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Fair market value deemed consideration: FMV used to compute capital gains when actual consideration is indeterminate.
Where actual consideration for transfer of a capital asset is not ascertainable, the fair market value (FMV) of the asset on the transfer date is to be deemed the full value of consideration for capital gains computation. Determination may use comparable sales, income, or cost approaches, but unique or illiquid assets and absence of standardized methods create practical valuation disputes. Taxpayers must substantiate FMV and authorities need valuation frameworks to ensure consistent application and prevent understatement of taxable gains.
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Fair market value deemed consideration for unquoted share transfers to prevent undervaluation and ensure correct capital gains computation.
Deemed full consideration for transfer of unquoted shares is the fair market value when actual consideration is lower; fair market value must be determined by prescribed valuation procedures, with exemptions available for specified classes or conditions, and compliance requires documentation, qualified valuation and potential administrative guidelines to resolve disputes.
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Full value of consideration deemed to stamp duty valuation; safe harbor permits minor discrepancies and valuation review.
Where declared consideration for transfer of land or buildings is less than the stamp duty valuation, the stamp duty value is deemed the full value of consideration for capital gains purposes; the stamp duty value as at the agreement date may apply if consideration is received through prescribed banking channels before the agreement date. A limited safe harbor accepts declared consideration within a narrow margin above stamp duty valuation. Assessing Officers may seek Valuation Officer review where the stamp duty value is disputed, and Clause 78 defines assessable as the value adopted for stamp duty purposes.
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Capital gains treatment for slump sales clarified: net worth valuation and accountant certification required for tax computation.
The computation treats the net worth of the transferred undertaking-aggregate assets less liabilities, excluding revaluation increases-as the cost of acquisition; where lump sum consideration diverges from market values, the fair market value of assets on the transfer date is deemed the full value of consideration. Depreciable assets use written down value, certain goodwill and specified assets are valued at nil, and an accountant's report certifying the net worth computation is required.
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Market Linked Debenture tax treatment: gains treated as short-term capital gains irrespective of holding period.
Clause 76 mandates that gains on Market Linked Debentures and specified debt instruments be treated as short-term capital gains irrespective of holding period, prescribes computation as full consideration less cost of acquisition and transaction expenditure (X = A - B - C), disallows deduction for Securities Transaction Tax, and defines covered assets and specified mutual funds to determine applicability.
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Cost of acquisition adjustment: depreciable assets' acquisition cost tied to written down value, altering capital gains computation.
Clause 75 treats the written down value of a depreciable asset, where depreciation has been claimed, as the cost of acquisition for capital gains purposes and directs that set-off and carry forward provisions apply subject to this modification, thereby aligning gain or loss on disposal with the asset's depreciated value.
Act Rules Bills
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Computation of capital gains on depreciable assets: revised short term treatment under an overriding block based formula.
Clause 74 creates an overriding framework for computing capital gains on depreciable asset blocks: if consideration from transfer exceeds transfer expenses plus the block's written down value at the year's start and additions during the year, the excess is treated as short term capital gains; on complete cessation of a block, acquisition cost is the opening written down value adjusted for acquisitions and resulting income is treated as short term capital gains.
Act Rules Bills
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Cost of acquisition rules designate deemed cost for non purchase transfers, preserving prior owner's cost with specified formulas.
Clause 73 prescribes the deemed cost of acquisition for assets received by gift, will, inheritance or similar transfers as the cost incurred by the previous owner, adjusted for improvements; it prescribes fair market value for assets declared under the Income Declaration Scheme and specific formulae for units in mutual funds, business trusts and segregated portfolios, and ties cost continuity to original assets in corporate reorganisations.
Act Rules Bills
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Mode of computation of capital gains: updated indexation, tightened deductible items, and rules for business trusts and non-residents.
Clause 72 updates the mode of computation of capital gains by retaining deductions for expenditure and cost of acquisition or improvement while specifying a Cost Inflation Index tied to the Consumer Price Index (urban) for indexation. It expressly disallows certain interest payments and securities transaction tax, sets out reduction rules for cost of acquisition involving business trusts and specified entities, and provides detailed computation rules for non-residents addressing foreign currency and rupee appreciation, alongside definitions for indexed cost concepts.
Act Rules Bills
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Withdrawal of exemption: non compliance with transfer conditions triggers taxation of capital gains and successor liability.
Clause 71 requires withdrawal of exemption and taxation of capital gains when a transferee converts a capital asset into stock in trade or when shareholding continuity of a parent/holding company in a subsidiary is broken within the prescribed period, and it makes successor entities or shareholders liable where specified conditions are not met, aligning functionally with the triggers and successor liability mechanisms in Section 47A of the Income tax Act.
Act Rules Bills
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Capital gains exemptions for specified restructurings preserve tax neutrality and facilitate cross-border and corporate reorganisations.
Clause 70 of the Income Tax Bill, 2025 designates specified classes of transactions as not regarded as transfer for capital gains purposes, exempting partitions of Hindu undivided families, transfers by will, gift or irrevocable trust, transfers between parent and subsidiary companies, amalgamations and demergers (including foreign company reorganisations), conversions and exchanges of securities, securities lending, reverse mortgage arrangements, mutual fund consolidations, transfers involving art and cultural institutions, and succession of business entities, thereby aligning with and expanding the scope of existing non-transfer provisions in Section 47 of the 1961 Act.
Act Rules Bills
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Capital gains on share buy backs: updated rules tax the gain, deem certain consideration nil, and align definitions with corporate law.
Clause 69 taxes the difference between acquisition cost and consideration on company repurchase of its own shares or specified securities, prescribes that certain forms of consideration under clause 2(40)(f) are deemed nil for tax purposes, and adopts the Companies Act definition of specified securities, thereby aligning tax treatment with current corporate law and updating statutory cross references.
Act Rules Bills
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Capital gains on liquidation distributions: shareholders taxed on market value gains with dividend adjustment applied.
Distributions of assets on company liquidation are not treated as transfers by the company; shareholders receiving money or assets are taxable under Capital gains, with gain measured by the market value of assets received less any part assessed as dividend, and that net amount deemed the full value of consideration for capital gains computation. Clause 68 parallels Section 46 in substance but changes the statutory cross reference used for calculation mechanics.
Act Rules Bills
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Capital gains modernization clarifies valuation and timing for taxation, including insurance recoveries and conversions to stock in trade.
Clause 67 retains the principle that gains from transfer of capital assets are taxable in the year of transfer and refines valuation and timing for specified situations: insurance recoveries are treated as capital gains with fair market value deemed as full consideration; unit linked insurance receipts are aligned with capital gains rules where exemptions do not apply; conversion to stock in trade uses fair market value at conversion as consideration and taxes gains when sold; beneficial interests in securities are attributed to the beneficial owner with FIFO cost and holding period rules.
Act Rules Bills
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Tax deductions in co operative bank reorganisations: allocation rules and book value transfers ensure continuity and fairness in taxation.
Clause 65 and Section 44DB set a special provision for computing tax deductions in co operative bank reorganisations by allocating deductions between predecessor and successor based on days before and after reorganisation, requiring transfers at book values, defining covered reorganisations by asset/liability transfer and continuity criteria, and providing for Central Government notification in specified cases to ensure genuine business purposes.
Act Rules Bills
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High-turnover businesses must provide prescribed electronic payment facilities to increase transaction traceability and tax transparency.
Clauses 64 and 187 of the Income Tax Bill, 2025 require persons carrying on business above the prescribed turnover threshold to provide facilities for accepting payments through prescribed electronic modes, in addition to any other electronic methods offered. These clauses parallel Section 269SU of the Income Tax Act, 1961, aiming to promote digital transactions, enhance traceability, and reduce tax evasion by imposing infrastructure and compliance obligations on high-turnover businesses.
Act Rules Bills
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Tax audit thresholds updated to emphasise digital transactions, altering audit triggers and filing timing for taxpayers.
Clause 63 updates mandatory tax audit triggers by revising turnover and receipt thresholds and by making the intensity of banking or online transactions decisive for higher audit thresholds; it maintains an audit requirement for professionals, preserves exemptions where declared profits align with deemed profit provisions, requires audit reports signed by an accountant and filed by the defined specified date, and allows reliance on audits under other laws if submitted on time.
Act Rules Bills
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Maintenance of books of account: updated thresholds and technological recordkeeping govern taxpayer record obligations for income verification.
Clause 62 modernizes maintenance of books of account by applying to specified professions and notified persons, updating income and turnover thresholds (with special treatment for individuals and HUFs), defining specified professions broadly, and empowering the Board to prescribe the types, form, manner and retention periods of records while encouraging technological methods of record-keeping to facilitate income verification and tax administration.
Act Rules Bills
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Presumptive taxation for non-residents fixes sectoral deemed profit rates and permits audit-based lower profit declaration.
Clause 61 establishes a special presumptive computation regime for specified non-resident business activities-shipping (including demurrage), cruise ships, aircraft operation, turnkey power project construction, mineral-oil services, and specified electronics services-by prescribing sectoral deemed profit rates as the taxable base, permitting non-residents to elect audit-based lower declared profits if they maintain detailed books and undergo audit, and restricting allowance of losses, deductions, and depreciation against the presumptively computed income.
Act Rules Bills
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Head office expenditure deductions limited by an adjusted total income cap, simplifying cross-border allocation and documentation requirements.
Clause 60 permits deduction of administrative costs incurred by non-resident head offices against profits and gains of business or profession, subject to a capped proportion of adjusted total income (or its average when losses occur) and to specified definitions of head office expenditure, thereby standardizing computation and limiting disproportionate reductions in taxable income.

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Review of concessional rates of BCD prescribed in notification no. 50/2017 - Customs dated 30.62017: The BCD exemption hitherto available on certain goods are being withdrawn by omitting following entries of notification No. 50/2017-Customs dated 30.6.2017.

3 February, 2020

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Budget 2020-21 + FINANCE BILL, 2020

S. No.

S. No. of Notification No 50/2017-customs

Description

1.

5

Tuna bait [0303]

2.

7

Goods upto an aggregate of ten thousand metric tonnes of total imports of Milk and cream, in powder, granules or other solid form in a financial year. [0402 10, 0402 21 00]

3.

7A

Whey, concentrated, evaporated or condensed, liquid or semi-solid [0404 10 10]

4.

7B

Other Whey [0404 90 00)

5.

8

Butter Ghee, Butter Oil [0405]

6.

9

Other cheese [0406 90 00)

7.

10

Pancreas (Products of animal origin, not elsewhere specified) (Chapter 5]

8.

11

Conch shell [0508 00]

9.

18

Bulbs or tubers, other live plants [0601 or 0602]

10.

36

All goods other than meslin or wheat [1001]

11.

38

Meslin [1001]

12.

40

Maize upto an aggregate of five lakh metric tonnes of total imports of such goods in a financial year [1005 90]

13.

47

Sugar beet seeds [1209 10 00)

14.

56

Edible oils [1508, 1512, 1513, 1514, 1515 or 1511 10]

15.

58

Refined vegetable oils of edible grade, in loose or bulk form (other than palm oil) [chapter 15]

16.

59

Vegetable oils of edible grade, in loose or bulk form (other than those specified against S. No. 58 and palm oil), imported for the manufacture of oil commonly known as “Vanaspati” or for refining.

Explanation. -The expression “Vegetable oil” means-

(a) in the case of cottonseed oil, oil having a free fatty acid content of at least 0.2%; and

(b) in the case of any other vegetable oil. oil with free fatty acid content of at least 0.5%. [15]

17.

68

Crude sunflower seed or safflower oil upto an aggregate of one lakh and fifty thousand metric tonnes of total imports of such goods in a financial year [1512 11]

18.

69

Crude sunflower seed or safflower oil other than those specified against S. No. 68 [1512 11]

19.

72

Refined rape, colza or mustard oil upto an aggregate of one lakh and fifty thousand metric tonnes of total imports of such goods in a financial year (1514 19 or 1514 99]

20.

78

Margarine, animal or vegetable oils of edible grade [1517 or 1518]

21.

83

Glycerol, crude; glycerol waters and glycerol lyes, (other than crude glycerin) [1520 00 00]

22.

88A

Raw Sugar upto an aggregate of three lakh metric tonnes of total imports of such goods. Provided that the import of raw sugar in physical form is completed within sixty (60) days from the date of issue Of the Tariff Rate Quota Allocation Certificate or license by Directorate General of Foreign Trade (DGFT) to the importer. Provided further that the importer shall convert the raw sugar into white/ refined sugar within a period, not exceeding thirty (30) days, from the date of filing of bill of entry or the date of entry inwards, whichever is later [1701]

23.

89

Dextrose Monohydrate [1702)

24.

92

Molasses resulting from extraction or refining of sugar [1703]

25.

93

Chewing gum whether or not sugar coated [1704 10 00]

26.

94

Food preparations, for infant use and put up for retail sale, of-

(i) goods of headings 0401 to 0404, containing cocoa calculated on a totally defatted basis, in a proportion by weight of 5% or more but less than 10%; or

(ii) flour, meal, starch or malt extract containing cocoa calculated on a totally defatted basis, in a proportion by weight of 40% or more but less than 50% [1806 90)

27.

95

Preparations for infant use put up for retail sale [1901 10]

28.

98

preserved potatoes [2004 10 00]

29.

99

Peanut Butter [2008 11 00]

30.

105

Wine, for use as sacramental wine [22]

31.

108

Angostura bitters [2208]

32.

113

Fin fish feed [2301 20, 2309 90 32, 2309 90 39]

33.

115

Dietary soya fibre [2304]

34.

148

Naphtha, when imported by Ratnagiri Gas and Power Private Limited (RGPPL), for use in generation of electricity in the power plants of Ratnagiri Gas and Power Private Limited (RGPPL) at Dabhol, District Ratnagiri, Maharashtra [2710]

35.

149

Naphtha, when imported for generation of electrical energy by a generating company as defined in section 2(28) of the Electricity Act, 2003 (36 of 2003) to supply electrical energy-or to engage in the business of supplying electrical energy [2701]

36.

152

Propane, Butane [2711 12 00, 2711 13 00]

37.

160

Electrical energy [ 2716 00 00]

38.

170

Phosphoric acid, for the manufacture of fertilizers(28]

39.

212

Japanese Encephalitis (JE) vaccine, imported by the Andhra Pradesh Government through UNICEF [30]

40.

220

Kyanite salts, in a form indicative of their use for manurial purpose [31]

41.

243

Isolated soya protein [3504]

42.

244

Colour positive unexposed cinematographic film in jumbo rolls and colour negative unexposed cinematographic film in rolls of 400 feet and 1000 feet [37]

43.

245

Instant print film [3701 20 00 or 3702]

44.

246

Cinematographic films, exposed but not developed [3704]

45.

247

Promotional material (like Trailers, making of film etc.) imported in the form of electronic promotion kits (EPK)/ beta cams (Any Chapter)

46.

263

The following polymers of ethylene, namely: -

(i) Cow density polyethylene (LDPE),

(ii) Linear low-density polyethylene (LLDPE),

(iii) High density polyethylene (HDPE),

(iv) Linear medium density polyethylene (LMDPE),

(v) Linear high-density polyethylene (LHDPE) [3901]

47.

264

All goods other than poly 'so-butylene [39021

48.

266

All goods [3903]

49.

274

Compostable polymer or bio-plastic used in the manufacture of bio degradable agro mulching films, nursery plantation pots and flower pots [3913 90 90]

50.

275

Water blocking tape for use in the manufacture of insulated Wires and cables falling under heading 8544 (except sub-heading 8544 11) [3919 90 90]

51.

278

Subbed polyester base, imported by M/s. Hindustan Photo Films Manufacturing Company Limited, Udhagamandalam for the manufacture of medical or industrial X-ray films and graphic art films [39201

52.

286

Patent leather [4114 20 10]

53.

287

Raw furskins [4301). tanned and dried furskins [4302]

54.

386

Lead bars. rods. profiles and wire [7806]

55.

388

Zinc tubes, pipes and tube or pipe fittings [7907]

56.

389

Tin plates, sheets and strip, of a thickness exceeding 0.2 mm; tin foil (whether or not printed or backed with paper, paperboard, plastics or similar backing materials), of a thickness (excluding any backing) not exceeding 0.2 mm; tin powders and flakes [8007]

57.

398

Parts and components of the goods specified in List 10 required for use in high voltage power transmission project (Any chapter]

58.

401

All items of equipment including machinery and rolling stock, procured by or on behalf of Delhi Metro Rail Corporation Ltd. for use in-

(i) Delhi MRTS Project Phase-I, and

(ii) Specified corridors of Delhi MRTS Project Phase-Il, comprising of the following, namely: -

(a) Vishwavidyalaya- Jahangirpuri;

(b) Central Secretariat-Qutab Minar (via All India Institute of Medical Sciences);

(c) Shahdara- Dilshad Garden;

(d) Indraprastha-New Ashok Nagar;

(e) Yamuna Bank-Anand Vihar-lnter State Bus Terminus; and

(f) Kirti Nagar-Mundka (along with operational Link to Shahdara- Rithala corridor) (Any Chapter)

59.

412

Goods specified in List 15 required for construction of roads [84 or any other chapter]

60.

447

The following goods required for manufacture of Optical disk drives (ODD), namely: -

(i) Pick up assembly

(ii) Digital signature procession integrated circuit

(iii) DC motor

(iv) LDO voltage regulator [84 or Any other Chapter]

61.

456

The following goods, namely: -

(a) Sprinklers and drip irrigation systems for agricultural and horticultural purposes;

(b) Micro Irrigation equipment [8424]

62.

457

Poultry incubators and brooders [8436 21 00]

63.

459

Parts for manufacture of printers falling under sub heading 8443 32 (except 8443 99 51, 8443 99 52, 8443 99 53) [8443]

64.

465

CD -Writers (8471]

65.

474

MP3 or MP4 or MPEG 4 player with or without radio or video reception facility [85]

66.

483

One set of pre-recorded cassettes accompanying books for learning languages and essential complement to such books, [85]

67.

484

Audio cassettes, if recorded with material from books, newspaper or magazines, for the blind [85]

68.

515

Colour television picture tubes for use in the manufacture of cathode ray televisions [8540 11]

 

 


Full Text:

Budget 2020-21 + FINANCE BILL, 2020

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Acts Income Tax