Capital Gain on Compulsory Transfer to Government [sec 45(5)]

  1. Where in assessment year a capital asset is compulsory acquired under any low or asset which is not compulsory acquired but the consideration is approved or determine by the central govt. or RBI then the capital gain from such transfer will be chargeable to tax as the income of previous year in which such compensation or part of compensation is first received by the assessee
  2. The amount by which the compensation is enhance shall be deemed as income under deducting cost of transfer related to such enhanced compensation

Computation of capital gain:

First Initial compensation [calculation in the year of receipt]

capital gain

Amount

Sale consideration (Initial compensation as deducted)

Less: Cost of acquisition /Indexed Cost of acquisition

Cost of improvement /Indexed Cost of improvement

Cost of transfer

******

*****

*****

***

Capital gain charable to tax in the year of compensation received

*****

 

Enhanced compensation [in the year of actual receipt]

capital gain

Amount

Sale consideration (Enhanced compensation received)

Less: Cost of acquisition /Indexed Cost of acquisition

Cost of improvement /Indexed Cost of improvement

Cost of transfer

******

NIL

NIL

***

Capital gain charable to tax in the year of actual received

*****

 

Where compensation received subsequently reduced by the court then the capital gain of that year in which compensation received was taxed shall be recomputed.

Leave a Reply

Your email address will not be published. Required fields are marked *