Cost of acquisition for capital gains tax purposes: Clause 73 of the Income Tax Bill, 2025 vs. Section 49 of the Income Tax Act, 1961

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...., providing guidelines for calculating the cost of acquisition in specific situations. This article delves into the detailed provisions of Clause 73, comparing and contrasting them with Section 49 of the Income Tax Act, 1961, to understand the legislative intent, practical implications, and potential areas for reform. Objective and Purpose The primary objective of Clause 73 in the Income Tax Bill, 2025 is to provide a clear framework for determining the cost of acquisition of capital assets acquired through various modes, such as gifts, inheritance, or corporate restructuring. This clarity is essential for calculating capital gains tax accurately. The legislative intent is to ensure consistency and fairness in tax treatment, preventing an....

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....t the time of declaration is used as the cost of acquisition. Section 49 of the Income Tax Act, 1961 Section 49 outlines the cost of acquisition for assets acquired through various modes, focusing on ensuring that the tax liability reflects the true economic gain. Key provisions include: * Similar to Clause 73, Section 49 deems the cost of acquisition for inherited or gifted assets as the cost incurred by the previous owner, plus improvements. * The section also addresses corporate restructuring scenarios, aligning the cost of acquisition with the original assets involved. * Specific provisions exist for assets acquired through the dissolution of firms or associations, with historical cut-off dates impacting the applicable rules. ....