Clause - 028 - Amendment of section 55.

THE FINANCE BILL, 2017

Clause 28 of the Bill seeks to amend section 55 of the Income-tax Act relating to meaning of "adjusted", "cost of improvement" and "cost of acquisition".

Under the existing provisions of the said section, the cost of long-term capital asset acquired before the 1st day of April, 1981 is taken to be the cost of acquisition to the assessee or the fair market value of the asset on that date, at the option of the assessee. The cost of improvement is also taken into account after the assessee has acquired the asset on or after 1st April, 1981.

It is proposed to amend the said section so as to advance the aforesaid cut-off date to 1st day of April, 2001. Where the long-term capital asset has been acquired before the 1st day of April, 2001, then, the cost of acquisition will be taken to be the value of the asset as on the 1st day of April, 2001. Similarly, in such cases the cost of improvement will be taken to be the cost of improvement after this date.

These amendments will take effect from 1st April, 2018 and will, accordingly, apply in relation to the assessment year 2018-2019 and subsequent years.

 

Cost of acquisition rules: cutoff date advanced, altering use of prior fair market value for long-term capital assets. Amendment to section 55 advances the statutory cut-off date used to compute cost of acquisition and cost of improvement for long-term capital assets: where an asset was acquired before the new cut-off date, its cost of acquisition is to be treated as the asset's value on that cut-off date and cost of improvement is recognised only if incurred after that date, with fair market value at the cut-off date available as the basis. The amendment is effective from 1st April, 2018 and applies to the assessment year 2018-2019 onwards.