more during previous year

4. If your stay in India is $9 days or more in (revious year and 7$& days or more during : years

preceding to previous year.

BUT IN CASE

• where a person leaves for employment or

• where a resident who leaves India as a member of Crew of Indian ship or

• where an Indian Citizen who is abroad comes to India for a visit

The period of stay would be 182 days instead of 60 days as per point#(2)

AND

7. If you are a resident in India has been at least 4 out of 9 years preceding to previous year1

:. If your stay in India has been '79 days or more out of ' years preceding to previous year.

> If you satisfy any one from /0 ? /40 and satisfy both /70 ? /:0 then your status -ill be Resident

and Ordinarily Resident /R@R01

> If you satisfy any one from /0 ? /40 and satisfy one or none from /70 ? /:0 then your status -ill

be Resident but Not Ordinarily Resident /R=@R0.


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S.N

O

. INCOMES Reside!

"d

#$di"$y

$eside!

(ROR)

Reside! %&!

#! #$di"$y

$eside!

(RNOR)

N#

$eside!

1 Income received in India whether accrued in

India or outside India.

Yes Yes Yes

2 Income deemed to be received India whether

accrued in India or outside India.

Yes Yes Yes

3 Income accruing or arising in India whether

received in India or outside India.

Yes Yes Yes

4 Income deemed to accrue or arise in Indiawhether received in India or outside India.

Yes Yes Yes

Income received and accrued outside Indiafrom a business controlled in or a professionsetup in India.

Yes Yes !o

" Income received and accrued outside Indiaor a profession set up outside India from a

business controlled from outside India or aprofession set up outside India.

Yes !o !o

# Income $not being from a business %profession& received and

accrued outsideIndia.

Yes !o !o

' Income earned and received outside India inthe year preceding to the relevant previousyear and remitted to India in the relevantprevious year.

!o !o !o

Various sections in PGBP are briefly discussed belo!

"AT#$% &' I"(&)%

)usiness,Aocation and (rofession carried on by the assessee of -hatsoever nature.

)%T*&+ &' A(("TI"G!

!s Regularly Bmployed can be Cash )asis or C!ccrual )asis Subect to (rovisions of Section :7).

$%"T, $AT%, TA%, I"#$A"(% '&$ B#I.+I"G / ec0 23! 4

!ny rent, rates, taxes, insurance premium paid by the assessee during the previous year in respect of

the place for business purpose -ould be allo-ed as a deduction.

$%PAI$ A"+ I"#$A"(% &' P.A"T, )A(*I"A$5, '#$"IT#$% /ec0 13! 4

!ny amount spent on repairs, insurance or hire charges, etc. @n (lant, machinery, furniture by a

business organisation is allo-ed as a deduction.

+%P$%(IATI&" /ec0 3!

Depreciation can be classified into 7 parts to deal in the subect of income tax

• =ormal Depreciation

• !dditional Depreciation

• Depreciation on SEF basis in case of electricity companies

=ormal depreciation is provided on bloc5 of assets method on %DA of the bloc5 as on every 7

Farch.


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)loc5 of assets means group of assets having same rate of depreciation and falling under a specific

class of assets. These assets are grouped together and depreciation is provided on the bloc5 as

illustrated in the coming points.

(om7utation of 8+V of the bloc!-

%DA at the beginning of year2

!dd23!ctual cost incurred on assets /!cHuired during the year02

Eess23Foney (ayable during the year /%hich is sold02 xxxxx

Depreciation at the prescribed 2

(losin: 8+V!

Depreciation is provided for -hole year except -hen, !sset is !cHuired and put to use during the year

for less than 89 days during the year , in this case the depreciation is limited to &9 of total

depreciation, but if same asset acHuired during earlier years but put to use this year and usage period

less than 89 days during current year then depreciation for -hole year.%hen all the assets of bloc5

are sold, in such a case no depreciation is allo-ed and short term capitalJgain or loss -ould be

attracted as per provisions of section &9 discussed in capital gains.(!RT @6 )E@K S@ED )LT

F@=BM (!M!)EB BBBDS %DA23 In such a case no depreciation is allo-ed and also short term

capital gain provision as per section &9 is attracted.

Ta5e a loo5 after Depreciation section in (G)( /(rofits and Gains from )usiness or (rofession02

A++ITI&"A. +%P$%(IATI&" ! 4

!dditional depreciation is only to manufacturing concerns. !dditional depreciation on certain assets2

49 or 9 /for N89days0. @nly factory machinery and eHuipments.

Assets on hich additional de7reciation is not alloed!-

• =ot second hand machinery

• =ot on ships, aircrafts and road transport vehicles

• =ot allo-ed on eHuipments installed in office

In case an enterprise is engaged in electricity business it has option to charge depreciation on SEF

basis but such an option is available once only and canOt be changed

#"AB&$B%+ +%P$%(IATI&"! 4

There cannot be loss under business head due to depreciation.If such depreciation could not be set

off under business head then it can be set off from any other head except salary in the same year,

and if still it could not be set off it can be carried for-ard indefinitely to succeeding years for set off in

the similar manner.

.icense to o7erate telecommunication ser;ices!

Deduction in eHual installments over Remaining useful life of licence on paid basis. If licence is sold,

%DA of licence is reduced by the amount of money recovered and remaining %DA is allo-ed as

deduction in eHual instalments over remaining life of asset.If sold for price exceeding %DA, no

deduction is allo-ed in remaining years instead capital gain is charged as per capital gain provisions.

A)&$TI


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assessee.

@thers2 & of cost of proect

Before commencement of business2 P 6or setting up any )usiness

After settin: u7 of business! 4 Bxtension or setting up of ne- underta5ing.Eist of specified

expenditure including documents li5e feasibility report, proect report, mar5et survey, engineering

services, legal charges , Drafting and printing of F@! and !@!, registration fees, issue of shares

and debentures, under-riting commission, expenditure on prospectus have to be submitted.

+eduction for amal:amation> demer:er and V$

Quantum2 3J& of expenditure in each successive year but it is to be noted that ARS is allo-ed only

-hen amount is actually paid -hich is not a case !malgamation demerger.

@ther Deductions in (G)( /(rofits and Gains from )usiness or (rofession0

&T*%$ +%+#(TI&" /section 63

• Insurance premium on stoc5s

• )onus or commission to employees2 deduction subect to section :7)

• Insurance on health of employees by any mode other than cash

• Interest on borro-ed capital, if for use of business

• Discount on issue of ero coupon bonds to be allo-ed as deduction on pro3rata basis.

• BmployerOs contribution to recognied provident fund or approved superannuation fund

subect to section :7)

• BmployerOs contribution to approved gratuity fund subect to section :7)

Bad debts sub?ect to conditions!

• Income from sale recognied. If any amount has been subseHuently recovered in respect of

above then it shall be taxable under business head even if business is discontinued.

• (rovision for bad and doubtful debts2 =@ deduction in general but deduction available to

Scheduled or non3scheduled cooperative ban5s 6oreign ban5s or State 6inance orporation

• STT paid 2 Deduction if income earned included in (G)(

G%"%$A. +%+#(TI&" #"+%$ %(TI&" @/13 BAI( (&"+ITI&" '&$ +%+#(TI&"!

• =ot of personal nature

• =ot of capital nature

• Incurred during (M .

8holly or exclusi;ely for business or 7rofession!

• Remuneration to Bmployees

• (ayment of penaltyJ damages of compensatory nature. (enalties paid to custom, sales tax

authorities, excise authorities, Income tax authorities not allo-ed.

Some Bxpenses not deductible in (G)( /(rofits and Gains from )usiness or (rofession0 are briefly

discussed belo-2

%P%"% "&T +%+#(TIB.%!

ection 2A /3! 4


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!@ may disallo- payment made to relative if in his opinion it is excess of the mar5et value.

ection 2A /32 P

!ny payment exceeding Rs. 49999 or Rs.7&999/ in case of payment to a transporter engaged in

plying,hiring, transporting etc.0 in a day by a assessee -ill be allo-ed as a deduction only -hen

payment is made by a account payee cheHue.

%(%PTI&"! P

This section is not applicable -hen

• (ayment is made to ban5 or financial institution,

• Govt. Lnder reHuired la-

• (ayment on a )an5ing oliday

• (ayment to employees not exceeding Rs.&9,999 P (ayment in a village not served by a ban5

• )oo5 !dustment

• (ayment for purchase of agriculture produce, (oultry farm produce, Dairy items, cottage

industry/-or5ing -ithout aid of po-er.

A.A$5 A"+ I"T%$%T &" (APITA. T& PA$T"%$ /%(TI&" 2/b3!

Interest, salary!

Deduction as per provisions in partnership deed.

Interest on ca7ital! P

Rate specified in partnership deed or 4 -hichever is lo-er.

alary! P

!llo-ed only to -or5ing partners.It should be lo-er of amount specified in partnership deed or

follo-ing amount23@n 6irst Rs.799,999 @f )oo5 P #9 of boo5 profits or Rs.&9,999 (rofits -hichever

is more

@n )alance @f )oo5 (rofits P $9 of boo5 profits

+%+#(TI&" #"+%$ %(TI&" B!-

Section :7 ) mentions some cases -here deduction -ill be allo-ed only -hen amount is

actually paid by the assessee before due date of filing return.In all these cases deduction of the

expense is allo-ed on Cpaid basis.o-ever -hen expenditure is disallo-ed in one year, it -ill be

allo-ed as a deduction in the previous year in -hich such expenses are actually paid.

. !ny sum payable by -ay of tax, cess, duty or fee under any la- and by -hatever name

called.

4. !ny sum payable by employer by -ay of contribution to provident fund or superannuation

fund or any other employee benefit fund.

7. !ny sum payable as bonus, commission to employees for services rendered.

:. !ny sum payable as interest on loan borro-ed from public financial institution or state

financial institution.

&. !ny sum payable as interest on loan ta5en from scheduled ban5 including co3operative

societies.

$. !ny sum payable by employer in lieu of leave salary to employee.


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)AI"T%"A"(% &' B&& &' A(("T B5 P%$&" (A$$5I"G &"

B#I"% &$ P$&'%I&" /%(TI&" AA A"+ $#.% 6'3! 4

!ssessee carrying on )usiness or profession other than the profession notified under the rule

$6Income BxceedsRs. 49999 In !ny @f 7 (receding (revious Mears or Ei5ely to exceed Eimit In

ase @f =e-ly Set Lp )usiness @r (rofession@rIf the turnover or sales or Gross Bxceeds Rs.9

Ea5hs .In !ny @f 7 (receding (revious Mears @r Ei5ely To Bxceed Eimit In ase @f =e-ly Set Lp

)usiness @r (rofession

$#.% 6'

In the case of !ssessee carrying on profession of la-, ompany Secretary, !ccountancy, medicine,

architecture etcGross Recipts Bxceeds Rs.&9,999 In !ll 7 (receding (revious Mears @r Ei5ely To

Bxceed Eimit In ase @f =e-ly Set Lp )usiness

7ecified Boos! P

ash )oo5, ournal /If !ccounts @n !ccrual )asis0, Eedger arbon opy @f Receipts Bxceeding Rs.

4& !nd @riginal opy @f Bxpenditure Bxceeding Rs.&9If The !ssessee 6alling Lnder Section ::ad,

::ae, ::bb, ::bbb @r !ny @ther Section @f (resumptive Income, Declares is Income Eo-er Than

Specified In These Sections, e Is ReHuired To Faintain Such )oo5s !s Fay Bnable !.@. To

ompute is Income.

ec0@1A

6ailing to 5eep, maintain or retain boo5s of accounts uJs ::!! read -ith rule $6,-ill be levied a

penalty of RS.4&9,999J3

(&)P#.A$5 A#+IT &' A(("T #"+%$ %(TI&" AB

Business! P In ase Gross Turnover @r Total Sales Bxceeds Rs.core

Profession! P In ase Gross Receipts Bxceeds Rs. 4& Ea5hs.! (erson 6alling Lnder Section :: !D

Declaring a Eo-er Income

'ilin: of $e7ort of Audit!

!n audit report duly verified by a ! on or before 79.9#.yyyy of the relevant year has to be

submitted.ec0@1B

6ailing to get accounts audited or furnish audit report reHuired uJs::!)6, -ill be levied a penalty of

RS.&9, 999J3 or BHual to !E6 @6 T@T!E S!EBS -hich ever IS EBSS

P$%#)PTIV% I"(&)% #"+%$ %(TI&" A+

/)usiness other than that of goods carriage02 P

This scheme is applicable to residents Individuals, L6, 6irm other than EE(. arrying on any

business -hose gross receipt from such business does not exceed Rs. rore ! sum eHual to 8 of

gross receipt paid or payable to the assessee or such higher

sum as declared by the assessee in the return of income shall be deemed to be the income from such

business.

o-ever for sum lo-er than this income, accounts have to be maintained and get audited.

!ll deductions under section 79 to 78 along -ith unabsorbed depreciation -ould be deemed to have

been allo-ed.

o-ever salary and interest to partners to the limit specified in section :9/b0 have to be allo-ed'

(resumptive Income notes in (G)( are briefly discussed belo-2


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P$%#)PTIV% I"(&)% #"+%$ %(TI&" A% /Business of :oods carria:e3! 4

Scheme is applicable to only those assesses -ho do not o-n more than 9 goods carriage at any

time during the previous year.

(rofits and gains from such business -ould be deemed to be as under23

'or hea;y :oods ;ehicle ! 4

$s0 =222 'or e;ery month or 7art of month for -hich such vehicle is o-ned by assessee

'or other ;ehicles! 4

$s0 =22 'or e;ery month or 7art of month for -hich such vehicle is o-ned by assessee

!ssessee can declare income higher than this specified limit.

o-ever for sum lo-er than this income, accounts have to be maintained and get audited.

!ll deductions under section 79 to 78 along -ith unabsorbed depreciation -ould be deemed to have

been allo-ed.

o-ever salary and interest to partners to the limit specified in section :9/b0 have to be allo-ed.

P$%#)PTIV% I"(&)% #"+%$ %(TI&" BBA

/=on3residentOs )usiness of operating aircraft02 3In this presume income to be & of the 6are and

freight2 P

%hether paid or payable in India or outside India for transportation of goods, passenger, livestoc5,

mail, etc. from any place in India!=D!mount received or deemed to be received in India for

transportation of goods, passenger, livestoc5, mail, etc. from any place outside India.

Faintain boo5s of accounts as necessary for !.@. to compute his income. Get his !ccounts audited

under section ::!).

(a7ital Gain Tax

10 (a7ital Gain as defined u>s =

• !ny profit or gain on transfer of a capital asset effected in the previous year /0

• Receipt of insurance amount for capital assets in the year of receipt damage due to

flood, riot, accident fire and action by enemy /!0

• !ny gain on transfer of capital assets by -ay of conversion in to stoc5 in trade of

business at fair mar5et price /40

• !ny gain to beneficial o-ner in case of transfer of security by depository /4!0

• !ny gain on transfer on capital assets to firm or !@( /not ompany ?o3operative

society0 at the price recorded in the boo5s of accounts /70

• !ny gain on distribution of capital assets on dissolution of firm or !@( at fair mar5et

price /:0

• !ny gain on compulsory acHuisition , consideration as determined J approved J

increased Jdecreased /&0


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• Difference on repurchasing of units P sec. 89) /40 in the year in -hich repurchase

too5 place /$0

0 Taxation in s7ecial cases as under

(om7any liCuidation 4 ec0 6 4

• Distribution to share holders on liHuidation of company taxed in the hands of share

holders.

(om7any 7urchasin: its on shares -ec0 6A-

U(urchase of its o-n shares by company , taxed in the hands of the shareholders

0 Transactions not transfer- ec @

•

L6 partitions

• Gift, -ill or irrevocable trust except BS@(.

• Transfer from holding to its 99 Indian subsidiary company except stoc5 in trade.

• Transfer to 99 Indian holding company by subsidiary except stoc5 in trade.

• !malgamated Indian company in the scheme of amalgamation

• !malgamation for shares held in Indian company by foreign amalgamating company

provided 4& existing shareholders continue ? no tax applicable in foreign country.

• !malgamation of ban5ing company by central govt. by ).R. !ct.

• Demerger to Indian ompany

• Demerger of shares held in Indian company by foreign company . if existing V the

shareholders continues.)usiness reorganisation from o3operative ban5 to another o3

operative ban5.

• !ny scheme of demerger J amalgamation.

• !ny transfer by non resident to non resident.

• !ny agriculture land before st march #'9.

• !ny apital !ssets of art, boo5 etc. to universityJmuseumJ art gallery etc. as notified.

• onversion of bonds etc. into shares or debentures.

• !ny transfer of membership to stoc5 exchange in exchange of shares prior to 7st Dec.

##8.


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• Transfer of land of sic5 industrial unit.

• Succession of firm by company -ith laid do-n condition.

• Bxchange of membership right and approved by SB)I.

• !ny firm transfer to EE( -ith laid do-n condition.

• Succession of sole proprietorship by a company.

• !ny transfer of lending of security as per SB)I guideline.

• Reverse mortgage.

0 (onditions of the abo;e exem7tions 4 ec @A

• 8 yrs limitation for of holding ? subsidiary company transfer.

• 7 yrs limitation for stoc5 exchange membership transfer.

• If other condition of transfer not complied -ith.

=0 )ode of (om7utation 4 ec D

6rom full value of consideration receivedJ accruing3 deduction of P

P Bxp. %holly ? exclusive for such transfer.

P ost of acHuisitionJ any improvement

Pro;ision 1.3 alculation of apital gain for non3resident 3conversion of transaction value into

foreign currency ? then conversion of capital gain in foreign currency into Indian

Pro;ision .3 apital gain other than non resident3 indexed cost of acHuisition and indexed of

!ny improvement -ill be adopted , Bxcept bond or debenture /other than indexed bond by

govt.0

Pro;ision. In case of transfer shareJdebentureJ-arrants under BS@(, mar5et value at the time

of transfer to be considered

Pro;ision . =o deduction for STT.

Bxpl. P ost of acHuisition3 index of the year of first year of assets hold or year beginning !pril

#8 -hichever is later.

Index cost of acHuisitionJimprovement same proportion as it bears to the index of the year of sale

and first year of assets held.

60 cost of certain acCuisition 4 ec 9

/0!ssets acHuired due to

P L6 partition


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3Succession , inheritance devolution

3!ny distribution on liHuidation of company

P !ny transfer under trust

3!ny other transferred under various clause of sec. :'.

3Individual property transferred to L6

The cost of acCuisition> im7ro;ement ill be ith reference to the 7re;ious oner0

-%x7l0 Pre;ious &ner 4 )eans the last 7re;ious oner of the ca7ital asset ho acCuired

it by a mode of acCuisition other than that referred abo;e 0

/40ost of amalgamating company in case of amalgamation .

/4!0. in case of conversion into share or debenture cost of acHuisition -ith reference to original

sharesJdebentures.

/4!!0. onversion to EE(, the cost of original security.

/4!)0. In case of BS@( , mar5et value at the time of issue.

/4J4DJ4B0. In case of merger, boo5 value of the demerged company as reduced by cost of

original shares ,also to apply for o3 operative ban5s.

/70In case of holding ? subsidiary company transactions P cost of original acHuisition.

/:0 !ny fair mar5et value consider uJs &$, the same -ill be the cost of acHuisition

+e7reciable Assets 4ec0=2

/i0!ny excess of full consideration over %DA of bloc5 of assets plus value of any assets

acHuired during the year, to be consider capital gain.

/ii0If %DA value of bloc5 is nil due to transfer of all bloc5 assets, %DA at the beginning of the

year -ill be considered.

In case of de7reciable assets 3%DA -ill be the cost of acHuisition. 4 ec0 =2A P

4 lum7 sale P ec0 =2B

4 ale to be considered as lon: ca7ital assets

• !ny underta5ing if held not more than 7$ month to be considered short term capital

assets

3=et -orth -ill be ta5en as a cost of acHuisition

3=et -orth to be certified

tam7 Valuation -ec0 =2(-

/03 In case of land and Jor building , stamp valuation adopted or assessed or assessable

deemed to be full value of consideration.


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/403-here assessee claims stamp value exceeds 6FA and such value not disputed in any

appeal the assessing officer may refer valuation to the valuation officer.

/703 if valuation officer value higher, then stamp duty valuation shall be ta5en as a full value

P If consideration not ascertainable 6FA shall be ta5en as full value. ec0 =2+

P !dvance money received on any previous occasion to be deducted from the computation of

cost of acHuisition. P ec0 =1

(a7ital Gain Tax -%%)PTI&"

Profit on sale of 7ro7erty used for residence 4 ec0= /0

3Transfer of long term building or lands appurtenant thereto and being residential house and

income chargeable under the head income from house property ? assesse being individual or

L6 has purchased -ithin the a period of one year before or t-o year after the date of transfer

or constructed -ithin a period of 7 year one residential house in India , then harge excess of

capital gain over the cost of purchase J construction and for sale of ne- assets -ithin 7 years,

cost -ill be ta5en nil.

3=o tax if capital gain eHual or less than cost of purchase J constructed ? cost of ne- assets to

be reduced by capital gain for sale -ithin 7 years for calculation of capital gain.

/40 3the amount of capital gain not appropriated for purchase before one year or not utilied

)efore filling the return the amount shall be deposited in accounts -ith such ban5s as specified

before due date of filing return and utilied as per scheme.

3The amount so deposited -ill be considered a cost of ne- assets together -ith other cost of

purchase J consideration if utilied.

P If amount so deposited not utilied -ithin the period specified /4J7 yrs0 amount not utilied -ill

be taxable after expiring of 7yrs. and amount can be -ithdra-n the amount so deposited

.and used for a:riculture 7ur7ose P ec0 =B 4

• Transfer of land being used for agriculture purpose in t-o year immediately preceding by

assesses J his parents J L6 and purchased any other land being used for agriculture

purpose -ithin t-o years, exemption in the same manner as laid da-n uJs &:.

(om7ulsory acCuisition of land and buildin:.3 ec0 =+-

3Transfer under compulsory acHuisition of land or building or any right in E?) forming part of

any industrial underta5ing and -as being used for such underta5ing in t-o years immediately

preceding and -ithin 7 yrs purchased J constructed any other E?) for shifting or setting up

another industrial underta5ing capital gain to be taxed as provided uJs &:.

(a7ital :ain in;ested in certain bonds 4 ec0 =%(-

• apital gain if invested -ithin a period of $ months -ith loc5 in period of 7 years in

specified bonds /infrastructure bonds0 upto Rs &9 Ea5hs in total

(a7ital :ain in;ested in residential house.3 ec0 =' 4


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/13 /a0!ny capital gain on long term assets not being residential house of individualJL6 and

purchased before one year or after t-o year or constructed -ithin 7 years one residential house

in India ,the capital gain -ill be taxed as under.

3If the cost of ne- assets is more than the net consideration of original assets Pno tax

3If the cost of ne- assets is less than the net consideration than tax same proportion of capital

gain as the cost of ne- assets bear to the net consideration of original assets.

/b0 Income from such residential house /other than one o-ned on the date of transfer of

original assets0 is chargeable under head income from house property.

/40 if assesee purchase -ithin 4 years or constructed -ithin 7 years of original transfer a

residential house other than ne- assets -hose income chargeable under income from house

property, exempt capital gain to be taxed in the year of purchased or construction.

/70 if ne- asset transferred -ithin 7 years of it purchasesJconstructed capital gain exempted to

be

/:0 procedure of ban5 deposited apply for net consideration.

hiftin: of industrial undertain: from urban area P ec0 =G-

• apital gain on capital assets being machinery or plant or building or land or any right in

E?) of industrial underta5ing situated in an urban and transfer effected due to such

shifting to any area other than urban and assessee -ithin one year before or 7 years

after of transfer purchased J acHuired J constructed (?F , Eand , building and incurred

other expenses specified for purpose of such shifting, than capital gain to be treated as

under

P If capital gain in excess of the above cost, difference -ill be treated as capital gain.

3If capital gain is eHual or less than the above cost capital gain nil.

3The loc5 in period of 7 years to be considered for capital gain on transfer of ne- assets.

3(rocedure of ban5 deposit of capital gain not utilied before filling of return apply in this case

also Shifting industrial underta5ing from urban area to any special economic one ec0 = GA-

/provision similar to &:G0

ec0 =GB P apital gain of long term residential property include land ? building by

individual JL6 and utilises net consideration in eHuity share of the eligible company before due

date of 6iling return uJs 7#/0 !=D The company utilises this amount for ne- asset -ithin one

year of subscription then Tax on capital gain -ill be proportionate if cost of ne- assets is lo-er

than net consideration or nil if cost of ne- assets is eHual or higher than net consideration.

Bligible ompany23

• It is a ne- formed Indian company after st !pril of relevant previous year It is a

manufacturing company.

• !ssesseeOs share investment or voting right, more than &9.


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• it is a SFB

• =e- assets P ne- plant ? machinery

Uompany may follo- the procedure of ban5 deposit if not purchases ne- assets before due

date of filing the return.

4 In case of transfer by compulsory acHuisition under any la-, period of investment to be

rec5oned from the date of the receipt of compensation. ec0 =*

(ost of im7ro;ement23 ec 0 == /13

• Good-illJ right etc. P =IE

• )efore st !pril #8 3=IE

• Bxpenses deductable under any head 3=IE

/3 (ost of acCuisition

/a03 Good-illJright

• In case of purchase P purchase price

• In other case P =IE

/aa0 P In case of addition of securities

• if issue -ithout any cost P =IE

Issued -ith cost P actual cost

In case renouncement

-ith nil price 3=IE

%ith cost 3!ctual cost price

/b0 !ny other capital assets

• property acHuired before st !pril #8 actual cost of acHuisition or 6FA as on st

!pril #8 at the option of assessee

• In case of property distributed by company 6FA on the date of distribution.

In case of share conversion etc. cost -ith reference to the cost of originalshares.

-here cost of previous o-ner can not be ascertained 6FA.

'or ascertainin: ')V , A0&0 may refer to ;aluation officer if- ec0 ==A-


15/16

• !.@. is of opinion that value claimed is at variance -ith the registered valuer valuation.

• !.@. is of opinion that 6FA exceed any certain age or value an prescribed or it is

necessary to do so.

(a7ital Assets ec0 /13

(roperty of any 5ind held by assessee but does not include

P Stoc5 in trade, consumable stores or ra- material held for business.

P (ersonal effects I e movable property include -earing apparels and furniture held for personal

use but exclude e-ellery ,dra-ings, art -or5 etc.

P !griculture land not situated -ithin municipal area -ith population not less than 9,999 as per

preceding census and area -ithin such distance not more than 4J$J8 K.F. from local limit of -ith

population more than 9,999Jone la5hJten la5hs

P Gold bond/#''0Jdefence bond/#890

P Special deposit bond ## Gold deposit bond ###

hort term ca7ital assets 4 ec0 /A3-

• apital assets held not more than 7$ months

• Securities listed in RSB or units of eHuity oriented funds or units of LTI or Wero

coupon bonds held not more than 4 months.

A77licable Tax! ec0 111A P

hort term

• BHuity shares in a company, or units of business trust ? sale subect to STT , tax X

&.

• In case of resident individual ? L6 , total Income /excluding STG0 is belo- taxable

limit. STG -ill be reduced to that extent .

• @ther short term gain , normal tax

• Deduction under chapter AI3! ? rebate uJs 88 from income excluding STG.

Tax on .T(G P ec0 11 4

• 49 for resident individual J L6 , domestic company and any other resident person

• In case of resident individual ? L6 benefit of deduction for income belo- taxable limit

available.

• In case of non3resident/ other than company 0 or foreign company


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P unlisted security X 9 -ithout index benefit.

P @ther assets ,tax X 49 of capital gain -ith index benefit.

• In case of listed securities / other than a unit 0 or Wero coupon bonds , ETG tax limited

to 9 %ithout index benefit

UDeduction of chapter AI3! and rebate uJs 88 from income excluding ETG

P ETG on eHuity share in a company or unit of eHuity oriented funds and such transaction

subect to STT, fully exempted P ec0 12/D3

3Such gain to be considered for F!T /&)0.

3 See more at2 http2JJtaxguru.inJincome3taxJcapital3gain3tax3income3tax3provisions3

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