Some transactions are not considered transfers of capital gains

According to the requirements of the Income Tax Act, capital gains occur when a capital asset is "transferred" during the prior year. No income is subject to taxation under the category "capital gains" if there is no transport of a capital asset.

Certain transactions are not considered "transfers" under this section of the Income Tax Act, and as a result, gains resulting from such agreements are not subject to capital gain tax. The justification for this exemption is that the transferor does not receive any taxable income as a result of these transactions.

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What transfer means?

Regarding a capital asset, "transfer" entails:-

  (a) the asset is sold, transferred, or abandoned; or

  (b) the cancellation of any corresponding rights; or

  (c) the acquisition of such is required by any law; or

  (d) if the asset is used as the stock-in-trade of a business that the owner of the asset operates, or if he else treats the item in that way;

  (e) any transaction requiring consent for the taking or reserving of possession of any secured property in connection with the fulfillment of a contract of the kind described in Section 53A of the Transfer of Property Act of 1882; or

  (f) any agreement that transfers or otherwise qualifies the enjoyment of any protected property; or

  (g) A zero-coupon bond's maturity or absolution.

Some transactions are not considered transfers

Because section 45 will not consider the following transactions to be transferred, no capital gains will result from them:-

  (a) Any distribution of capital assets in kind made to members of a Hindu undivided family at the moment of complete or partial division.

  (b) Any capital asset transfer made by a gift, a will, or an irrevocable trust.

  (c) Instead of issuing shares in the combined business, the transfer of shares in the merging firm or demerged company.

  (d) A company's distribution of assets in kind to its shareholders upon liquidation.

  (e) Transfer of capital assets if the transferee company is an Indian business and the holding company is one hundred percent its subsidiary.

  (f) Capital asset transfer as part of a strategy to merge a banking business with a banking organisation.

Section 12a is a lifeline for NGOs as it waives the entire tax.

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