Section 48:
Mode of computation.
1The income chargeable under the head “Capital gains” shall be
computed, by deducting from the full value of the consideration received or accruing as a result of the
transfer of the capital asset the following amounts, namely:—
(i) expenditure incurred wholly and exclusively in connection with such transfer;
(ii) the cost of acquisition of the asset and the cost of any improvement thereto:
Provided that in the case of an assessee, who is a non-resident, capital gains arising from the transfer
of a capital asset being shares in, or debentures of, an Indian company shall be computed by converting
the cost of acquisition, expenditure incurred wholly and exclusively in connection with such transfer and
the full value of the consideration received or accruing as a result of the transfer of the capital asset into
the same foreign currency as was initially utilised in the purchase of the shares or debentures, and the
capital gains so computed in such foreign currency shall be reconverted into Indian currency, so,
however, that the aforesaid manner of computation of capital gains shall be applicable in respect of
capital gains accruing or arising from every reinvestment thereafter in, and sale of, shares in, or
debentures of, an Indian company:
Provided further that where long-term capital gain arises from the transfer of a long-term capital
asset, other than capital gain arising to a non-resident from the transfer of shares in, or debentures of, an
Indian company referred to in the first proviso, the provisions of clause (ii) shall have effect as if for the
words “cost of acquisition” and “cost of any improvement”, the words “indexed cost of acquisition” and
“indexed cost of any improvement” had respectively been substituted:
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Provided also that nothing contained in the first and second provisos shall apply to the capital gains
arising from the transfer of a long-term capital asset being an equity share in a company or a unit of an
equity oriented fund or a unit of a business trust referred to in section 112A:
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Provided also that nothing contained in the second proviso shall apply to the long-term capital gain
arising from the transfer of a long-term capital asset, being a bond or debenture other than—
(a) capital indexed bonds issued by the Government; or
(b) Sovereign Gold Bond issued by the Reserve Bank of India under the Sovereign Gold Bond
Scheme, 2015:
Provided also that in case of an assessee being a non-resident, any gains arising on account of
appreciation of rupee against a foreign currency at the time of redemption of rupee denominated bond of
an Indian company 4
held by him, shall be ignored for the purposes of computation of full value of
consideration under this section:
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Provided also that where shares, debentures or warrants referred to in the proviso to clause (iii) of
section 47 are transferred under a gift or an irrevocable trust, the market value on the date of such transfer
shall be deemed to be the full value of consideration received or accruing as a result of transfer for the
purposes of this section:
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Provided also that no deduction shall be allowed in computing the income chargeable under the
head “Capital gains” in respect of any sum paid on account of securities transaction tax under Chapter VII
of the Finance (No. 2) Act, 2004 (23 of 2004).
Explanation.—For the purposes of this section,—
(i) “foreign currency” and “Indian currency” shall have the meanings respectively assigned to
them in section 2 of 7
the Foreign Exchange Management Act, 1999 (42 of 1999);
(ii) the conversion of Indian currency into foreign currency and the reconversion of foreign
currency into Indian currency shall be at the rate of exchange prescribed in this behalf;
(iii) “indexed cost of acquisition” means an amount which bears to the cost of acquisition the
same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost
Inflation Index for the first year in which the asset was held by the assessee or for the year beginning
on the 8
1st day of April, 2001, whichever is later;
(iv) “indexed cost of any improvement” means an amount which bears to the cost of improvement
the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the
Cost Inflation Index for the year in which the improvement to the asset took place;
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(v) “Cost Inflation Index”, in relation to a previous year, means such Index as the Central
Government may, having regard to seventy-five per cent of average rise in the 10
Consumer Price
Index (urban) for the immediately preceding previous year to such previous year, by notification in
the Official Gazette, specify, in this behalf.
Notes:
1. Subs. by Act 18 of 1992, s. 24, for section 48 (w.e.f. 1-4-1993).
2. Ins. by Act 13 of 2018, s. 18 (w.e.f. 1-4-2018).
3. Subs. by Act 28 of 2016, s. 29, for the third proviso (w.e.f. 1-4-2017) which was earlier inserted by Act 26 of 1997,
s. 18 (w.e.f. 1-4-1998).
4. Subs. by Act 7 of 2017, s. 24 to read as “subscribed” (w.e.f. 1-4-2018).
5. Ins. by Act 10 of 2000, s. 22 (w.e.f. 1-4-2001).
6. Ins. by Act 23 of 2004, s. 12 (w.e.f. 1-4-2005).
7. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 1-4-2013).
8. Subs. by Act 7 of 2017, s. 24 for “1st day of April, 1981” (w.e.f. 1-4-2018).
9. Subs. by Act 10 of 2000, s. 22, for clause (v) (w.e.f. 1-4-1993).
10. Subs. by Act 25 of 2014, s. 19, for “Consumer Price Index for Urban non-manual employees” (w.e.f. 1-4-2016).