Capital Gains

1. Preconditions for charge u/s. 45

Income under the head “Capital Gains” can be charged only if the following three conditions are satisfied

1. There must be a “capital asset” [for definition of “capital asset” refer S. 2(14)] :
   "Capital Asset” means––
   1. Property of any kind held by an assessee, whether or not connected with his business or profession;
   2. Any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992, but does not include––
      1. Any stock-in-trade [other than the securities referred to in sub-clause (b).
      2. Personal effects of the assessee;
      3. Agricultural land in a rural area;
      4. 6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Bonds, 1980 issued by the Central Government;
      5. Special Bearer Bonds, 1991 issued by the Central Government;
      6. Gold Deposit Bonds issued under Gold Deposit Scheme 1999 and deposit certificates issued under the Gold Monetisation Scheme, 2015 (Finance Act, 2016).

      Explanation 1 – "Property" includes any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.
      Explanation 2 – (a) The expression “Foreign Institutional Investor” shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD; (b) the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.

2. There must be a “transfer” of such capital asset [for meaning of “transfer”, refer Sections 2(47), 47 & 46(1)]; and
3. There must arise either profits or gains or loss out of such transfer.

2. Year of Chargeability

Capital Gains are generally charged to tax in the year in which “transfer” takes place [for exception to this general rule, refer column (4) of Table 2].

3. Mode of Computation

3.1 Income under the head Capital Gains is to be computed as follows:

3.2 Capital Gains u/s. 48 are computed as follows:

* Section 51 – Where any sum of money, received as an advance or otherwise in the course of negotiations for transfer of a capital asset, has been included in the total income of the assessee for any previous year in accordance with the provisions of clause (ix) of sub-section (2) of section 56, then, such sum shall not be deducted from the cost for which the asset was acquired or the written down value or the fair market value, as the case may be, in computing the cost of acquisition.

Exceptions to Section 48

1. In case of a non-resident, Capital Gains on transfer of shares in or debentures of an Indian company are to be computed firstly by converting cost of acquisition, full value of consideration and expenses incurred in connection with transfer into originally utilised foreign currency and reconverting the capital gains so computed into Indian rupees.
   Rule 115A prescribes the rates of conversion and reconversion for the purpose of calculation of capital gains in the above case. The rates of conversion and reconversion are as follows:

2. The benefit of indexation of cost will not be available for computation of Capital Gains on transfer of Bonds/Debentures
3. While calculating long-term Capital Gains (other than those covered under (a) and (b) above) cost of acquisition and cost of improvement are required to be indexed at prescribed indices.
4. Finance Act, 2016 has inserted proviso to Section 48 w.e.f. 1 April 2017 stating that while computing capital gains arising to a non-resident assessee on redemption of rupee denominated bond of an Indian company subscribed by him, the gain arising on account of appreciation of rupee against a foreign currency shall be ignored for the purpose of computation of full value of consideration. W.e.f. 1 April 2018, the benefit available to subscriber of bond is also extended to subsequent acquirer of such bonds.
5. For computing long term Capital Gain arising on transfer of Sovereign Gold Bond issued by the RBI under the Sovereign Gold Bond Scheme, 2015, the cost of acquisition shall be indexed.

3.3 Capital Gains u/s. 50 are computed as follows:

If the resultant figure is negative, the same is chargeable as deemed short-term Capital Gains u/s. 50.

If the resultant figure is positive and the entire block ceases to exist as such (for the reason that all the assets in that block are transferred during the year) the resultant figure indicates deemed short-term capital loss (refer CBDT Circular No. 469 dated 23-9-1986 — reported in 162 ITR (Stat) 21, 30).

If the resultant figure is positive and the block continues to exist (for the reason that at least one asset in the block continues to be owned by the assessee) then there will be no gains or losses and the assessee will be entitled to claim depreciation on the resultant figure.

3.4 Capital Gains u/s. 50B

Profit arising on slump sale of one or more undertakings would be chargeable to tax as Long-Term Capital Gain in the year of transfer if such undertakings have been owned and held by the assessee for at least 36 months before the date of transfer or as Short-Term Capital Gain if held for a shorter period.

The net worth (as defined) of the undertakings would be regarded as the cost of acquisition and improvement. No indexation would be allowed in respect of such cost.

3.5 Indexation

In case the capital asset is a long-term capital asset, the cost of acquisition is to be increased by cost inflation index. The prescribed cost inflation index is not notified till date.

For example, if cost of acquisition of an asset acquired in F. Y. 2004-05 is ₹ 50,000, its indexed cost of acquisition in F. Y. 2015-16 would be ₹ 50000 x Index for the year of transfer divided by Index for the year of acquisition

From 1-4-2018, the base year of indexation is shifted from 1981 to 2001.

4. Exempt Capital Gains

Refer sections 10(33), 10(37), 10(38), sections 54 to 54GB and section 115F.

Finance Act, 2016 has inserted a proviso to section 10(38) whereby clause (b), relating to security transaction tax, shall not apply to a transaction undertaken on a recognised stock exchange located in any International Financial Services Centre and where the consideration for such transaction is paid or payable in foreign currency.

Finance Act, 2017 has inserted a provision to section 10(38) to provide that w.e.f 1st April 2018 this exemption shall not apply to income arising from transfer of equity share, acquired on or after 1 October 2004 and such transaction were not chargeable to STT. However, exemption should continue to be available to certain acquisitions to be notified by the Central Government.

Vide press release dated 3rd April 2017, the Central Government issued a draft notification for public comments. The draft notification provides that all transactions of acquisitions of equity shares (acquired on or after 1st October 2004 and are not subject to STT) are notified under Section 10(38) except the following:

1. Acquisition of listed equity shares (not frequently traded on a recognised stock exchange in India) through a preferential issue, other than preferential issues to which Chapter VII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009) does not apply;
2. Transaction of purchase of listed equity share in a company is not entered through a recognised stock exchange;
3. Acquisition of equity shares of a company during the period between the date on which the company is delisted and again relisted on a recognised stock exchange

The terms ‘frequently traded shares’, ‘listed’ and ‘recognised stock exchange’ are defined in the notification. The press release lists down certain mode of acquisitions where exemption should continue to be available (such as through IPO, FPO, bonus or right issue, etc.).

5. Rate of Tax on Capital Gains

Refer “Rates of Tax” on page 3.76

TABLE 1 – Long term Capita Assets – Minimum holding period

Proviso section 2(42A) states that capital gain arising on unlisted shares of a company and units of a Mutual Fund specified under clause (23D) of section 10 transferred during the period beginning on the 1st day of April, 2014 and ending on the 10th day of July, 2014 will be considered as short-term if the said shares/units were held for not more than twelve months.

Capital Gains on Specific Transfers

(‘C.A.’ refers to Capital Assets) TABLE 2

Note :

1. As per Circular No. 768, dated 24th June, 1998, FIFO method shall be followed in case of dematerialised securities. Where the investor has more than one security account, FIFO method shall be followed account wise.
2. As per Section 55A the AO may refer to the Valuation Officer for ascertaining the fair market value of the asset under following circumstances:
3. Where in view of the AO the value of the asset claimed by the assessee in accordance with the estimate made by a registered valuer, is less than is FMV or (w.e.f. 1-7-2012, section 55A, clause (a) is amended as follows:
4. Where in view of the AO, the value of the asset claimed by the assessee in accordance with the estimate made by a registered valuer is at variance with its fair market value)
5. Where in view of the AO the value of the asset claimed by the assessee is less than the FMV by so much percentage or by so much amount as may be prescribed or
6. Having regard to the nature of the asset and other relevant circumstances, it is necessary to do so.
7. As per section 50D (with effect from 1st April, 2013), where the consideration received or accruing as a result of the transfer of a capital asset by an assessee is not ascertainable or cannot be determined, then, for the purpose of computing income chargeable to tax as capital gains, the fair market value of the said asset on the date of transfer shall be deemed to be the full value of the consideration received or accruing as a result of such transfer.
8. The definition of agricultural land has been amended and divided into three categories based on population and shortest aerial distance. Notification by Central Government now not required.

TABLE 3.1

COST OF ACQUISITION

Table – 3.2 Cost of acquisition in special cases

* Provision deeming cost of acquisition of self-generated goodwill as Nil not applicable to professional firms and cases of notional transfers; e.g., when a person becomes a partner [CBDT Cir. No. 495 of 22nd September 1987 168 ITR (St) 87, 105, 106.]

** In case of any capital asset (other than goodwill, trademark, brand name, tenancy rights, stage carriage permit, loom hours or right to manufacture etc.), acquired by the assessee (or the previous owner) before 1st April 1981, the fair market value of the asset as on 1st April 1981 may, at the option of the assessee, be treated as cost of acquisition. W.e.f 1st April 2018, the base year for computing indexed cost of acquisition or indexed cost of improvement is shifted from 1 April 1981 to 1st April 2001.

Note: Where the cost to the previous owner cannot be ascertained the cost of acquisition to the previous owner means the fair market value on the date on which the capital asset became the property of the previous owner [Section 55(3)].

Exempt Capital Gains

Exemption under the head Capital Gains TABLE 4

Notes:

1. If the new asset is transferred, within a period of 3 years from the date of purchase/construction, the cost shall be reduced, in the year of transfer, by the gains exempted earlier.
2. If the gains are not reinvested as specified, before the due date of filing the return under section 139(1), then the amount not so reinvested is required to be deposited on or before that date in an account in a specified bank/institution and utilised for the purchase/construction of the relevant asset in accordance with the notified scheme within specified time limit in order to continue availing of the benefit of exemption [For the notified scheme, see 172 ITR (St.) 91].
3. Industrial land or building must have been used for the purposes of the business of the undertaking. New asset must be purchased/constructed for the purposes of shifting/ 
   re-establishing/setting up industrial undertaking.
4. The assessee must not own more than one residential house other than the new house on the date of the transfer of the original asset.
5. The assessee must neither purchase within 2 years after or construct within 3 years after the day of transfer, any other residential house other than the one in which reinvestment is made nor transfer the new asset within 3 years from the date of its acquisition/construction, otherwise the amount of gains earlier exempted shall be deemed to be LTCG in the year of such transfer.
6. The industrial undertaking must have been situated in an urban area and the transfer must have been effected as a result of shifting to a non-urban area.
7. The industrial undertaking must have been situated in an urban area and the transfer must have been effected as a result of shifting to a Special Economic Zone as defined in clause (za) of the Special Economic Zones Act, 2005.
8. ‘Foreign Exchange Asset’ means any of the assets listed in Note 9 below which assessee has acquired or purchased with, or subscribed to in convertible foreign exchange.
9. A 'Specified Asset' under Section 115F means :
   1. Shares in an Indian company;
   2. Debentures issued by Indian company which is not a private company;
   3. Deposits with an Indian company which is not a private company;
   4. Any security of the Central Government as defined in section 2(2) of the Public Debt Act;
   5. Other notified assets.
10. In case of compulsory acquisition of asset under any law, time for reinvestment or deposit in specified assets, of sale proceeds or capital gains as the case may be, as prescribed by sections 54, 54B, 54D, 54EC and 54F shall be reckoned from the date of receipt of compensation as per provisions of section 54H.
11. Board Circular No. 471 dated 15th October 1986 (162 ITR (St) 41) has clarified that cases of allotment of flats under the self-financing scheme of the Delhi Development Authority (DDA) should be treated as cases of ‘construction’ for the purposes of section 54 and section 54F.
    Similarly, the Board Circular No. 672 dated. 16th December 1993 (205 ITR (St) 47) has clarified that allotment of flats/ houses by co-op. societies and other institutions, whose schemes of allotment and construction are similar to those of DDA (as mentioned in para 2 of aforesaid Circular No. 471), would be treated as ‘construction’ for the purposes of section 54 and Section 54F.
12. Board Circular No. 667 dated 18th October 1993 (204 ITR (St) 103) has clarified that for the purpose of computing exemption under section 54 or section 54F, the cost of the plot together with cost of the building will be considered as cost of new asset, provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections.
13. Where new asset is transferred within 3 years from date of its acquisition, or converted into money or any loan/ advance is taken on securities of specified bond, the amount of gains earlier exempted shall be deemed to be LTCG in the year of such transfer or conversion.
14. Cost of specified asset shall not be considered for:
    • Rebate under section 88 up to A.Y 2005-06;
    • Deduction under section 80C from A.Y. 2006-07.
15. Where new asset is transferred within 3 years from date of its acquisition or converted into money or any loan/ advances is taken on the security of specified assets, amount of gains earlier exempted shall be deemed to be LTCG in year of such transfer or conversion.
16. Where new asset is transferred within one year from date of its acquisition, amount of gains earlier exempted shall be deemed to be LTCG in the year of such transfer.
17. The benefit of exemption under Section 54B extended to HUF with effect from 1st April 2013.
18. Under Section 54GB
    1. "Eligible company" means a company which fulfils the following conditions, namely:—
       It is a company incorporated in India during the period from the 1st day of April of the previous year relevant to the assessment year in which the capital gain arises to the due date of furnishing of return of income under sub-section (1) of section 139 by the assessee;
       1. It is engaged in the business of manufacture of an article or a thing;
       2. It is a company in which the assessee has more than 50% share capital or more than 50% voting rights after the subscription in shares by the assessee; and
       3. It is a company which qualifies to be a small or medium enterprise under the Micro, Small and Medium Enterprises Act, 2006 or from 1st April 2017 is an ‘eligible start up’;
    2. "New asset" means new plant and machinery but does not include—
       1. Any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person;
       2. Any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house;
       3. Any office appliances including computers or computer software;
       4. Any vehicle; or
       5. Any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any previous year.
    3. As per the section, the amount of the net consideration, which has been received by the company for issue of shares to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the due date of furnishing of the return of income by the assessee under Section 139, shall be deposited by the company, before the said due date in an account in any such bank or institution as may be specified and shall be utilised in accordance with any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and the return furnished by the assessee shall be accompanied by proof of such deposit having been made
    4. If the equity shares of the company or the new asset acquired by the company are sold or otherwise transferred within a period of 5 years from the date of their acquisition, the amount of capital gain arising from the transfer of the residential property which was not charged to tax, shall be deemed to be the income of the assessee chargeable under the head “Capital gains” of the previous year in which such equity shares or such new asset are sold or otherwise transferred, in addition to taxability of gains, arising on account of transfer of shares or of the new asset, in the hands of the assessee or the company, as the case may be.
    5. The exemption is available in case of any transfer of residential property made on or before 31 March 2017.
    6. The time period has been extended from 31 March 2017 to 31 March 2019 in case the investment is made in an “eligible start-up”. (inserted by Finance Act, 2016 w.e.f. 1April 2017 [term “eligible start-up” – as defined in Explanation below Section 80-IAC(4)].
    7. Section 54GB shall be effective from 1 April 2013 and would accordingly apply from A.Y. 2013-14 and subsequent years.

NO TRANSFER FOR THE PURPOSES OF CAPITAL GAIN

Following transactions are not regarded as transfer for the purpose of Capital Gain (Section 47).

Distribution/ Transfer of a Capital Asset

1. On total or partial partition of H.U.F. [Section 47(i)]
2. Under a gift/ an irrevocable trust (except shares, debentures or warrants issued under ESOP/ESOS) or under a will [Section 47(iii)].
3. By a company to its Indian subsidiary company if Parent company held all the shares of Indian subsidiary company [Section 47(iv)] (see notes 1 and 2).
4. By a subsidiary company to the Indian holding company if the Indian holding company held all the shares of the subsidiary company. [Section 47(v)] (see notes 1 and 2).
5. By the amalgamating company to the Indian amalgamated company in a scheme of amalgamation. [Section 47(vi)].
6. Being shares held in an Indian company by the amalgamating foreign company to the amalgamated foreign company in the scheme of amalgamation if [Section 47(via)]
   • At least 25% of shareholders of the first company remains shareholders of the later company, and
   • There is no capital gains tax on such transfer in the country of first company
7. A capital asset by a banking company to a banking institution in a scheme of amalgamation sanctioned and brought into force by the Central Government under Section 45(7) of the Banking Regulation Act, 1949 [Section 47(viaa)].
8. (viab) any transfer, in a scheme of amalgamation, of a capital asset, being a share of a foreign company, referred to in Explanation 5 to clause (i) of sub-section (1) of Section 9, which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the amalgamating foreign company to the amalgamated foreign company, if—
   1. At least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company; and
   2. Such transfer does not attract tax on capital gains in the country in which the amalgamating company is incorporated;
9. (vicc) any transfer in a demerger, of a capital asset, being a share of a foreign company, referred to in Explanation 5 to clause (i) of sub-section (1) of Section 9, which derives, directly or indirectly, its value substantially from the share or shares of an Indian company, held by the demerged foreign company to the resulting foreign company, if,—
   1. The shareholders, holding not less than 3/4th in value of the shares of the demerged foreign company, continue to remain shareholders of the resulting foreign company; and
   2. Such transfer does not attract tax on capital gains in the country in which the demerged foreign company is incorporated:
      Provided that the provisions of Sections 391 to 394 of the Companies Act, 1956 shall not apply in case of demergers referred to in this clause;
10. By the demerged company to the resulting company if the resulting company is an Indian company [Section 47(vib)].
11. Being share or shares held in an Indian company by the demerged foreign company to the resulting foreign company, if
    • The shareholders holding not less than 3/4th in the value of shares of the demerged foreign company continue to remain shareholders of the resulting foreign company.
    • There is no capital gain tax on such transfer in the country in which the demerged foreign company is incorporated [Section 47(vic)].
12. Transfer by a predecessor co-operative bank to a successor co-operative bank in a business reorganisation. [Section 47(vica)].
13. Transfer of shares of a predecessor co-operative bank against shares of successor co-operative bank in a business reorganisation [Section 47(vicb)].
14. Transfer or issue of shares in case of a demerger to shareholders of demerged company by resulting company [Section 47(vid)] (In the case of a demerger, there is a requirement under Section 2(19AA)(iv) that the resulting company has to issue its shares to the shareholders of the demerged company on a proportionate basis. It is proposed to amend the provisions of Section 2(19AA) so as to exclude the requirement of issue of shares where resulting company itself is a shareholder of the demerged company. The requirement of issuing shares would still have to be met by the resulting company in case of other shareholders of the demerged company.)
15. Being shares held in the amalgamating company by a shareholder in a scheme of amalgamation against the allotment of shares in the Indian amalgamated company “except where the shareholder itself is the amalgamated company” [Section 47(vii)].
16. Being bonds or shares referred to in Section 115AC(1), made outside India by a non-resident to another non-resident. [Section 47(viia)].
17. Transfer of a rupee denominated bond of an Indian company issued outside India, by a non-resident to another non-resident outside India [Section 47(viiaa)]
18. Clause (viib) - any transfer of a capital asset, being a Government Security carrying a periodic payment of interest, made outside India through an intermediary dealing in settlement of securities, by a non-resident to another non-resident.
    Explanation.—For the purposes of this clause, “Government Security” shall have the meaning assigned to it in clause (b) of Section 2 of the Securities Contracts (Regulation) Act, 1956;
19. Clause (viic) (inserted by Finance Act, 2016) w.e.f. 1April 2017 - any transfer of Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond Scheme, 2015, by way of redemption, by an assessee being an individual
20. Being items of national importance specified in Section 47(ix) transferred to a University, National Museum, etc.
21. By conversion of bonds, debentures, etc. into shares or debentures of same company. [Section 47(x)].
22. Conversion of Foreign Currency Exchangeable Bonds referred to in Section 115AC(1)(a) into shares or debentures of any company. [Section 47(xa)]
23. Conversion of preference shares of a company into equity shares of that company [Section 47(xb)]
24. Being membership of a recognised stock exchange, on or before 31 December 1988, in exchange of shares by a person other than a company to a company “Membership of recognised stock exchange” is defined by Explanation to Section 47(xi).
25. Being land of Sick Industrial co., under a scheme of SICA 1985, where such company is managed by its workers co-operative. [Section 47(xii)].
26. Transfer of a capital asset where an AOP or a BOI is succeeded by a company in the course of demutualisation or corporatisation of a recognised stock exchange in India under a scheme approved by SEBI provided all the assets and liabilities of the AOP/ BOI are taken over by the successor company. [Section 47(xiii)]
27. Any transfer of a capital asset, being share of a special purpose vehicle to a business trust in exchange of units allotted by that trust to the transferor. [Section 47(xvii)]
28. Explanation - For the purposes of this clause, the expression “special purpose vehicle” shall have the meaning assigned to it in the Explanation to clause (23FC) of Section 10.
29. Clause (xviii) – any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating scheme of a mutual fund, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated scheme of the mutual fund:
    Provided that the consolidation is of two or more schemes of equity oriented fund or of two or more schemes of a fund other than equity oriented fund.
    Amendment also made in Section 2(42A) whereby period of holding of the units of the consolidated scheme shall include the period for which the units in consolidating schemes were held by the assessee.
30. Sale/ Transfer of any Capital Asset where a firm/ Sole Proprietary Concern (SPC) is succeeded by a company provided given hereafter conditions are complied. [Sections 47(xiii/xiv)]
    
    IMPORTANT CONDITIONS FOR FIRMS
    1. All partners become shareholders in ratio of capital.
    2. Aggregate shares of old partners not to reduce below 50% of the total voting power for minimum 5 years.
    3. All assets and liabilities are taken over by new company.
    4. Partners not to receive any benefit (other than shares) as a consideration.

    IMPORTANT CONDITIONS FOR SOLE PROPRIETARY CONCERN (SPC)

    5. Proprietor’s shares not to reduce below 50% for minimum 5 yrs.
    6. Conditions c & d of firms also applicable to SPC.
31. Clause (xix) inserted by Finance Act, 2016 – any transfer by a unit holder of a capital asset, being a unit or units, held by him in the consolidating plan of a mutual fund scheme, made in consideration of the allotment to him of a capital asset, being a unit or units, in the consolidated plan of that scheme of the mutual fund.
32. Transfer of a membership right in a recognised stock exchange for acquisition of shares, and trading or clearing rights under a scheme of demutualisation or corporatisation approved by SEBI. [Section 47(xiiia)]
33. Sale/ transfer of capital asset where a private company or unlisted public company is converted into a limited liability partnership (LLP) provided following conditions are fulfilled: (see notes 2 and 3.) (Section 47(xiiib)).
    
    IMPORTANT CONDITIONS FOR CONVERSION INTO LLPS
    1. All the assets and liabilities of the company before conversion are taken over by the new LLP.
    2. All the shareholders of the company immediately before conversion become the partners of the LLP. The profit sharing ratio and capital contribution are in the same proportion as their share holding in the company.
    3. The shareholders do not receive any additional benefit.
    4. Aggregate profit sharing ratio of the old shareholders not to reduce below 50% for minimum 5 years.
    5. The total sales, turnover or gross receipts of the company in any 3 years preceding the year of conversion do not exceed Rs 60 lakhs.
    6. No amount is paid to the partners out of the accumulated profits as on the date of conversion for 3 years from the date of conversion.
    7. The total value of the assets as appearing in the books of account of the company in any of the 3 previous years preceding the previous year in which the conversion takes place does not exceed Rs 5 crore rupees (inserted by Finance Act, 2016).
34. Transfer in a scheme of lending of any securities subject to the guidelines issued by SEBI, established under Section 3 of SEBI Act, 1992 (15 of 1992) (or RBI constituted under Section 3(1) of the RBI Act, 1934) [Section 47 (xv)].
35. Transfer of a capital asset in a transaction of reverse mortgage under a scheme made and notified by the Central Government [Section 47(xvi)] (retrospective from A.Y. 2008-09).
36. Section 46(1): Where assets of the company are distributed to the shareholders on liquidation of company, such distribution shall not be regarded as transfer by company.

Notes:

1. If there is any transfer of a capital asset as a stock-in-trade after 29 February 1998 then clauses (iii) and (iv) given above will not apply.
2. Please refer Section 47A for withdrawal of exemption in certain cases.