Section 49 of Income Tax Act "Cost with reference to certain modes of acquisition"
49. (1) Where the capital asset became the property of
the assessee-
(i) on any distribution of assets on the total or partial
partition of a Hindu undivided family;
(ii) under a gift or will;
(iii) (a) by succession, inheritance or devolution, or
(b) on any distribution of assets on the dissolution of a
firm, body of individuals, or other association of persons,
where such dissolution had taken place at any time before
the 1st day of April, 1987, or
(c) on any distribution of assets on the liquidation of a
company, or
(d) under a transfer to a revocable or an irrevocable trust,
or
(e) under any such transfer as is referred to in clause (iv)
or clause (v) or clause (vi) or clause (via) or clause (viaa)
or clause (viab) or clause (vib) or clause (vic) or clause (vica)
or clause (vicb) or clause (vicc) or clause (xiii) or clause
(xiiib) or clause (xiv) of section 47;
(iv) such assessee being a Hindu undivided family, by the
mode referred to in sub-section (2) of section 64 at any
time after the 31st day of December, 1969,
the cost of acquisition of the asset shall be deemed to be
the cost for which the previous owner of the property
acquired it, as increased by the cost of any improvement of
the assets incurred or borne by the previous owner or the
assessee, as the case may be.
Explanation.-In this sub-section the expression "previous
owner of the property" in relation to any capital asset
owned by an assessee means the last previous owner of the
capital asset who acquired it by a mode of acquisition other
than that referred to in clause (i) or clause (ii) or clause
(iii) or clause (iv) of this sub-section.
(2) Where the capital asset being a share or shares in an
amalgamated company which is an Indian company became the
property of the assessee in consideration of a transfer
referred to in clause (vii) of section 47, the cost of
acquisition of the asset shall be deemed to be the cost of
acquisition to him of the share or shares in the
amalgamating company.
(2A) Where the capital asset, being a share or debenture of
a company, became the property of the assessee in
consideration of a transfer referred to in clause (x) or
clause (xa) of section 47, the cost of acquisition of the
asset to the assessee shall be deemed to be that part of the
cost of debenture, debenture-stock, bond or deposit
certificate in relation to which such asset is acquired by
the assessee.
(2AA) Where the capital gain arises from the transfer of
specified security or sweat equity shares referred to in
sub-clause (vi) of clause (2) of section 17, the cost of
acquisition of such security or shares shall be the fair
market value which has been taken into account for the
purposes of the said sub-clause.
(2AAA) Where the capital asset, being rights of a partner
referred to in section 42 of the Limited Liability
Partnership Act, 2008 (6 of 2009), became the property of
the assessee on conversion as referred to in clause (xiiib)
of section 47, the cost of acquisition of the asset shall be
deemed to be the cost of acquisition to him of the share or
shares in the company immediately before its conversion.
(2AB) Where the capital gain arises from the transfer of
specified security or sweat equity shares, the cost of
acquisition of such security or shares shall be the fair
market value which has been taken into account while
computing the value of fringe benefits under clause (ba) of
sub-section (1) of section 115WC.
(2ABB) Where the capital asset, being share or shares of a
company, is acquired by a non-resident assessee on
redemption of Global Depository Receipts referred to in
clause (b) of sub-section (1) of section 115AC held by such
assessee, the cost of acquisition of the share or shares
shall be the price of such share or shares prevailing on any
recognised stock exchange on the date on which a request for
such redemption was made.
Explanation.-For the purposes of this sub-section, "recognised
stock exchange" shall have the meaning assigned to it in
clause (ii) of the Explanation 1 to sub-section (5) of
section 43.
(2AC) Where the capital asset, being a unit of a business
trust, became the property of the assessee in consideration
of a transfer as referred to in clause (xvii) of section 47,
the cost of acquisition of the asset shall be deemed to be
the cost of acquisition to him of the share referred to in
the said clause.
(2AD) Where the capital asset, being a unit or units in a
consolidated scheme of a mutual fund, became the property of
the assessee in consideration of a transfer referred to in
clause (xviii) of section 47, the cost of acquisition of the
asset shall be deemed to be the cost of acquisition to him
of the unit or units in the consolidating scheme of the
mutual fund.
(2AE) Where the capital asset, being equity share of a
company, became the property of the assessee in
consideration of a transfer referred to in clause (xb) of
section 47, the cost of acquisition of the asset shall be
deemed to be that part of the cost of the preference share
in relation to which such asset is acquired by the assessee.
(2AF) Where the capital asset, being a unit or units in a
consolidated plan of a mutual fund scheme, became the
property of the assessee in consideration of a transfer
referred to in clause (xix) of section 47, the cost of
acquisition of the asset shall be deemed to be the cost of
acquisition to him of the unit or units in the consolidating
plan of the scheme of the mutual fund.
96[(2AG)The cost of acquisition of a unit or units in the
segregated portfolio shall be the amount which bears, to the
cost of acquisition of a unit or units held by the assessee
in the total portfolio, the same proportion as the net asset
value of the asset transferred to the segregated portfolio
bears to the net asset value of the total portfolio
immediately before the segregation of portfolios.
(2AH)The cost of the acquisition of the original units held
by the unit holder in the main portfolio shall be deemed to
have been reduced by the amount as so arrived at under
sub-section (2AG).
Explanation.-For the purposes of sub-section (2AG) and
sub-section (2AH), the expressions "main portfolio",
"segregated portfolio" and "total portfolio" shall have the
meanings respectively assigned to them in the circular No.
SEBI/HO/IMD/DF2/CIR/P/2018/160, dated the 28th December,
2018, issued by the Securities and Exchange Board of India
under section 11 of the Securities and Exchange Board of
India Act, 1992 (15 of 1992).]
(2B) [***]
(2C) The cost of acquisition of the shares in the resulting
company shall be the amount which bears to the cost of
acquisition of shares held by the assessee in the demerged
company the same proportion as the net book value of the
assets transferred in a demerger bears to the net worth of
the demerged company immediately before such demerger.
(2D) The cost of acquisition of the original shares held by
the shareholder in the demerged company shall be deemed to
have been reduced by the amount as so arrived at under
sub-section (2C).
(2E) The provisions of sub-section (2), sub-section (2C) and
sub-section (2D) shall, as far as may be, also apply in
relation to business reorganisation of a co-operative bank
as referred to in section 44DB.
Explanation.-For the purposes of this section, "net worth"
shall mean the aggregate of the paid up share capital and
general reserves as appearing in the books of account of the
demerged company immediately before the demerger.
(3) Notwithstanding anything contained in sub-section (1),
where the capital gain arising from the transfer of a
capital asset referred to in clause (iv) or, as the case may
be, clause (v) of section 47 is deemed to be income
chargeable under the head "Capital gains" by virtue of the
provisions contained in section 47A, the cost of acquisition
of such asset to the transferee-company shall be the cost
for which such asset was acquired by it.
(4) Where the capital gain arises from the transfer of a
property, the value of which has been subject to income-tax
under clause (vii) or clause (viia) or clause (x) of
sub-section (2) of section 56, the cost of acquisition of
such property shall be deemed to be the value which has been
taken into account for the purposes of the said clause (vii)
or clause (viia) or clause (x).
(5) Where the capital gain arises from the transfer of an
asset declared under the Income Declaration Scheme, 2016,
and the tax, surcharge and penalty have been paid in
accordance with the provisions of the Scheme on the fair
market value of the asset as on the date of commencement of
the Scheme, the cost of acquisition of the asset shall be
deemed to be the fair market value of the asset which has
been taken into account for the purposes of the said Scheme.
(6) Where the capital gain arises from the transfer of a
specified capital asset referred to in clause (c) of the
Explanation to clause (37A) of section 10, which has been
transferred after the expiry of two years from the end of
the financial year in which the possession of such asset was
handed over to the assessee, the cost of acquisition of such
specified capital asset shall be deemed to be its stamp duty
value as on the last day of the second financial year after
the end of the financial year in which the possession of the
said specified capital asset was handed over to the assessee.
Explanation.-For the purposes of this sub-section, "stamp
duty value" means the value adopted or assessed or
assessable by any authority of the State Government for the
purpose of payment of stamp duty in respect of an immovable
property.
(7) Where the capital gain arises from the transfer of a
capital asset, being share in the project, in the form of
land or building or both, referred to in sub-section (5A) of
section 45, not being the capital asset referred to in the
proviso to the said sub-section, the cost of acquisition of
such asset, shall be the amount which is deemed as full
value of consideration in that sub-section.
(8) Where the capital gain arises from the transfer of an
asset, being the asset held by a trust or an institution in
respect of which accreted income has been computed and the
tax has been paid thereon in accordance with the provisions
of Chapter XII-EB, the cost of acquisition of such asset
shall be deemed to be the fair market value of the asset
which has been taken into account for computation of
accreted income as on the specified date referred to in
sub-section (2) of section 115TD.
(9) Where the capital gain arises from the transfer of a
capital asset referred to in clause (via) of section 28, the
cost of acquisition of such asset shall be deemed to be the
fair market value which has been taken into account for the
purposes of the said clause.
What is Capital gains? Section 45 of Income Tax Act 1961
What are the Transactions not regarded as transfer? Section 47 of Income Tax Act 1961
What is Withdrawal of exemption in certain cases? Section 47A of Income Tax Act 1961
What is Mode of computation? Section 48 of Income Tax Act 1961
What is Cost with reference to certain modes of acquisition? Section 49 of Income Tax Act 1961