Computation of Cost of Acquisition of Certain Assets under Business Income Head: Clause 40 of the Income Tax Bill, 2025 vs. Section 43C of the Income Tax Act, 1961

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..... ssets. Income Tax Bill, 2025 Introduction The computation of the cost of acquisition of assets is a critical aspect of determining taxable income under the head "Profits and Gains of Business or Profession." Both Clause 40 of the Income Tax Bill, 2025, and Section 43C of the Income Tax Act, 1961, address this issue by providing special provisions for computing the cost of acquisition of certain .....

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..... ambiguities and inconsistencies in determining the cost basis for assets acquired through non-traditional means. By providing a standardized approach, these provisions aim to enhance fairness and transparency in the tax system. Detailed Analysis Clause 40 of the Income Tax Bill, 2025 Clause 40 outlines the method for computing the cost of acquisition for assets acquired by an amalgamated compa .....

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..... improvements made to the asset. * Includes expenditures incurred in connection with the transfer, such as gift-tax payments. * Applies to assets sold after February 29, 1988. Practical Implications Both provisions have significant implications for businesses and individuals involved in asset transfers through amalgamations, gifts, or partitions. They ensure consistency in tax treatment and p .....

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..... ich is not mentioned in Section 43C. * Temporal Application: Section 43C applies to assets sold after February 29, 1988, whereas Clause 40 does not specify a similar temporal restriction, suggesting a broader application. * Expenditure Consideration: Both provisions consider improvements and expenditures related to the transfer, but Section 43C explicitly includes gift-tax payments, which is n .....

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