Capital Gains

Notional cost of acquisition of the asset

The notional cost of acquisition of capital assets is specified in section 49 of the Income Tax Act . As per this section, in the circumstances entioned hereunder, the cost of acquisition in the hands of the assessee shall be taken to be the same as it was for the previous owner of the asset.The cost of improvement of the asset incurred or borne by the previous owner or by the assessee as the case may be is also claimable while computing the capital gains. The circumstances covered by section 49 are :

1. transfer on account of any distribution of the assets on the total or partial partition of a Hindu Undivided Family.

2. transfer under a Will or Gift.

(a) transfer by way of succession , inheritance or devolution./, or

(b) on any distribution of assets on the liquidation of a company, or

(c) under a transfer to a revocable or irrevocable trust, or

(d) under the circumstances of transfer between a holding company and subsidiary company and between an amalgamating company and an amalgamated company which otherwise are not regarded as a transfer for the purposes of capital gains .

4. where the HUF becomes the owner of the property on account of the individual member's act of throwing his separate property in the common stock of the HUF or by transferring the property to the HUF for inadequate consideration as specified in section 64(2) of the Income Tax Act.

In the above circumstances the term previous owner means the last owner who had become the owner of the property in circumstances other than those enumerated above.