Part 1 - Direct Taxes

Income from Business & Profession 1.79 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication SECTION DESCRIPTION 41(5) 1. The business or profession referred to in section 41 has been discontinued. 2. There is income of the nature referred to in section 41(1), section 41(3), section 41(4) or section 41(4A) [i.e., income u/s. 41(2) is not included here]. 3. The loss, not being a speculation loss, of the PY in which the business ceased to exist could not be set-off. 4. Such loss shall be allowed to be set-off against the incomes arising under section 41 [except for section 41(2)]. 5. Loss of a PY prior to the PY of discontinuance of business, which remains unabsorbed, cannot be set-off using section 41(5). 43AA (I) Monetary Items as per Section 43AA and ICDS • Monetary items are moneys held and assets to be received or liabilities to be paid in fixed or determinable amount of money. • Foreign currency transactions shall be recorded at the rate prevailing on the date of transaction. Event Tax Treatment (i) Settlement during the PY Exchange gain Taxable as PGBP income Exchange Loss Allowed as a deduction under PGBP (ii) No settlement during the PY and re-stated as on 31st March of the PY Exchange gain Taxable as PGBP income Exchange Loss Allowed as a deduction under PGBP (II) Non-Monetary Items as per Section 43AA and ICDS • Non-Monetary Items are assets and liabilities others than monetary items. • Transaction shall be recorded at the foreign exchange rate prevailing on the date of transaction. • Non-monetary items, except inventory, shall not be converted at the exchange rate prevailing at the end of the previous year. • If Inventories are valued at Net Realisable Value (NRV) denominated in foreign currency, such inventory shall be valued using the exchange rate on the date when NRV was determined. • Exchange Gain/ Exchange Loss = Value at which the inventory was initially recorded (-) Value at the end of the PY.

Direct Taxes 1.80 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication SECTION DESCRIPTION • Exchange gain, as calculated above, shall be taxable as PGBP. Exchange Loss shall be allowed as a deduction. (III) Forward Exchange Contracts • Any premium or discount arising at the inception of a forward exchange contract shall be amortized as expense or income over the life of the contract. • Exchange differences on such a contract shall be recognized as income or as expense in the previous year in which the exchange rates change. • Any profit or loss arising on cancellation or renewal shall be recognized as income or as expense for the previous year. 43CA In case of transfer of land and building or both held as stock in trade, the consideration is less than the stamp duty value (SDV), the SDV shall be considered as consideration. If the difference does not exceed 10% of consideration, no applicability of section 43CA. If the assessee claims before the Assessing Officer (AO) that the SDV exceeds the fair market value of such property and such SDV has not been disputed in any appeal or revision or reference, then the AO may refer the valuation of such land/building/both to a Valuation Officer (DVO) 43D Interest income on bad and doubtful debts [debts are considered as bad and doubtful according to the guidelines prescribed by RBI or NHB] shall be taxable in the PY in which such income is credited to the profit and loss account or in the PY in which is actually received, whichever is earlier. This provision is applicable to – i. Public financial institution ii. Scheduled bank iii. Co-operative bank [however, primary agricultural credit society, primary cooperative agricultural and rural development bank are excluded from this section] iv. A State financial corporation or a v. A State industrial investment corporation or vi. such class of NBFCs as may be notified by the Central Government in the Official Gazette in this behalf; or vii. Public company involved in lending and borrowing activities

Income from Business & Profession 1.81 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication (8) Maintenance of Books of Accounts & Audit - S. 44AA & 44AB SECTION 44AA & RULE 6F - Maintenance of Accounts by Certain Persons Carrying on Profession or Business Particulars Specified Professions Other Professions/ Any business Individual/HUF Other Assessees Condition to be checked The gross receipts from profession during P.Y. > ` 1,50,000 in ALL OF 3 YEARS preceding P.Y. The turnover and gross receipts during P.Y. > `25,00,000 OR The taxable income from business/ profession during P.Y. > `2,50,000 in ANY 1 OF 3 YEARS preceding P.Y. The turnover and gross receipts during P.Y. > `10,00,000 OR The taxable income from business/ profession during P.Y. > `1,20,000 in ANY 1 OF 3 YEARS preceding P.Y. If condition is satisfied Books to be maintained compulsorily – Journal, Ledger, Cash book (including petty cash book), Bank book, Bills issued in respect of income, Bills received in respect of expenditure incurred Such books of account and other documents shall be maintained that may enable the Assessing Officer to compute his total income in accordance with the provisions of the Act. If condition is not satisfied Such books of account and other documents shall be maintained that may enable the Assessing Officer to compute his total income in accordance with the provisions of the Act. Not Compulsory to maintain books of account. If Section 44AA is not complied with – 1. A penalty of `25,000/- shall be imposed under section 271A. 2. The Assessing Officer shall resort to best judgment assessment under section 144 for nonmaintenance of books of account [Refer section 145(3)]. The books of account and other documents shall be kept and maintained for a period of 6 years from the end of the relevant assessment year:

Direct Taxes 1.82 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Where the assessment in relation to any assessment year has been reopened u/s. 147 of the Act, all the books of account and other documents which were kept and maintained at the time of reopening of the assessment shall continue to be so kept and maintained till the assessment has been completed. Specified professions legal, medical, engineering, architectural, accountancy, technical consultancy, interior decorators, authorized representatives, film artist (including director, actor, cameraman, music director, art director, dance director, editor, singer, lyricist, story writer, screen play writer, dialogue writer & a dress designer), company secretary or information technology. SECTION 44AB: Audit of Accounts of Certain Persons Carrying on Business or Profession CRITERIA FOR APPLICABILITY OF “AUDIT” U/S. 44AB PROFESSION (I) If the Gross Receipts for the PY > ` 50 lakhs (II) If the assessee is covered by section 44ADA Income offered to tax < Deemed profit u/s. 44ADA & Total income > Basic Exemption Limit (BEL) (III) Amendment as per Finance Act, 2023: If the assessee is covered by section 44ADA and declares his profits as per section 44ADA(1), then audit under this section is not applicable. BUSINESS (I) If the sales, turnover, gross receipts > ` 1 crore (II) In the case of a person whose— (a) Receipts IN CASH ≤ 5% of Total Receipts during the PY; AND (b) Payments IN CASH ≤ 5% of Total Payments during the PY Tax audit shall be applicable if the turnover, sales or gross receipts > ` 10 crores. The payment or receipt, as the case may be, by a cheque drawn on a bank or by a bank draft, which is NOT ACCOUNT PAYEE, shall be DEEMED to be the payment or receipt, as the case may be, IN CASH (III) If the assessee is covered by Section 44AE, Section 44BB, Section 44BBB Income offered to tax < Deemed profit under the relevant section (IV) If the assessee is covered by section 44AD If section 44AD(4) gets attracted & the total income > BEL, then audit is applicable. (V) Amendment as per Finance Act, 2023: If the assessee is covered by section 44AD and declares his profits as per section 44ADA(1), then audit under this section is not applicable.

Income from Business & Profession 1.83 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication CRITERIA FOR APPLICABILITY OF “AUDIT” U/S. 44AB Other Points 1. The tax audit report shall be furnished 1 month prior to the due date of filing return of income. 2. If audit applies, the due date of filing return of income for that AY shall be 31st October. 3. Section 271B: Penalty for failure to get books of account audited is 0.5% of the turnover/sales/gross receipts or a maximum of `1,50,000, whichever is less. (9) Presumptive Taxation PARTICULARS SECTION 44AD: COMPUTING PROFITS AND GAINS OF BUSINESS ON PRESUMPTIVE BASIS. SECTION 44ADA: COMPUTING PROFITS AND GAINS OF PROFESSION ON PRESUMPTIVE BASIS. SECTION 44AE: PROFITS AND GAINS OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES Applicable to Resident Individual, Resident HUF and Resident Firm (excluding LLP) All resident assessees carrying on profession as specified u/s. 44AA All assessees Not Applicable to Assessees - (a) claiming deduction u/s. 10AA or u/s. 80- IA to section 80RRB (b) engaged in the business referred to in section 44AE. (c) carrying on profession as specified u/s. 44AA (d) earning income in the nature of commission or brokerage (e) carrying on any agency business N.A. N.A.

Direct Taxes 1.84 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication PARTICULARS SECTION 44AD: COMPUTING PROFITS AND GAINS OF BUSINESS ON PRESUMPTIVE BASIS. SECTION 44ADA: COMPUTING PROFITS AND GAINS OF PROFESSION ON PRESUMPTIVE BASIS. SECTION 44AE: PROFITS AND GAINS OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES Criteria for applicability Turnover, Sales and Gross Receipts < ` 2 crores Amendment as per Finance Act, 2023: If the amounts received during the PY, in cash, does not exceed 5% of the total turnover or gross receipts of such PY, then this section shall apply if the turnover, sales, gross receipts ≤ ` 3 crores. Amounts received by cheque or draft, which is not account payee, shall be deemed to be “received in cash.” Gross Receipts ≤ ` 50 lakhs Amendment as per Finance Act, 2023: If the amounts received during the PY, in cash, does not exceed 5% of the gross receipts of such PY, then this section shall apply if the turnover, sales, gross receipts ≤ ` 75 lakhs. Amounts received by cheque or draft, which is not account payee, shall be deemed to be “received in cash.” Number of goods carriages owned throughout the PY < 10 Rate of presumptive profit 8% of the turnover/sales/ gross receipts. The rate of profit shall be 6% on that turnover/ sales/gross receipts which has been received during the PY or before the due date of filing return of income as per section 139(1) through account payee cheque, account payee bank draft, electronic clearing system or other electronic modes prescribed by Rule 6ABBA. If the actual income claimed by the assessee is higher than the presumed profit, such higher income shall be taxable. 50% of the Gross receipts If the actual income claimed by the assessee is higher than the presumed profit, such higher income shall be taxable. Heavy Goods Vehicle - HGV [i.e., Gross Weight > 12,000 kgs]: `1,000 p.m. per ton × number of tons × number of months for which the HGV was owned by the assessee. Goods carriage other than HGV: `7,500 p.m. × number of months for which the goods carriage was owned by the assessee. If the actual income claimed by the assessee is higher than the presumed profit, such higher income shall be taxable.

Income from Business & Profession 1.85 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication PARTICULARS SECTION 44AD: COMPUTING PROFITS AND GAINS OF BUSINESS ON PRESUMPTIVE BASIS. SECTION 44ADA: COMPUTING PROFITS AND GAINS OF PROFESSION ON PRESUMPTIVE BASIS. SECTION 44AE: PROFITS AND GAINS OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES Provisions of section 30 to 38 All deductions are deemed to be allowed. UAD cannot be reduced from the presumed profit. In case of a partnership firm, the interest on capital and salary to partners is deemed to be allowed. All deductions are deemed to be allowed. UAD cannot be reduced from the presumed profit. In case of a partnership firm, the interest on capital and salary to partners is deemed to be allowed. All deductions are deemed to be allowed. UAD cannot be reduced from the presumed profit. However, in case of a partnership firm, interest on capital and remuneration to partners shall be deducted according to the limits u/s. 40(b). Tax Audit under section 44AB If the assessee offers his income to tax as per the section of presumptive tax [i.e., presumed profit or a higher amount], then tax audit is not required. However, if the assessee opts to offer his income to tax lower than the presumed profit, then audit u/s. 44AB shall be mandatory. If the assessee offers his income to tax as per the section of presumptive tax [i.e., presumed profit or a higher amount], then tax audit is not required. However, if the assessee opts to offer his income to tax lower than the presumed profit AND his total income > Basic Exemption Limit, then audit u/s. 44AB shall be mandatory. If the assessee offers his income to tax as per the section of presumptive tax [i.e., presumed profit or a higher amount], then tax audit is not required. However, if the assessee opts to offer his income to tax lower than the presumed profit, then audit u/s. 44AB shall be mandatory.

Direct Taxes 1.86 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication PARTICULARS SECTION 44AD: COMPUTING PROFITS AND GAINS OF BUSINESS ON PRESUMPTIVE BASIS. SECTION 44ADA: COMPUTING PROFITS AND GAINS OF PROFESSION ON PRESUMPTIVE BASIS. SECTION 44AE: PROFITS AND GAINS OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES Maintenance of books under section 44AA If the assessee offers his income to tax as per the section of presumptive tax [i.e., presumed profit or a higher amount], then maintenance of books of account is not mandatory. However, if the assessee opts to offer his income to tax lower than the presumed profit, then maintenance of books of account u/s. 44AA shall be mandatory. If the assessee offers his income to tax as per the section of presumptive tax [i.e., presumed profit or a higher amount], then maintenance of books of account is not mandatory. However, if the assessee opts to offer his income to tax lower than the presumed profit AND his total income > Basic Exemption Limit, then maintenance of books of account u/s. 44AA shall be mandatory. If the assessee offers his income to tax as per the section of presumptive tax [i.e., presumed profit or a higher amount], then maintenance of books of account is not mandatory. However, if the assessee opts to offer his income to tax lower than the presumed profit, then maintenance of books of account u/s. 44AA shall be mandatory. Payment of advance tax Liable to pay advance tax only as per the last installment of 15th March. No need to follow all the installments u/s. 211. Liable to pay advance tax only as per the last installment of 15th March. No need to follow all the installments u/s. 211. No relaxation provided. Assessee will have to pay advance tax according to the installments laid down in section 211. Deduction under Chapter VI-A Allowed, except for the deductions in “Part C” Allowed Allowed Set-off of losses Permitted Permitted Permitted Section 44AD(4): If an assessee declares his income for a particular PY as per section 44AD [i.e., presumed profit or actual profit, whichever is higher], he is bound to declare his income for the next 5 PYs as per section 44AD. If he does not declare income as per section 44AD for any PY in the next 5 PYs [called as PY of non-compliance], then he is not eligible to claim the benefit of section 44AD for 5 years next following the PY of non-compliance. He shall be required to maintain his books of account under section 44AA and get those books audited under section 44AB for those 5 PYs following the PY of non-compliance [provided his total income > Basic Exemption Limit].

Income from Business & Profession 1.87 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication SECTION 44DA: SPECIAL PROVISIONS FOR COMPUTING INCOME BY WAY OF ROYALTIES, ETC., IN CASE OF NON-RESIDENTS AND FOREIGN COMPANIES Payer of income: Government or an Indian concern Receiver of income: a non-resident or a foreign company Nature of income: Royalty or Fees for technical services (FTS) When does section 44DA apply? Condition 1: Such non-resident or a foreign company carries on business in India through a permanent establishment (PE) or performs professional services from a fixed place of profession Condition 2: the right, property or contract in respect of which the royalties or FTS are paid is effectively connected with such PE or fixed place of profession Effects if section 44DA is applicable: (i) The head of income under which this income shall be chargeable to tax shall be PGBP. (ii) Expenditure incurred wholly and exclusively for the purpose of such PE or the fixed place of profession shall be allowed as a deduction. (iii) Reimbursement of actual expenses by the PE to its head office or to any other offices shall be allowed as a deduction. (iv) Section 44BB shall not apply in respect of income under this section. (v) Maintenance of books and documents as per section 44AA and audit u/s. 44AB are mandatory. (vi) Regular rates of tax shall apply in this case. (vii) MAT is applicable on this income taxed u/s. 44DA. If section 44DA is not applicable, then the Royalty and Fees for Technical Services shall be taxed under section 115A @ 10% without allowing any deduction of expenses. In such a case, these incomes will not be included in “Book Profit” of the foreign company for computing MAT. Presumptive Taxation for Non-residents Particulars Section 44B Section 44BBA Section 44BB Section 44BBB Assessee covered Non-resident Non-resident Non-resident Foreign company Nature of Business Business of operation of ships Business of operation of aircrafts Providing services or facilities in connection with prospecting for, or extraction or production of mineral oils. Civil Construction in respect of a turn-key power project approved by the Central Government.

Direct Taxes 1.88 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Particulars Section 44B Section 44BBA Section 44BB Section 44BBB Supplying plant and machinery on hire in connection with prospecting for, or extraction or production of mineral oils. Erection of plant and machinery in respect of a turn-key power project approved by the Central Government. Testing and c o m m i s s i o n i n g of plant and machinery in respect of a turn-key power project approved by the Central Government. Amount of deemed profits as per the section 7.5% of [Amount accruing in India in respect of shipping at a port in India + Amount received or deemed to be received in India in respect of shipping at any port outside India] 5% of [Amount accruing in India in respect of carriage from any place in India + Amount received or deemed to be received in India in respect of carriage from any place outside India] 10% of [Amount accruing as a result of prospecting or extraction of mineral oils in India + Amounts received or deemed to be received in India in respect of prospecting or extraction of mineral oils outside India] 10% of the amount accruing in India POINTS TO BE NOTED: 1. Applicability of Minimum Alternate Tax (MAT), if the assessee covered by the afore-said sections is a foreign company: (a) Section 44B and Section 44BBA: MAT will not apply to a foreign company covered by these 2 sections. (b) Section 44BB and Section 44BBB: If the foreign company declares profits as per the section, MAT will not apply. If the foreign company declares profits lower than that prescribed in the sections, then MAT will apply to such foreign company. 2. For all the 4 sections, it is not possible for the AO to tax the assessee on an amount higher than the amount mentioned in the section.

Income from Business & Profession 1.89 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Particulars Section 44B Section 44BBA Section 44BB Section 44BBB 3. For the business of “operation of ships u/s. 44B” and “operation of aircraft u/s. 44BBA”, it is not possible for the assessee to declare profits lower than the amount mentioned in the respective section. 4. For the business covered in section 44BB and section 44BBB, the assessee can declare profits lower than that mentioned in the section but will have to maintain books of account u/s. 44AA and get them audited u/s. 44AB. In this situation, the AO shall have the power u/s. 143(3) to determine the total income or loss of the assessee and the sum payable/sum refundable. Also, in this situation, if the assessee is a foreign company, the provisions of MAT will apply. 5. Amendment inserted by the Finance Act, 2023 for Section 44BB & Section 44BBB: If the assessee declares profit in accordance with these sections (i.e., they do not declare lower profits), then brought forward losses u/s. 72 and unabsorbed depreciation u/s. 32(2) cannot be set-off against such profits for that AY. 6. The assessees can claim deduction under Chapter VI-A towards incomes taxed under these 4 sections. 2

Direct Taxes 1.90 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication VII. Income from 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 a. There must be a “capital asset” [for definition of “capital asset” refer S. 2(14)] : “Capital Asset” means–– a. Property of any kind held by an assessee, whether or not connected with his business or profession; b. 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–– i. Any stock-in-trade [other than the securities referred to in sub-clause (b)]. ii. Personal effects of the assessee excluding diamonds, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art; iii. Agricultural land in India situated in a rural area; iv. 6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Bonds, 1980 issued by the Central Government; v. Special Bearer Bonds, 1991 issued by the Central Government; vi. Gold Deposit Bonds issued under Gold Deposit Scheme 1999 and deposit certificates issued under the Gold Monetisation Scheme, 2015 (Finance Act, 2016). c. Any unit linked insurance policy to which exemption under section 10(10D) does not apply on account of applicability of the fourth and fifth proviso thereof 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. b. There must be a “transfer” of such capital asset [for meaning of “transfer”, refer Sections 2(47), 47 & 46(1)]; and c. 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: a) In respect of capital assets other than depreciable assets as per S. 48 b) In respect of depreciable assets other than mentioned in (c) as per S. 50

Income from Capital Gains 1.91 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication c) In respect of depreciable assets of an undertaking engaged in generation or generation and distribution of power as per S. 50A d) In respect of listed market linked debentures As per S. 50AA e) In respect of slump sale as per S. 50B 3.2 Capital Gains u/s. 48 are computed as follows: a) Full value of consideration received or accruing as a result of the transfer of capital asset [also refer column 5 of Table 2] a b) Less Expenditure incurred wholly & exclusively in connection with transfer [Expenditure by way of Securities Transaction Tax is not allowable] b c) Less Cost of acquisition and cost of improvement (refer tree diagram below) c d) * Refer below d Income/Loss chargeable u/s. 45 r.w.s. 48 [a-b -(c-d)] * 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 a. 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: Cost of acquisition The average of telegraphic transfer (TT) buying rate and TT selling rate (as on the date of acquisition) of the foreign currency utilised in the purchase of asset Expenditure incurred wholly and exclusively in connection with transfer consideration The average of TT buying rate and TT selling rate as on the date of transfer Full value of consideration The average of TT buying rate and TT selling rate as on the date of transfer For reconverting the capital gains TT buying rate as on the date of transfer b. The benefit of indexation of cost will not be available for computation of Capital Gains on transfer of Bonds/Debentures/specified shares and units. c. 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. d. 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

Direct Taxes 1.92 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication purpose of computation of full value of consideration. W.e.f. 1st April 2018, the benefit available to subscriber of bond is also extended to subsequent acquirer of such bonds. e. For computing long-term Capital Gains 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: a) Opening W.D.V. of the Block of Assets ‘a’ b) Full value of consideration received or accruing as a result of transfer or transfers of asset falling within the concerned block of assets during the relevant previous year ‘b’ c) Expenditure incurred wholly and exclusively in connection with such transfer or transfers. This deduction would not be available in a case where the entire block ceases to exist as such, for the reason that all the assets in that block are transferred during the year. ’c’ d) Actual cost of any asset falling within the concerned block of assets acquired during the relevant previous year. ‘d’ Resultant figure a+c+d-b 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. Where goodwill of a business or profession forms part of a block of asset for the assessment year beginning on 1st April 2020 and depreciation thereon has been obtained by assessee, the written down value of that block of asset and short term gain, if any, is to computed in prescribed manner in accordance with proviso to section 50(2) inserted by Finance Act 2021 3.4 Capital Gains u/s. 50AA Section 50AA has been inserted vide Finance Act 2023 which deems the capital gains from transfer or redemption or maturity of listed marked linked debentures, irrespective of their holding period, as short- term capital gains taxable at applicable rates. Securities Transaction tax paid is not allowed as a deduction while computing such gains. 3.5 Capital Gains u/s. 50B Profit arising on slump sale of one or more undertakings would be chargeable to tax as LongTerm Capital Gains 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. Fair market value of the capital assets as on the date of transfer, calculated in prescribed

Income from Capital Gains 1.93 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication manner shall be deemed to be the full value of consideration received or accruing as a result of transfer (deeming provision inserted by Finance Act 2021 w.e.f. 2001) Up-to A.Y. 2020-21, section 2(42C) defined slump sale as transfer of one or more undertakings as a result of sale for lumpsum consideration without values being assigned to the individual assets and liabilities in such sale. It was held by various courts in the past that slump sale through exchange was not covered by the definition of slump sale and therefore the provisions of section 50B and thus gains on such slump exchange were not charged to tax [Ref. CIT vs. Bharat Bijlee Ltd. (365 ITR 258 BOM HC)] Finance Act 2021 has amended the definition of slump sale under section 2(42C) w.e.f. A.Y. 2021- 22 to mean transfer of one or more undertaking by “any means”for a lump sum consideration without values being assigned to the individual assets and liabilities in such transfer. Further, an explanation is added to provide that the term ‘transfer’ shall have the same meaning as assigned under section 2(47). 3.6 Indexation In case the capital asset is a long-term capital asset (except for specified equity shares and equity oriented units), the cost of acquisition is to be increased by cost inflation index. 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 ` 50,000 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. The list of cost inflation index is as followsSr. No. Financial Year Cost Inflation Index 1 2001-02 100 2 2002-03 105 3 2003-04 109 Sr. No. Financial Year Cost Inflation Index 4 2004-05 113 5 2005-06 117 6 2006-07 122 7 2007-08 129 8 2008-09 137 9 2009-10 148 10 2010-11 167 11 2011-12 184 12 2012-13 200 13 2013-14 220 14 2014-15 240 15 2015-16 254 16 2016-17 264 17 2017-18 272 18 2018-19 280 19 2019-20 289 20 2020-21 301 21 2021-22 317 22 2022-23 331 23. 2023-24 348 4. Exempt Capital Gains Exemption u/s. 10(38) has been withdrawn w.e.f. 1st April, 2018. 5. Taxability of Long term Capital Gains u/s. 112A Long Term Capital Gains on sale of specified equity shares, units of equity oriented funds and units of business trust are taxable above ` 1,00,000/- at the rate of 10% without indexation benefit. The final 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: i. Acquisition of listed equity shares (not frequently traded on a recognised stock exchange in India) through a preferential

Direct Taxes 1.94 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication issue, other than preferential issues to which Chapter VII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009) does not apply; ii. Transaction of purchase of listed equity share in a company is not entered through a recognised stock exchange; iii. 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.). 6. Rate of Tax on Capital Gains Refer “Rates of Tax” topic Long term Capital Assets – Minimum holding period Sr. No. Capital Asset Minimum Holding Period for “LongTerm” 1 Listed security in a recognised stock exchange in India (other than a unit) 12 months Sr. No. Capital Asset Minimum Holding Period for “LongTerm” 2 Units of Unit Trust of India 12 months 3 Unit of an equity oriented fund 12 months 4 Unlisted shares (w.e.f. 1st April, 2017) 24 months 5 Land or Building or both (w.e.f. 1st April, 2018) 24 months 6 Units of a Mutual Fund specified under section 10(23D) 36 months 7 Any other Capital Asset 36 months Proviso to section 2(42A) states that capital gains 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 shortterm if the said shares/units were held for not more than twelve months.

Income from Capital Gains 1.95 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication (1) Capital gains on specific transfers (‘C.A.’ refers to Capital Assets) Section Particulars of transfer Capital Gains assessable in the hands of Year in which chargeable Amount deemed to be the full value of consideration for the purpose of S. 48 45(1A) Moneys/other assets received from insurance co. towards damage/ destruction of C.A. due to certain specified natural calamities The person receiving the money/assets Year in which moneys/ other asset is received from insurance co. Value of moneys/FMV of assets received from insurance co. 45(1B) Amount received under unit linked insurance policy to which exemption u/s 10(10D) does not apply by virtue of fourth and fifth proviso thereof Recipient of money under such policy Year in which such money is received To be prescribed 45(2) Conversion of C.A. into stock-in-trade The owner of such asset Year in which sale or transfer of stock-in-trade takes place FMV of the asset on date of conversion 45(2A) Transfer of Securities made by depository. (Refer note 1) The beneficial owner of the securities Year in which such securities are transferred Amount of consideration received 45(3) Transfer of C.A. by a person to firm/ AOP/BOI as his capital contribution or otherwise The partner or the member so transferring Year in which asset is so transferred The amount recorded in the books of the firm/ AOP/BOI 45(4) Receipt of money or C.A. or both by a partner/member in connection with reconstitution of firm/AOP/BOI The firm/AOP/BOI Year of receipt of money or C.A. or both by the partner/member Value of money and FMV of CA on the date of receipt

Direct Taxes 1.96 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Particulars of transfer Capital Gains assessable in the hands of Year in which chargeable Amount deemed to be the full value of consideration for the purpose of S. 48 45(5) Transfer of C.A. by compulsory acquisition under any law OR transfer where consideration determined/ approved by Central Govt./RBI (a) Initial compensation (b) Enhanced compensation The transferor The transferor Year in which initial compensation is first received Year in which enhanced compensation is first received Proviso inserted w.e.f. 1-4-2015 – any amount of compensation received in pursuance of an interim order of a Court, Tribunal or other authority shall be deemed to be income chargeable in the year in which the final order of such court, Tribunal or other authority is made. Amount of initial compensation as reduced by order of any Court/Tribunal/other authority Enhanced amount (cost of acquisition and improvement are deemed to be NIL) as reduced by order of any Court/Tribunal or other authority 45(5A) Transfer of land or building or both under specified agreement for development of a real estate project in consideration for a share in the land or building or both in the said project with or without cash consideration. The transferor being an individual or HUF Year in which the certificate of completion for the whole or part of the project is issued by the competent authority (authority empowered to approve the building plan) Stamp duty value on the date of issue of the certificate, of his share, in land or building or both in the project, increased by consideration received in cash / cheque / draft / any other mode (if any)

Cost of Acquisition (COA) — In Special Cases 1.97 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Particulars of transfer Capital Gains assessable in the hands of Year in which chargeable Amount deemed to be the full value of consideration for the purpose of S. 48 45(6) Transfer of units referred to in S. 80CCB(2) by way of repurchase The transferor Year in which repurchase takes place The repurchase price 46(2) Distribution of assets of a Company to its share holders on its liquidation The shareholder Year in which the share holder receives any money or other assets Moneys received from the Co. + Market value of other assets on the date of distribution less amount assessed as deemed dividend u/s. 2(22)(c) 46A Purchase by a company of its own shares/specified securities (buy back of shares) The shareholder or the holder of the specified securities Year in which such shares or other specified securities purchased by the company Amount received from the company Proviso to s. 47(iii) Shares, debentures, warrants allotted to employees under Employees Stock Option Plan or Scheme framed in accordance with guidelines issued by the Central Government The employee Year in which shares, debentures, warrants are transferred under a gift or an irrevocable trust to the employee FMV on the date of its transfer 50AA Market Linked Debentures which are listed securities The transferor Year in which asset is transferred Amount of consideration received or accruing as a result of transfer 50B Slump sale of Capital Assets or business undertaking The transferor Year in which slump sale takes place FMV of the capital assets calculated in the manner as may be prescribed 50C Transfer of land or building or both The transferor Year in which asset is transferred Higher of : (i) sale consideration (ii) value adopted/ assessed/assessable by State Government for stamp duty valuation

Direct Taxes 1.98 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Particulars of transfer Capital Gains assessable in the hands of Year in which chargeable Amount deemed to be the full value of consideration for the purpose of S. 48 (only if it exceeds 105% of the sale consideration upto 31-3- 2020 and 110% of sale consideration after 1-4- 2020) 50CA Transfer of unquoted shares (i.e. not quoted regularly on any recognised stock exchange) of the company (Note No. 5) The transferor Year in which consideration is received or accrued FMV of share determined in a prescribed manner where consideration paid/accrued is less than such FMV 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: a. 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(upto 30-06-2012 and w.e.f. 1-7-2012, 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) or b. (i) 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 (ii) having regard to the nature of the asset and other relevant circumstances, it is necessary to do so. 3. 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.

Cost of Acquisition (COA) — In Special Cases 1.99 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 4. 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. 5. W.e.f 1st April 2020, Finance Act 2019 has inserted a proviso in section 50CA to provide that these provisions shall not apply to certain prescribed category of consideration/class of persons, subject to the conditions as may be prescribed COST OF ACQUISITION Capital Asset being goodwill, Capital Asset being Any other any other intangible asset, tenancy rights, "financial asset" [S. 55(2)(aa)] Capital Asset (C.A) stage carriage permits, loom hours or right to manufacture/produce/process any article/thing or right to carry on any business/profession or any other right Original 1. Right/entitlement Additional Where the C.A. became the "financial to subscribe financial property of the assessee Acquired by Acquired otherwise asset" for additional asset by way of ............ purchase than by purchase financial asset except S. 49(1) 2. Additional if acquired by financial asset if acquired by the holder of ...distribution ...consolidation, division, ...any of In the case of ...any other allotted without the renouncee the original of C.A. by a conversion, reconversion the modes stock-in-trade con- manner any payment financial asset Co. u/s. 46(2) of share into stock u/s. 49(1) verted into cap. In case of units of MF: or vice versa asset 49(9) COA of such asset = loss on sale of original asset ignored as per S. 94(8) COA = COA = In case of other assets COA = Price pd COA = COA = Fair COA = COA = FMV of COA =AcPurchase COA = NIL* Amt. paid COA of such to renouncer Amt actually Market value COA = COA of COA to the inventory on the tual cost Price right/asset=NIL + amt pd paid on the date of the original asset** previous date of of Acqto the co. distribution** owner** conversion uisition** Acquired by previous owner and became property of assessee on partition of HUF or under a gift/will, or on liquidation of a company or by succession/devolution COA = COA to the previous owner Note: As per Finance Act, 2018, for computing long-term Capital Gains on specified assets mentioned below being sold after 31st January 2018, the cost of acquisition shall be deemed to be higher of: a. The actual cost of acquisition of such asset, and b. The lower of:

Direct Taxes 1.100 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication i. The fair market value of such asset (highest price of share on stock exchange on 31st January, 2018 or when the share was last traded ii. The sale value accrued when the share/unit is sold. The long-term capital gain/loss on such specified assets mentioned below shall be calculated as sales consideration less cost of acquisition as determined above For equity shares and equity oriented units other than specified asset mentioned below, there gains shall be calculated as sales consideration – actual cost of acquisition. Specified assets being: 1. Equity share in a company, Unit of equity oriented fund. Unit of business trust acquired on or before 31st January, 2018 where STT has been paid on transfer of such unit COST OF ACQUISITION (COA) — IN SPECIAL CASES Cost of acquisition (COA) - In special cases Sr. No. Particulars Section Cost of acquisition 1 Shares of recognised stock exchange Section 55(2) (ab) COA of capital asset being equity share or shares allotted to shareholders of recognised stock exchange under a scheme demutualisation or corporatisation shall be the COA of original membership of the exchange. However, COA of trading or clearing rights of Stock Exchange would be NIL 2 Amalgamation under Section 47(vii) Section 49(2) The COA = COA of shares in amalgamating company 3 On conversion of bonds debentures, debenture stock, deposit certificate into shares or debentures or on conversion of bonds referred to in Section 115AC(1)(a) Section 49(2A) COA = that part of the cost of bonds, debenture, etc. in relation to which such asset is acquired by assessee 4 Stock Options Section 49(2AA) COA in case of specified security taxed as perquisites under Section 17(2) shall be the fair market value taken into consideration for the purpose of valuation of perquisites 5 Conversion of Company into LLP Section 49(2AAA) On conversion of company into LLP, the cost of acquisition of the capital asset being the right of the partner will be the cost of acquisition of share or shares in the company immediately before its conversion 6 Specified Security and Sweat Equity Section 49(2AB) COA will be fair market value taken into account while computing value of fringe benefit under Section 115WC(1)(ba) 7 Share (s) acquired by nonresident on redemption of GDRs as referred to in Section 115AC(1)(b) Section 49(2ABB) COA of shares acquired by a non-resident on redemption of GDRs shall be the price of such shares as prevailing on any recognised stock exchange on the date on which a request for redemption is made by the assessee

Cost of Acquisition (COA) — In Special Cases 1.101 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Cost of acquisition (COA) - In special cases Sr. No. Particulars Section Cost of acquisition 8 Unit of business trust becomes the property in consideration of transfer referred in Section 47(xvii) Section 49(2AC) COA of the asset shall be deemed to be the cost of acquisition to the assessee of the share referred to in Section 47(xvii) 9 Unit(s) in a consolidated scheme of a mutual fund became the property in consideration of a transfer referred to Section 47(xviii) Section 49(2AD) COA of the asset shall be deemed to be the cost of acquisition to the assessee of the unit(s) in the consolidating scheme of the mutual fund 10 Equity share of a company, became the property of the assessee in consideration of a transfer [referred to in Section 47(xb)] Section 49(2AE) w.e.f. 1 April 2018 COA is deemed to be that part of the cost of the preference share in relation to such asset 11 Unit or units in a consolidated plan of a mutual fund scheme, became the property of the assessee in consideration of a transfer [referred under Section 47(xix)] Section 49(2AF) w.e.f. 1.4.2017 COA of the asset is deemed to be the cost of acquisition to the assessee of the unit or units in the consolidating plan of the scheme of the mutual fund 12 Demerger - COA of the shares in the resulting company Section 49(2C) Amount which bears to the COA of shares held by the assessee demerged companies the same proportion as the net book value of the assets transferred in a demerger bears to the net worth of the demerged company immediately before such demerger 13 Demerger - COA of the shares of demerged company Section 49(2D) COA of the original shares held by the shareholders in the demerged company shall be deemed to have been reduced by the amount so arrived at under Section 49(2C) 14 Reorganisation of co-operative bank Section 49(2E) Provisions of Sections 49(2), Section 49(2C) and Section 49(2D) shall apply to reorganisation of co-operative bank referred to in Section 44DB 15 Units or units in the segregated portfolio Section 49(2AG) COA of such segregated units shall be the amount which bears, to the cost of acquisition of unit(s) held by the assessee in the total portfolio, the same proportion as the net asset value (NAV) of the asset transferred to the segregated portfolio bears to the NAV total portfolio immediately before the segregation of the portfolios.

Direct Taxes 1.102 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Cost of acquisition (COA) - In special cases Sr. No. Particulars Section Cost of acquisition 16 Original units in the main portfolio after segregation of portfolio. COA of original units in the main portfolio after segregation shall be equal to original cost minus cost allocated to units in segregated portfolio as determined under section 49(2AG) 17 Deemed income under section 47A in respect of transfer of capital assets between a holding company and its subsidiary company Section 49(3) COA shall be the cost for which the asset was acquired by the transferee company 18 Property, the value of which is subject to tax under section 56(2)(vii), 56(2)(viia) or 56(2)(x), gift from non-relatives Section 49(4) COA shall be the value taken into account for the purpose of taxation under Section 56(2) (vii) 56(2)(viia) or 56(2)(x) 19 Transfer of an asset declared under the Income Disclosure Scheme, 2016 and tax, surcharge and penalty is paid on the fair value of the asset on the date of commencement of this Scheme Section 49(5) COA shall be deemed to be the fair value of the asset which is taken into account for the purpose of Income Disclosure Scheme, 2016 20 Capital Gains on transfer of specified capital asset [referred in clause (c) of the Explanation to Section 10(37A)], after expiry of 2 years from the end of the financial year in which the possession was given to the assessee Section 49(6) COA is deemed to be its stamp duty value as on the last day of the 2nd financial year 21 Capital Gains on transfer of share in the project being land or building or both (referred in section 45(5A)) and not being the capital asset referred to in the proviso of such sub-section) Section 49(7) COA is the amount which is deemed as full value of consideration in that sub-section 22 Capital Gains on transfer of asset held by a trust or an institution in respect of which accreted income has been computed and tax paid (under Chapter XII-EB), Section 49(8) COA of such asset is deemed to be the FMV of the asset considered for computation of accreted income as on the specified date referred in Section 115TD(2)

Cost of Acquisition (COA) — In Special Cases 1.103 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Cost of acquisition (COA) - In special cases Sr. No. Particulars Section Cost of acquisition 23 Transfer of Capital Asset held as stock-in-trade before conversion into Capital Asset Section 49(9) COA of such asset is deemed to the FMV of the inventory which is converted into Capital Asset and considered for computation of business income as per the provisions of clause (via) of Section 28 24 Conversion of gold into Electronic Gold Receipt (‘EGR’) and vice versa S e c t i o n 49(10) COA of EGR is deemed to be the cost of gold in the hands of the person in whose name EGR is issued. Similarly, cost of gold released against an EGR is deemed to be the cost of EGR in the hands of such person * Provisions of 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 1st April, 1981 to 1st April, 2001. However from A.Y.2021-22 where the capital asset is land or building or both, the fair market value of such asset as on 1-4-2001 shall not exceed SDV of the same as on 1-4-2001 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. [Sec. 55(3)] The provisions of section 49(2AAA) are inserted by Finance Act, 2010. Finance Act, 2015 inserted sub-section (2AD) to section 49 which states that where the capital asset, being a unit or units in a consolidated scheme of a mutual fund, became the property of the assessee in consideration of a transfer referred to in clause (xviii) of section 47, the cost of acquisition of the asset shall be deemed to be the cost of acquisition to him of the unit or units in the consolidating scheme of the mutual fund. The Finance Act, 2015 has provided that the period of holding in case of shares which are acquired on redemption of GDRs as referred to in section 115AC(1)(b) shall be reckoned from the date on which a request for redemption is made by the assessee. The cost of acquisition shall be computed in accordance with sub-section (2ABB) as inserted in section 49 by the Finance Act, 2015. The cost of acquisition of shares acquired by a non-resident on redemption of GDRs shall be the price of such shares as prevailing on any recognised stock exchange on the date on which a request for redemption is made by the assessee. 2

Direct Taxes 1.104 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication (2) Deductions Capital Gains Deductions under the head Capital Gains Section Asset Assessee Holding Period of Original Assets Whether Reinvestment Necessary — Time Limit Other Conditions/ Incidents Quantum (1) (2) (3) (4) (5) (6) (7) 54 Residential House Property Individual/ HUF 2 years Yes — In one residential house in India, within 1 year before, or 2 years after the date of transfer (if purchased) or 3 years after the date of transfer (if constructed). From 01.04.2019, a person can claim deduction u/s 54 by Investing in 2 residential houses if the Capital Gains amount does not exceed ` 2 Crores. However, the said option can be exercised only once in the lifetime of the assessee. See Notes 1, 2, 10, 11 and 12, 19 The amount of gains, or the cost of new asset, whichever is lower. Finance Act 2023 has inserted a proviso to restrict the exemption on reinvestment in a new residential house to Rs. 10 crore. 54B Agricultural Land except those Exempted u/s. 10(37) Individual/ HUF (see Note 17) Use for 2 years Yes — In agricultural land, within 2 years after the date of transfer. Must have been used by assessee or his parents for agricultural purposes. See Notes 1, 2 and 10 As above

Deductions Capital Gains 1.105 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Asset Assessee Holding Period of Original Assets Whether Reinvestment Necessary — Time Limit Other Conditions/ Incidents Quantum (1) (2) (3) (4) (5) (6) (7) 54D Industrial Land or Building or any right therein Any Assessee Use for 2 years Yes — In industrial land, building, or any right therein within 3 years after the date of transfer. Must have been c o m p u l s o r i l y acquired. See Notes 1, 2, 3 and 10 As above 54EC Long-term Capital Asset (LTCA) being Land or Building of both Any Assessee Refer Table at page 1.94 Yes — Whole or any part of capital gains within 6 months from the date of transfer is invested in bonds redeemable after 5 years and issued on or after 1st April 2018 by NHAI or REC and notified by the Govt. or from 1st April 2018 any other bond notified by the Central Government See Notes 10, 14 and 15. Investment made by an assessee in the long-term specified asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed ` 50 lakhs. The amount of gain or the cost of new asset whichever is lower subject to ` 50,00,000 per assessee during any financial year for investments made on or after 1st April 2018. Also investment in bonds notified before 1st April 2018 would be subject to conditions laid down in notification including limiting conditions (i.e. ` 50 lakhs per assessee) 54EE Any Longterm Capital Asset (inserted by Finance Act, 2016) Any Assessee Refer Table at page 1.94 Yes-— Whole or any part of capital gain in unit or units, issued before the 1st April 2019, of such fund as may be notified by the Central Government Investment made on or after the 1st April 2016, in the long-term specified asset by an assessee during any financial year does not exceed ` 50 lakhs Investment made by an assessee in the longterm specified asset, from capital gains arising from the transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed ` 50 lakhs

Direct Taxes 1.106 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Asset Assessee Holding Period of Original Assets Whether Reinvestment Necessary — Time Limit Other Conditions/ Incidents Quantum (1) (2) (3) (4) (5) (6) (7) 54F Any Capital Asset (not being a residential house) Individual, HUF Refer Table at page 1.94 Yes — In one residential house in India, within 1 year before, or 2 years after the date of transfer (if purchased), or 3 years after the date of transfer (if constructed) See Notes 2, 4, 5, 10, 11, 12, 16, 19 If the cost of the specified asset is not less than net consideration of the original asset, the whole of the gains. If the cost of the specified asset is less than the net consideration, the proportionate amount of the gains. Finance Act 2023 has inserted a proviso to restrict the maximum eligible amount of reinvestment in a new residential house to Rs. 10 crore. 54G Industrial land or building or plant or machinery Any Assessee — Yes — In similar assets and expenses on shifting of original asset, within 1 year before, or 3 years after the date of transfer. See Notes 1, 2 and 6 The amount of gains, or the aggregate cost of new asset and shifting expenses, whichever is lower. 54GA Industrial land or building or plant or machinery Any Assessee — Yes — In similar assets and expenses on shifting of original assets to a Special Economic Zone – within 1 year before or 3 years after the date of transfer See Notes 1, 2 and 7 The amount of gains, or the aggregate cost of new asset and shifting expenses, whichever is lower

Deductions Capital Gains 1.107 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Asset Assessee Holding Period of Original Assets Whether Reinvestment Necessary — Time Limit Other Conditions/ Incidents Quantum (1) (2) (3) (4) (5) (6) (7) 54GB Residential property being a house or a plot of land (transferred upto 31st March 2022) Individual/ HUF 5 years Yes — In subscription of equity shares before due date of filing return of an eligible company and the company within 1 year utilises the amount for purchase of new asset See Note 18 If the cost of the specified asset is not less than net consideration of the original asset, the whole of the gains. If the cost of the specified asset is less than the net consideration, the proportionate amount of the gains. 115F Foreign Exchange Asset NonResident Indian (Individual) Refer Table at page 1.94 Yes — In ‘Specified Assets’ or Specified Savings Certificates of Central Government, within 6 months after the date of transfer See Notes 8, 9 and 13 Same as under section 54F above. 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.

Direct Taxes 1.108 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 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 : i. Shares in an Indian company; ii. Debentures issued by Indian company which is not a private company; iii. Deposits with an Indian company which is not a private company; iv. Any security of the Central Government as defined in section 2(2) of the Public Debt Act; v. 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 selffinancing 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 coop. 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: o 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 a residential house, other than new asset is purchased within two year or constructed within three years after transfer of original asset or where new asset is transferred within three 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

Deductions Capital Gains 1.109 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 18.1 “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 gains arises to the due date of furnishing of return of income under sub-section (1) of section 139 by the assessee; i. It is engaged in the business of manufacture of an article or a thing; ii. It is a company in which the assessee has more than 25% share capital or more than 25% voting rights after the subscription in shares by the assessee; and iii. 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’; 18.2 “New asset” means new plant and machinery but does not include— i. Any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; ii. Any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house; iii. Any office appliances including computers or computer software; iv. Any vehicle; or v. 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. 18.3 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 18.4 If the equity shares of the company or the new asset acquired by the company are sold or otherwise transferred within a period of 3 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. 18.5 The exemption is available in case of any transfer of residential property made on or before 31st March, 2021. 18.6 The time period has been extended from 31st March, 2017 to 31 March 2019 in case the investment is made in an “eligible startup”. (inserted by Finance Act, 2016 w.e.f. 1st April, 2017 [term “eligible start-up” – as defined in Explanation below Section 80- IAC(4)]. 18.7 Section 54GB shall be effective from 1 April, 2013 and would accordingly apply from A.Y. 2013-14 and subsequent years. 19. A proviso has been inserted, both in section 54 and section 54F to the effect that, for the purposes of deposit in the Capital

Direct Taxes 1.110 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Gains Account Scheme, capital gains or net consideration, as the case may be, in excess of ` 10 crore shall not be taken into account. 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 i. On total or partial partition of H.U.F. [Section 47(i)] ii. Under a gift/an irrevocable trust (except shares, debentures or warrants issued under ESOP/ESOS) or under a will [Section 47(iii)]. iii. 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). iv. 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). v. By the amalgamating company to the Indian amalgamated company in a scheme of amalgamation. [Section 47(vi)]. vi. 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 vii. 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)]. viii. Clause (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 — a. At least 25% of the shareholders of the amalgamating foreign company continue to remain shareholders of the amalgamated foreign company; and b. Such transfer does not attract tax on capital gains in the country in which the amalgamating company is incorporated; ix. Clause (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,— a. 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 b. 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. x. By the demerged company to the resulting company if the resulting company is an Indian company [Section 47(vib)]. xi. 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

Deductions Capital Gains 1.111 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication to remain shareholders of the resulting foreign company. • There is no capital gains tax on such transfer in the country in which the demerged foreign company is incorporated [Section 47(vic)]. xii. Transfer by a predecessor co-operative bank to a successor co-operative bank or the converted banking company in a business reorganisation. [Section 47(vica)]. xiii. Transfer of shares of a predecessor cooperative bank against shares of successor co-operative bank or the converted banking company in a business reorganisation [Section 47(vicb)]. xiv. 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.) xv. 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)]. xvi. Being bonds or shares referred to in Section 115AC(1), made outside India by a nonresident to another non-resident. [Section 47(viia)]. xvii. 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)]. xviii. Being bonds or Global depository receipt referred to in section 115AC(1) or rupee denominated bond of an Indian Company or derivative or such other securities as may pe notified by the Central Government in this behalf, by a non-resident on a recognised stock exchange located in any International Financial Services Centre and the consideration for the transaction is paid/payable in foreign currency. [section 47(viiab)] xix. Clause (viiac) – any transfer in a relocation, of a capital asset by the original fund to the resulting fund xx. Clause (viiad) – any transfer by a share holder or a unit holder or interest holder, in a relocation of, a capital asset being a share or unit or interest held by him in the original fund in consideration for the share or unit or interest in the resultant fund xxi. Clause (viiae) – Any transfer of capital asset by Indian Infrastructure Finance Company Limited to an institution established for financing the infrastructure and development, set up under an Act of Parliament and notified by the Central Government for the purpose of this clause xxii. Clause (viiaf) – Any transfer of capital asset, under a plan approved by the Central Government, by a public sector company to another public sector company notified by the Central Government for the purpose of this clause or to a State Government xxiii. 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;

Direct Taxes 1.112 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication xxiv. Clause (viic) (inserted by Finance Act, 2016) w.e.f. 1st April, 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. xxv. Clause (viid) (inserted by Finance Act, 2023) w.e.f. 1st April 2024 - any transfer of a capital asset, being conversion of gold into Electronic Gold Receipt (‘EGR’) issued by a Vault Manager or vice versa Section 2(42A) has been amended by Finance Act, 2023 to provide that the period of holding of EGR issued in respect of gold deposited by an assessee shall include the period for which gold was held by him prior to its conversion into EGR. Similarly, the period of holding of gold released in respect of an EGR will also include the period for which EGR was held by the assessee prior to its conversion into gold. xxvi. Being items of national importance specified in Section 47(ix) transferred to a University, National Museum, etc. xxvii.By conversion of bonds, debentures, etc. into shares or debentures of same company. [Section 47(x)]. xxviii. Conversion of Foreign Currency Exchangeable Bonds referred to in Section 115AC(1)(a) into shares or debentures of any company [Section 47(xa)]. xxix. Conversion of preference shares of a company into equity shares of that company [Section 47(xb)] xxx. Being membership of a recognised stock exchange, on or before 31st 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). xxxi. 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)]. xxxii.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)]. xxxiii. 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)]. xxxiv. 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. xxxv.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. xxxvi. 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 a. All partners become shareholders in ratio of capital. b. Aggregate shares of old partners not to reduce below 50% of the total voting power for minimum 5 years.

Deductions Capital Gains 1.113 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication c. All assets and liabilities are taken over by new company. d. Partners not to receive any benefit (other than shares) as a consideration. IMPORTANT CONDITIONS FOR SOLE PROPRIETARY CONCERN (SPC) e. Proprietor’s shares not to reduce below 50% for minimum 5 years. f. All assets and liabilities are taken over by new company. g. Proprietor not to receive any benefit (other than shares) as a consideration xxxvii. 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. xxxviii. 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)] xxxix. 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 a. All the assets and liabilities of the company before conversion are taken over by the new LLP. b. 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. c. The shareholders do not receive any additional benefit. d. Aggregate profit sharing ratio of the old shareholders not to reduce below 50% for minimum 5 years. e. The total sales, turnover or gross receipts of the company in any 3 years preceding the year of conversion do not exceed ` 60 lakhs. f. 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. g. 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 ` 5 crore rupees (inserted by Finance Act, 2016). xl. 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)]. xli. 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). xlii. 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 29th February 1988 then clauses (iii) and (iv) given above will not apply. 2. Please refer Section 47A for withdrawal of exemption in certain cases.

Direct Taxes 1.114 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Immovable property being land or Building or Both Held as Stock in trade Section 43CA (A.Y.2014-15 onwards) Section 50C (A.Y. 2003-04 onwards) Agreement value is >_ SDV Agreement value is < SDV Agreement value is >_ SDV Agreement value is < SDV Agreement value to be adopted as sale consideration for computing income from PGBP SDV Value to be adopted as sale consideration for computing Income from PGBP (only if SDV exceeds 110% of the sale consideration) Agreement value to be adopted as sale consideration for CG SDV Value to be adopted as sale consideration for CG (only if SDV exceeds 110% of the sale consideration) SDV >Fair Market Value (FMV) of property The assessee may represent before the ITO ITO may refer the matter of valuation to the Department Valuation Officer (DVO) SDV > Fair Market Value (FMV) of property The assessee may represent before the ITO Not held as stock in trade ITO may refer the matter of valuation to the Department Valuation Officer (DVO) Valuation adopted by DVO < SDV Valuation adopted by DVO >_ SDV Value determined by DVO to be adopted as sale consideration for OG SDV Value to be adopted as sale consideration for OG Value determined by DVO to be adopted as sale consideration for computing Income from PGBP SDV Value to be adopted as sale consideration for computiong income from PGBP Valuation adopted by DVO < SDV Valuation adopted by DVO >_ SDV (3) Full value of consideration in respect of transfer of immovable property held as business asset – Section 43CA

1.115 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication VIII. Clubbing provisions Section Person whose income to be clubbed Nature of income to be clubbed Person in whose hands to be clubbed 64(1)(ii) Spouse Salary, commission, fees, remuneration from concern where individual has substantial interest. If spouse possesses technical/ professional qualification and income is solely attributable to the application of such knowledge, it is not to be clubbed Spouse having substantial interest in the concern. Substantial interest threshold is 20% or more. 64(1)(iv) Spouse From assets transferred to spouse for inadequate consideration other than (i) transfer under an agreement to live apart, or (ii) an income from house property includible under Section 27(i). Interest on capital contributed in the firm out of the transferred funds will however, be clubbed. Where assets transferred are invested in any business, income arising out of the business shall be taxed in proportionately Transferor 64(1)(vi) Son's wife From assets transferred (after 1-6-1973) to son’s wife for inadequate consideration. Interest on capital contributed in the firm out of the transferred funds will however be clubbed. Where assets transferred are invested in any business, income arising out of the business shall be taxed proportionately Transferor 64(1)(vii) Spouse Income for immediate or deferred benefit of spouse from assets transferred for inadequate consideration to an AOP or a person Transferor 64(1)(viii) Son's wife Income for immediate or deferred benefit of son’s wife from assets transferred for inadequate consideration (after 1-6-1973) to an AOP or a person Transferor

Direct Taxes 1.116 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Person whose income to be clubbed Nature of income to be clubbed Person in whose hands to be clubbed 64(1A) Minor child (except a minor child suffering from any disability mentioned in Section 80U) Any income accruing/arising to a minor, except income from: a) manual work, or b) application of his skill, or talent, or specialised knowledge and experience i. 1st year: That parent whose income is higher. Subsequent years; the same parent — unless the AO is satisfied that it should be clubbed with the other parent. ii. where marriage does not subsist, in the hands of the custodian parent. Exempt up to ` 1,500 per minor [section 10(32)] 64(2) HUF Income from property converted to HUF property or transferred to HUF by an individual (after 31-12-1969) for inadequate consideration. If converted property is partitioned, income from partitioned property received by spouse, is clubbed in the hands of the individual. Transferor 2

Gifts Taxation - Income from Other Sources 1.117 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication IX. Gifts Taxation - Income from Other Sources Generally, gifts received are not regarded as Income chargeable to tax. However, by virtue of section 2(24)(xiii) r.w.s. 56(2) any sum of money exceeding ` 50,000 received without consideration by an individual or an HUF from any person is chargeable to tax as Income under the head Other Sources, subject to following exceptions: • Receipts from Relative. (Refer Chart at the bottom) • Receipts at the time of Marriage. • Receipts by way of Inheritances or by will • Receipts in Contemplation of Death • Receipts from Local Authority u/s. 10(20) • Receipts from Charitable Trust registered u/s. 12A, 12AA or 12AB, except by persons referred to in section 13(3); • Receipts from fund/foundation/institution/ hospital/medical institution referred in Sec. 10(23C), except by persons referred to in section 13(3); • Receipt by a fund/foundation/hospital/medical institutions referred to in sub-clauses (iv), (v), (vi) and (via) of Sec. 10(23C) • Receipts from certain specified restructuring (mentioned later) • Receipts from a private trust created solely for the benefit of his relatives. • Receipts from prescribed class of persons and subject to prescribed conditions (Rule 11UAC) • Receipt by an individual from any person in respect of any expenditure actually incurred by him on medical treatment for him or his family member for a COVID-19 related illness, subject to conditions as may be prescribed • Receipt by a member of the family of a deceased person from employer of the deceased received within 12 months from the date of death and subject to conditions as may be prescribed • Receipt by a member of the family of a deceased person from any person or persons to the extent aggregate of such sum does not exceed ten lakh rupees, which is received within 12 months from the date of death and subject to conditions as may be prescribed Also, it is pertinent to note that the taxation of gifts is to be looked upon from the recipient’s perspective. List of Property – (to be treated as Gift) • Immovable property being land or building or both; • Shares and securities; • Jewellery; • Archaeological collections; • Drawings; • Paintings; • Sculptures; • Any work of art; • Bullion (w.e.f. 1-6-2010) • Virtual Digital Assets (w.e.f. 1-4-2023) Section 56(2) has been further amended and w.e.f. 1-4-2017, the scope of taxation on gifts is increased by taxing gifts in case of all the persons instead of the specified ones mentioned in 56(2) (vii) [S. 56(2)(x)]

Direct Taxes 1.118 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Earlier Now Sections 56(2)(vii) & (viia) Section 56(2)(x) Applicable only in case of individual, HUF; Firm and Co. in certain cases, wherein, receipt of sum of money or property without or inadequate consideration in excess of ` 50,000/- shall be chargeable to tax under income from other sources. This Section is newly inserted, wherein, any person receiving sum of money or property without or inadequate consideration in excess of ` 50,000/- shall be chargeable to tax under income from other sources. Finance Act 2019 has inserted a clause (XI) in the proviso to section 56(2)(x) w.e.f. 1st April 2020 to provide that these provisions shall not apply to certain prescribed category of consideration/class of persons, subject to the conditions as may be prescribed. Brother & Spouse Sister & Spouse Brother & Spouse Sister & Spouse Father Lineal Ascendant Mother Sister & Spouse Brother & Spouse INDIVIDUAL Lineal Father Ascendant Mother SPOUSE Daughter & Spouse Lineal Descendant Son & Spouse Lineal Descendant Brother & Spouse Sister & Spouse ANY MEMBER HUF ANY MEMBER Valuation of Gift in case of i. Immovable Property (being land or building or both) 56(2)(x)(b) – Immovable Property – Without Consideration If SDV ≤50,000 If SDV > 50,000 Donor Donee Donee Donor Provisions not applicable Not considered as transfer u/s. 47(iii) – No Capital Gains SDV is income from other Sources u/s. 56(2) (x). COA will be SDV. Holding period will be counted from acquisition of property by donor.

Gifts Taxation - Income from Other Sources 1.119 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 56(2)(x)(b) – Immovable Property – Inadequate Consideration If SDV – Consideration value ≤50,000 If SDV – Consideration value > 50,000 and w.e.f A.Y. 2019-20, SDV is more than 5% of consideration and w.e.f. A.Y.2021-22 SDV is more than 10% of consideration [20% in case of property referred to in the second proviso to section 43CA(1)] Donor Donee Donor Donee Provisions not applicable Section 50C will be applicable if Land & Building is capital Assets for Donor and Sale Consideration for Donor will be SDV. Capital Gains will be SDV less COA. Section 43CA will be applicable if Land & Building is not a capital Asset for Donor and Sale Consideration for Donor will be SDV. Income from PGBP will be SDV less COA. Difference of SDV and sales consideration is income from other Sources u/s. 56(2)(x). At the time of further sale, COA will be SDV and holding period will be counted from acquisition of property by the purchaser. It is also provided that in a case where the date of the agreement to purchase the property fixing the consideration and the date of registration are different, the taxability will be determined with reference to the stamp duty value on the date of agreement and not registration. This exception will apply only where at least part of the consideration has been paid by any mode other than cash, on or before the date of such agreement. (ii) Any other property: 56(2)(x)(c) – Movable Property – Without Consideration If FMV≤50,000 If FMV > 50,000 Donor Donee Donor Donee Provisions not applicable Not considered as transfer u/s. 47(iii) – No Capital Gain Fair Market Value (FMV) shall be income from other Sources u/s. 56(2)(x). COA will be FMV. Holding period will be counted from the date of acquisition of property by donor.

Direct Taxes 1.120 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 56(2)(x)(c) – Movable Property at inadequate Consideration If FMV – Consideration value ≤50,000 If FMV – Consideration value > 50,000 Donor Donee Donor Donee Provisions not applicable Not considered as transfer u/s. 47(iii) – No Capital Gains Difference of FMV and Consideration is income from other Sources u/s. 56(2)(x). At the time of further sale COA will be FMV and holding period will be counted from the date of acquisition of property by the purchaser. W.e.f. 1-6-2010 following items added u/s. 56(2)(viia) : Receipt of shares of a closely-held company (on or before 1st June 2010 but before 1st April 2017) without consideration or for inadequate consideration by firm (incl. LLP) or closely held company from any person(s) is taxable. Provision not applicable in case of the following restructuring: • Transfer of shares of Indian company by amalgamating foreign company to amalgamated foreign company • Transfer of shares of Indian company by demerged foreign company to resulting foreign company • Transfer by shareholder of co-operative bank in a business reorganisation of a co-operative bank. • Transfer by shareholder of shares of amalgamating company • Transfer or issue by the resulting company, in a scheme of demerger, • A resulting company pursuant to a scheme to a scheme of demerger; or • An amalgamated Indian company pursuant to a scheme of amalgamation; • A successor co-operative bank, in a business reorganisation, in lieu of shares of a predecessor co-operative bank. Valuation rules for determining ‘fair market value of gifts’ Synopsis of the Rules The rules 11U, 11UA and 11UAA prescribes the different methods for the purpose of valuation of specified assets. The determination of FMV, under these rules, will be for the purpose of section 56 and section 50CA of the Act. Notification No. 23/2010, which came into force from 1st October, 2009 and Notification No. 61/2017, which came into force from 1st April, 2017. Further, specified assets received from relative are not covered by the provisions of section 56(2)(vii)/(x) of the Act.

Gifts Taxation - Income from Other Sources 1.121 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Methods of Valuation 1. Valuation of specified assets (other than shares & securities) Description of the property Basis of determination of FMV Specified assets other than shares and securities Estimated price which specified assets will fetch if sold in the open market on the valuation date In case if specified assets are received by the way of purchase on the valuation date from the Registered Dealer (means a dealer who is registered under Central Sales Tax Act, 1956 or General Sales Tax Law for the time being in force in any State including value added tax laws) FMV is the Invoice Value of the asset In case if specified assets are received by any other mode and the value of specified assets > ` 50,000 The assessee may obtain the report of registered valuer in respect of the price it would fetch if sold in the open market on the valuation date A registered valuer is a person who is entitled to function as registered valuer for the purpose of the Wealth Tax Act 2. Valuation of Shares & Securities • Valuation of quoted shares & securities Description of the property Basis of determination of FMV If quoted shares and securities are received by way of transaction carried out through any Recognised Stock Exchange (RSE) Transaction value recorded in such RSE If quoted shares and securities are received by way of transaction carried out other than through any RSE Lowest price quoted on any RSE on the valuation date If in case there is no trading on the valuation date, then, FMV will be lowest price on the date immediately preceding the valuation date when trading happened • Valuation of unquoted shares Description of the property Basis for determination of FMV Unquoted Equity Shares Value as per the balance sheet (including notes thereto) on the valuation date in terms of the following formula: (A+B+C+D-L) x PV (PE)

Direct Taxes 1.122 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Description of the property Basis for determination of FMV Where, A = Book value of assets (other than jewellery, artistic work, shares, securities and immovable property) in the balance sheet as reduced by – i. Any amount of income tax paid, if any, less the amount of income-tax refund claimed, if any; and ii. Any amount shown as asset including the unamortised amount of deferred expenditure which does not represent the value of any asset; B = The price which the jewellery and artistic work would fetch if sold in the open market on the basis of the valuation report obtained from a registered valuer; C = Fair market value of shares and securities as determined according to rule 11UA; D = The value adopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of the immovable property L = Book value of liabilities shown in the balance sheet, excluding: i. Paid-up equity capital; ii. Amount set aside for undeclared dividend; iii. Reserves and surplus, other than towards depreciation, even if the resulting figure is negative; iv. Amount of provision for tax, other than advance income-tax paid in excess of tax payable with reference to book profits (minimum alternate tax); v. Provision towards unascertained liabilities; vi. Provision towards contingent liabilities. PE = Total amount of paid-up equity share capital PV = Paid-up value of such equity shares received Unquoted shares other than equity shares in a company which are not listed in any RSE Price it would fetch if sold in open market on the valuation date and the assessee is required to obtain a report from a Merchant Banker or a Chartered Accountant in support of the FMV

Gifts Taxation - Income from Other Sources 1.123 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Rule 11-UAA – Section 50CA applicable to transfer of unquoted shares Description of the property Basis of determination of FMV Valuation of Unquoted Shares FMV to be determined in accordance with the above prescribed method (refer table 2 above) Section 56(2)(viib) applies to closely held company Description of the property Basis for determination of FMV Any closely held company receives any consideration from any person for issue of equity shares of closely held company > the face value of the shares. Note: The provision was not applicable to consideration received from non-residents for issue of shares. Finance Act 2023 has amended the provision and is now made applicable to receipt of any consideration for issue of shares from any person irrespective of residency status. Assessee has option to choose any one of following method (a) Value as per the balance sheet (including notes thereto) on the valuation date in terms of the following formula: (A-L) x PV (PE) Where, A = Book value of assets in balance sheet less advance incometax paid, any amount which does not represent the value of any asset, including debit balance in profit & loss account L = Book value of liabilities shown in the balance sheet, excluding: i. Paid-up equity capital; ii. Amount set aside for undeclared dividend; iii. Reserves and surplus, other than towards depreciation, even if the resulting figure is negative; iv. Amount of provision for tax, other than advance incometax paid in excess of tax payable with reference to book profits (minimum alternate tax); v. Provision towards unascertained liabilities; vi. Provision towards contingent liabilities. PE = Total amount of paid-up equity share capital PV = Paid-up value of such equity shares received Or (b) FMV of unquoted equity shares as determined by Merchant Banker as per the discounted free cash flow method Unquoted shares other than equity shares in a company which are not listed in any RSE Price it would fetch if sold in open market on the valuation date and the assessee is required to obtain a report from a Merchant Banker or a Chartered Accountant in support of the FMV Above provision does not apply to amount received by: • Venture capital undertaking from a venture capital company, venture capital fund

Direct Taxes 1.124 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • A specified fund (i.e. Category I or Category II Alternative Investment Funds regulated under Securities and Exchange Board of India Act, 1992 or w.e.f. 1-4-2023 under the International Financial Services Centres Authority Act, 2019) • A “start up” company from a resident for issue of its shares. For an entity to qualify as a ‘start-up’, following conditions are to be fulfilledParticulars As per latest Notification (Notification No. G.S.R. 127(E) dated 19 February 2019; confirmed by CBDT vide Notification No. S.O.1131(E) dated 05 March 2019) As per old notification (Notification No. G.S.R. 364(E) dated 11 April 2018 as amended by Notification No. G.S.R. 34(E) dated 16 January 2019) Eligible activity – entity working towards Innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation Age of the entity i.e., from incorporation Up to 10 years Up to 7 years Turnover (in any FY from incorporation) Not exceeding ` 100 crore Not exceeding ` 25 crore For exemption from tax u/s. 56(2)(viib), following conditions are to be fulfilled by the startupParticulars As per latest Notification (Notification No. G.S.R. 127(E) dated 19 February 2019; confirmed by CBDT vide Notification No.S.O.1131(E) dated 05 March 2019) As per old Notification (Notification No. G.S.R. 364(E) dated 11 April 2018 as amended by Notification No. G.S.R. 34(E) dated 16 January 2019) Conditions 1. Recognized by DPIIT (above conditions to be fulfilled); 2. Aggregate paid-up share capital and share premium not exceeding `25 crore after past/proposed share issue; threshold excludes shares issued to: Non-resident VCC/VCF Specified listed company (defined) 3. Restriction on investment in specified assets; 1. Recognized by DIPP (above conditions to be fulfilled); 2. Aggregate paid-up share capital and share premium not exceeding `10 crore after past/proposed share issue; 3. Investors meet specified criteria (returned income and net worth); 4. CBDT approval for exemption Valuation Report Not called for Merchant banker valuation with documents

Set-off and carry forward of losses 1.125 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication A second proviso is inserted to section 56(2) (viib) w.e.f. 1st April, 2020 to provide that in case of failure to comply with any of the specified conditions in the notification, the consideration received by the company in excess of the face value of the shares shall be taxed as income of the year in which the failure takes place and it shall also be deemed that the company has under reported the said income and penalty provisions of Section 270A shall apply for the said previous year. Forfeiture of Advance - section 56(2)(xi) Where any sum of money received as an advance or otherwise in the course of negotiations for transfer of Capital Assets, is forfeited and the negotiations do not result into transfer of such capital asset, then such sum shall be chargeable under this section as “Income from other sources”. Distribution by business trusts to its unit holders - section 56(2)(xii) Clause (xii) has been inserted in Section 56(2) by Finance Act 2023 to provide that any amount received by a unit holder from a business trust (that is not exempt under clauses (23FC) or (23FCA) of section 10 and the business trust is not chargeable on the same under section 115UA(2)), shall be chargeable as the income of the unit holder under this section as “Income from other sources”. Any such amount received by a unit holder from a business trust towards redemption of unit or units held by him, the sum so received shall be reduced by the cost of acquisition of the unit or units to the extent such cost does not exceed the sum received. Income from Life insurance policies - section 56(2)(xiii) Clause (xiii) has been inserted in Section 56(2) by Finance Act 2023 to provide any sum received under a life insurance policy (other than ULIP) shall be taxable under the head “Income from other sources” if not exempt under section 10(10D). Sum received under life insurance policies, in excess of the aggregate of premium paid during the term of policy, shall be treated as income. The rules shall be prescribed for the computation of such income.

1.126 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication X. Set-off and Carry Forward of Losses Sr. No. Section Type of Loss Set off Against Income Can be carried forward for In same Assessment Year In subsequent Assessment Years (1) (2) (3) (4) (5) (6) 1. 72 Business or Profession (Nonspeculation other than depreciation) Business Income Head; or any other head except salaries [Sec. 71(2A)] Business Income Head (Note 1) 8 years 2. 32 Depreciation As above Business Income Head or any other head (Note 2) Indefinitely 3. 73 Business (Speculation) Speculation Profit Speculation Profit 4 years with effect from Assessment Year 2006-07 (8 years up to assessment year 2005-06) 4. 70/74 Short-term capital loss Capital gains Capital gains 8 years 70/74 Long-term capital loss Long-term capital gain Long-term capital gains 8 years 5. 74A Running and maintaining race horses Such income only Such income only 4 years 6. 71 Other sources Other sources or any other head No carry forward N. A. 7. 71B House Property: a. Let out property b. Self-occupied Property (On account of interest on borrowed capital) Income from House property head or any other head As above Income from House property As above 8 years 8 years 8. 72A/ 72AA/ 72AB In case of amalgamation/ demerger See topic of Amalgamation/ Demerger 9. 73A Losses by specified Businesses (Note 5) — Business income of specified business Indefinitely

Set-off and carry forward of losses 1.127 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication NOTES: 1. Unabsorbed business losses can be carried forward and set-off against profits from any business from A.Y. 2000-01. There is no need to continue the same business in which the loss was incurred. 2. Depreciation can be carried forward and set off against the profits from any business in the succeeding assessment year up to A.Y. 2001-02. The business in which the loss was incurred need not be continued in that year. 3. The effect of depreciation, business loss and investment allowance should be given in the following order: • Current year’s Depreciation; • Unabsorbed Business loss; • Unabsorbed Depreciation; • Unabsorbed Investment Allowance. 4. A return of loss is required to be furnished for determining the carry forward of such losses, by the due date prescribed for different assessees u/s. 139(1) of the Act. (S. 80). This condition is however not required to be fulfilled for claiming losses under house property and unabsorbed depreciation. 5. Section 35AD has been inserted w.e.f. 1-4- 2010. Specified business has been defined u/s. 35AD. In order to remove any ambiguity, section 35AD has been amended by Finance Act, 2011 to remove the word “new” in case of hotels and hospitals. With this, the loss incurred in any specified business shall be eligible to be set-off against profit of any other specified business whether or not the latter is eligible for deduction u/s. 35AD. Finance Act, 2016 has amended section 80 to provide that loss will be allowed to be setoff only if return is filed by the due date of filing of the return of income. 6. In case of conversion of company into LLP, the accumulated loss and unabsorbed depreciation of the company shall be allowed to be set-off and carried forward by the new LLP. 7. No set off of loss from transfer of the Virtual Digital Assets (VDAs) shall be allowed against income computed under any other provision of the Act and such loss shall not be allowed to be carried forward to succeeding assessment years. (S. 115BBH) 8. Other sections: Section 73 amended by Finance (No. 2) Act, 2014 w.e.f. 1-4-2015 whereby for the words “the principal business of which is the business of banking”, the words “the principal business of which is the business of trading in shares or banking” has been substituted. Section 78 : Sub-section (1) : In case of change in the constitution of the firm, the amount of proportionate loss of the retired or deceased partner which exceeds his share of profits shall not be allowed to be carried forward in the hands of the firm. Sub-section (2) : Where any person carrying on business or profession is succeeded by another person otherwise than by inheritance, the benefit of carry forward of loss would not be available to the successor. Section 79 : (a) In case of a company (not being a company in which public are substantially interested), where there is a change in the shareholding of the company, the loss shall be allowed to be carried forward only if beneficial owners of the shares entitled to 51% voting power are the same on the last day of the year in which loss is incurred and the relevant previous year. (b) In case of start-up company (as referred in section 80-IAC), where there is a change in the shareholding of the company, the loss, limited to first seven years of company, shall be allowed to be carried forward if beneficial owners of shares are same as on the last day of the year in which loss is incurred

Direct Taxes 1.128 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication and the relevant previous year or if beneficial owners of the shares entitled to 51% voting power are the same on the last day of the year in which loss is incurred and the relevant previous year. (c) W.e.f. AY 2018-19 this Section is not applicable to a company where change in shareholding is pursuant to a resolution plan approved under Insolvency and Bankruptcy Code 2016 after affording reasonable opportunity of being heard to the Jurisdictional Principal Commissioner or Commissioner. (d) W.e.f. AY 20-21 the section shall not be applicable to a company, and its subsidiary and the subsidiary of such subsidiary where- (1) the Tribunal, on an application moved by the Central Government under section 241 of the Companies Act, 2013, has suspended the Board of Directors of such company and has appointed new directors nominated by the Central Government, under section 242 of the said Act; and (2) a change in shareholding of such company, and its subsidiary and the subsidiary of such subsidiary, has taken place in a previous year pursuant to a resolution plan approved by the Tribunal under section 242 of the Companies Act, 2013 after affording a reasonable opportunity of being heard to the jurisdictional Principal Commissioner or Commissioner. (e) w.e.f. AY 2022-23 the section shall not apply to a company to the extent that a change in the shareholding has taken place during the previous year on account of relocation referred to in the Explanation to clause (viiac) and (viiad) of section 47. (f) W.e.f. AY 2022-23, the restriction contained un sub-section (1) of section 79 in regard to carry forward of losses in case of change in the shareholding of the company shall not apply to an erstwhile public sector company, subject to satisfaction of certain conditions. Section 79A : W.e.f. AY 2022-23, any loss, either of the current period or brought forward, or unabsorbed depreciation cannot be adjusted against “undisclosed income” (as defined in the section) detected during a search under section 132 or requisition under section 132A or survey under section 133A, other than section 133A(2A). (g) W.e.f AY 2023-24, such eligible start-up will be allowed to carry forward losses incurred in first ten years (instead of seven years) of incorporation subject to fulfillment of conditions. 2