For the purpose of the taxability of capital assets, one of the basic condition is the transfer the capital asset .i.e. there should be change in the ownership of the asset which can be due to sale, exchange, surrender, extinguishment of right, acquisition, conversion or redemption or any other act by which shows that ownership of the asset has been changed.
There are certain transactions which are not regarded as transfer under the income tax act and those exceptions are given under section 47 of the income tax act like asset received by the members at the time partition of HUF or asset transferred under a gift or will or irrevocable trust.
There are certain transactions which person may not consider transfer but from income tax point of view they are considered as transfer, which are as follows
Transfer by way of conversion by owner of a capital asset into stock in trade of a business carried on by him but capital gain tax will be payable only when such stock in trade is sold by that person.
The profits or gain arising from the transfer of a capital assets by a person to a firm or other association of person or body of individuals in which he is or becomes partner or member tax is payable by person who is transferring the capital assets.
The profits or gain arising from the transfer of a capital assets by way of distribution of capital assets on the dissolution of a firm or other association of person or body of individuals shall be chargeable to tax as capital gain for such Firm/AOP/BOI.
What is transfer
- Surrender of asset
- Extinguishment of right
- Compulsory acquisition of asset
- Conversion of cap. Asset into stock in trade
- Redemption of zero coupon bonds
Transactions not regarded as transfer
- Asset recovered at the time of liquidation of company to its share holders
- Asset received by a member at the time of partition of HUF
- Asset received in gift
- Transfer of FCCB/GDR purchase in foreign currency & Transfer is made by one NR to another NR outside India
- Work of archeological collection etc. transfer to govt. national museum.
- Conversion of bonds/ deb. into shares/deb. Of that company.
- Land of Sick Industrial company