Preface
About Direct Taxes:
Content of this book:
Detailed Index:
Provisions:
Judicial Decisions:
Judicial Decisions landmark or prescribed by ICAI
Judicial Decisions,
Practical Questions:
1.4 1.4 1.4 1.4 1.5 1.5 1.5 1.6 1.7 1.8 1.8 1.8 1.9 1.9 1.9 1.10 1.10 1.10 1.10 1.10
3 INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME
1.29 1.31
4.31 4.31 4.33 4.34 4.38 4.38 4.38 4.39 4.41 4.41 4.42 4.44 4.51 4.51 4.55 a 4.56 4.58 4.59 4.61 4.62 4.62 4.63 4.65 4.67 4.68 4.68 4.68 4.70 4.71 4.73 4.74 4.76
5.23
5.25 5.25 5.27 5.28 5.29 5.30 5.32 5.33 5.37 5.38 5.39 5.40 5.41 5.43
5.43 5.43
5.52 5.52
5.52
5.52 5.53 5.53 5.53 5.54 5.54 vii
5.54 5.54 5.55 5.55 5.55
5.55
5.55 5.56 5.58 5.59 5.59 5.60 5.65 5.67 5.67
Exemptions from Capital Gains under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54H
8 TAX ON CONVERSION OF UNACCOUNTED MONEY x
9 INCOME OF OTHER PERSONS, INCLUDED IN ASSESSEE’S TOTAL INCOME (CLUBBING OF INCOME)
Assessment Procedures [Chapter XIV]
COLLECTION AND RECOVERY OF TAX
MISCELLANEOUS TOPICS, STT/CTT AND IFSC
(INCLUDING GAAR)
OVERVIEW OF MODEL TAX CONVENTIONS
APPLICATION AND INTERPRETATION OF TAX TREATIES
Interpretation of Tax Treaties
FUNDAMENTALS OF BASE EROSION AND PROFIT SHIFTING (BEPS)
CHAPTER
Capital Gains
[Sec. 45 to Sec. 55A]
Basis of Charge : [Sec. 45(1)]
transfer of a capital asset effected in the previous year unless
Definition of ‘Capital Asset’ : [Sec. 2(14)]
Capital Asset means -
a
b or held by an investment fund specified in clause of Explanation 1 to section 115UB
[Inserted by Finance Act, 2025 w.e.f. A.Y. 2026-27]
c but does NOT include
i stock-in-trade [other than the securities referred to in sub-clause (b) above], consumable stores or raw materials
Note:
ii Personal effects of movable nature other than
iii Agricultural land in India
aerially
a
iv Special Bearer Bond, 1991,
v Gold Deposit Bonds Deposit Certificates
Gold Monetisation Scheme, 2015
Explanation to Sec. 2(14):
Vodafone International Holdings B.V. v. Union of India (2012) Explanation
rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.
Determining whether an asset is Stock-in-trade or Capital asset:
manner in which it is held.
not a pure question of law but essentially a question of fact. magnitude and frequency of buying and selling of shares, the period of holding of such shares, ratio of sales to purchases and the total holdings
[PVS Raju v. ACIT (2012) 340 ITR 75 (AP)]
Surplus on sale of shares or securities taxable as ‘Business Income’ or ‘Capital Gains’? [Circular No. 06/2016, dated 29.02.2016] to distinguish the shares held as investments from the shares held as stock-in-trade.
no universal principle in absolute terms can be laid down to decide the character of income from sale of shares and securities (i.e. whether the same is in the nature of capital gain or business income),
vide Circular No. 06/2016 dated 29.02.2016 the Assessing Officers in holding whether the surplus from sale of listed shares or securities would be treated as Capital Gain or Business Income, shall take into account the following:
a assessee opts
b more than 12 months as Capital Gains shall not be put to dispute by the Assessing Officer once taken applicable in subsequent Assessment Years
c i.e
unlisted shares, irrespective of the period of holding, it shall be treated as Capital asset.
Items of precious metals; to what extent constitutes Jewellery:
Explanation 1 to section 2(14), jewellery includes:
Gold utensils cannot be regarded as of personal effects and thereby they are capital assets
JUDICIAL DECISIONS:
CIT v. Benarashilal Kataruka (1990) 185 ITR 493 (Cal.)
Items of silverware including dinner plates of different sizes, finger bowls, and jugs were held to be personal effects.
The main factor in deciding whether an article constitutes personal effect is the nature of the article. no capital gains will arise on the sale of silver utensils.
Ramanathan Chettiar v. CIT 1985 Mad. , a large number of the same type of silver articles
Maharaja Rana Hemanth Singhji v. CIT (1976) 103 ITR 61 (SC)
Only those effects can be legitimately said to be personal which pertain to the assessee’s person. capital gains are taxable in the present case.
CIT v. Saroj Goenka 1983 140 ITR 88 Chen.
[Sec. 2(42A) & Sec. 2(29AA)]
Note:
Long Term Capital Asset
Note:
Explanations to Sec. 2(42A)
Types of Capital Gain:
Short Term Capital Gain [Sec. 2(42B)]:
Long Term Capital Gain [Sec. 2(29B)]:
Bharti Gupta Ramola v. CIT [2012] (Delhi)
TAX RATES ON CAPITAL GAINS
Short Term Capital Gains: regular income-tax except in the case covered under section 111A as below.
Tax on Short Term Capital Gains where STT is charged: [Sec. 111A]
a short term capital asset chargeable to Securities Transaction Tax (STT),
i tax @ 20% (15% if transferred before 23.07.2024) ii
[Amended by Finance (No. 2) Act, 2024 w.e.f. 23.07.2024]
Note: Provided Resident Individual or Resident HUF shall be reduced falls short of the maximum amount which is not chargeable to income-tax
Provided further also apply on transaction undertaken in an International Financial Services Centre (IFSC), even if STT is not paid
not be allowed
Tax on Long Term Capital Gains : [Sec. 112]
a) In case of a Resident Individual or Resident HUF: i tax @ 12.5% without indexation
[Amended by Finance (No. 2) Act, 2024] ii as reduced by
Provided Resident individual or Resident HUF shall be reduced falls short of the maximum amount which is not chargeable to income-tax
2nd Proviso to Sec. 112: [Inserted by Finance (No. 2) Act, 2024]
Resident Individual or HUF long term capital asset being Land or Building or both acquired before 23.07.2024
12.5% without indexation, 20% with indexation, excess tax shall be ignored.
Analysis:
(b) In case of a Domestic Company: i tax @ 12.5% without indexation on ( [Amended by Finance (No. 2) Act , 2024] ii
(c) In case of a Non-resident (not being a company) or a Foreign Company: i tax @12.5% without indexation
Note:
ii. tax @ 12.5% without indexation
[Amended by Finance (No. 2) Act, 2024] ii
In case of Resident Individual:
In case of Non-Resident Individual: other than Long Term Capital Gain
Tax will be computed as under:
STT has a equity share b a unit of an equity oriented mutual fund ULIP to which exemption u/s 10(10D) does not apply unit of a business trust the tax exceeding ` 1,25,000 shall be 12.5%.
[Amended by Finance (No. 2) Act, 2024]
Note: Aggregate limit of long term capital gains not taxable during the previous year shall not exceed ` 1,25,000.
Points to Note:
shall be reduced falls short of the maximum amount which is not chargeable to income-tax
The following are the transactions where benefit of Sec. 112A shall not be available, if STT was not paid at the time of acquisition: [Notification 60/2018, dated 01.10.2018] a other than acquisition of listed equity shares in a company:
a Explanation 1
other than the following acquisition of listed equity shares in a company made as per Securities Contracts Regulation Act, 1956, if applicable:
Practical Question: Mr. A (age 45)Mrs. B (age 62)Mr. C (age 81)Mr. D (age 82)
(i) If tax is paid as per default tax regime u/s 115BAC for the A.Y. 2026-27 Mr. A (age 45)Mrs. B (age 62)Mr. C (age 81)Mr. D (age 82)
Direct Tax Laws & International Taxation (DT)
– Study Material | A.Y. 2026-27 | May/Sept. 2026/Jan.2027 Exams
AUTHOR : RAVI CHHAWCHHARIA
PUBLISHER : TAXMANN
DATE OF PUBLICATION : OCTOBER 2025
EDITION : 9TH EDITION
ISBN NO : 9789364553100
NO. OF PAGES : 1140
BINDING TYPE : PAPERBACK
DESCRIPTION
Direct Tax Laws & International Taxation – Study Material is a comprehensive guide for CA Final – Group II | Paper 4, updated for Assessment Year 2026–27. This Edition provides complete coverage of the Income-tax Act 1961 and International Taxation, presented in a clear, analytical, and exam-oriented manner. The book blends theory, illustrations, and judicial interpretations to simplify complex tax concepts and strengthen conceptual understanding.
This book is primarily designed for CA Final students preparing for Paper 4 under the New Syllabus. It also serves as an invaluable reference for:
• CMA Final and CS Professional aspirants
• Law, Commerce, and Management Students
• Practitioners and Academicians
The Present Publication is the 9th Edition for the May/Sept. 2026 & Jan. 2027 Exams. This book is authored by CA. Ravi Chhawchharia, with the following noteworthy features:
• [Comprehensive Coverage] As per the latest ICAI syllabus for CA Final Paper 4
• [Analytical & Logical Approach] Concepts explained through reasoning, flowcharts, and examples
• [Balanced Language] Simple yet technically accurate explanations
• [Practice-oriented] Includes numerous solved and unsolved questions for self-assessment
• [Judicial Integration] Covers key case laws, circulars, and notifications
• [Multi-exam Utility] Also useful for CS, CMA, MBA, LL.B., and other exams
