Section 76 — Special provision for computation of capital gains in case of Market Linked Debenture
Old Act equivalent: Section 50AA of IT Act 1961 Sub-part: E.—Capital gains
Statutory Text
(1) Irrespective of anything contained in section 2(101) or section 72, the gains on the transfer or redemption or maturity, of a capital asset as mentioned in sub-section (2) shall be treated as short-term capital gains and shall be computed as per sub-section (3). (2) For the purposes of sub-section (1), the capital asset shall be— (a) a unit of a Specified Mutual Fund acquired on or after the 1st April, 2023 or a Market Linked Debenture; or (b) an unlisted bond or an unlisted debenture which is transferred or redeemed or matures on or after the 23rd July, 2024. (3) For the purposes of sub-section (1), the short-term capital gains shall be computed as per the following formula:— X = A – B – C, where,— X = short-term capital gains; A = full value of consideration received or accruing as a result of the transfer or redemption or maturity of the debenture or unit or bond; C = the expenditure incurred wholly and exclusively in connection with such transfer or redemption or maturity. (4) In computing capital gains under sub-section (3), no deduction shall be allowed for any sum paid as securities transaction tax as per Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004). (5) For the purposes of this section,— (a) “Market Linked Debenture” means a security, by whatever name called, which has an underlying principal component in the form of a debt security and where the returns are linked to market returns on other underlying securities or indices, and include any security classified or regulated as a market linked debenture by the Securities and Exchange Board of India; (b) “Specified Mutual Fund” means a Mutual Fund, by whatever name called, which invests more than 65% of its total proceeds in debt and money market instruments or a fund which invests 65% or more of its total proceeds in units of such Mutual Fund, subject to the following:— (i) the percentage of investment in debt and money market instruments or in units of a fund shall be computed with reference to the annual average of the daily closing figures; (ii) “debt and money market instruments” shall include any securities, by whatever name called, classified or regulated as debt and money market instruments by the Securities and Exchange Board of India. Special provision for computation of capital gains in case of slump sale.
Sub-sections
Sub-section (1)
Irrespective of anything contained in section 2(101) or section 72, the gains on the transfer or redemption or maturity, of a capital asset as mentioned in sub-section (2) shall be treated as short-term capital gains and shall be computed as per sub-section (3).
Sub-section (2)
For the purposes of sub-section (1), the capital asset shall be— (a) a unit of a Specified Mutual Fund acquired on or after the 1st April, 2023 or a Market Linked Debenture; or (b) an unlisted bond or an unlisted debenture which is transferred or redeemed or matures on or after the 23rd July, 2024.
Sub-section (3)
For the purposes of sub-section (1), the short-term capital gains shall be computed as per the following formula:— X = A – B – C, where,— X = short-term capital gains; A = full value of consideration received or accruing as a result of the transfer or redemption or maturity of the debenture or unit or bond; C = the expenditure incurred wholly and exclusively in connection with such transfer or redemption or maturity.
Sub-section (4)
In computing capital gains under sub-section (3), no deduction shall be allowed for any sum paid as securities transaction tax as per Chapter VII of the Finance (No. 2) Act, 2004 (23 of 2004).
Sub-section (5)
For the purposes of this section,— (a) “Market Linked Debenture” means a security, by whatever name called, which has an underlying principal component in the form of a debt security and where the returns are linked to market returns on other underlying securities or indices, and include any security classified or regulated as a market linked debenture by the Securities and Exchange Board of India; (b) “Specified Mutual Fund” means a Mutual Fund, by whatever name called, which invests more than 65% of its total proceeds in debt and money market instruments or a fund which invests 65% or more of its total proceeds in units of such Mutual Fund, subject to the following:— (i) the percentage of investment in debt and money market instruments or in units of a fund shall be computed with reference to the annual average of the daily closing figures; (ii) “debt and money market instruments” shall include any securities, by whatever name called, classified or regulated as debt and money market instruments by the Securities and Exchange Board of India. Special provision for computation of capital gains in case of slump sale.
Provisos
None.
Explanations
None.
Tables
Table 1:
B = the cost of acquisition of the debenture or unit or bond; and
Key Structure
- Applies to: All assessees transferring, redeeming, or holding to maturity the specified capital assets.
- Asset type: Three categories: (a) units of a Specified Mutual Fund acquired on or after 1st April, 2023, or Market Linked Debentures; (b) unlisted bonds or unlisted debentures transferred, redeemed, or maturing on or after 23rd July, 2024. “Market Linked Debenture” means a security with an underlying principal component in the form of debt where returns are linked to market returns on other securities or indices, including any security classified as MLD by SEBI. “Specified Mutual Fund” means a fund investing more than 65% of total proceeds in debt and money market instruments (computed on annual average of daily closing figures).
- Conditions: Gains on transfer, redemption, or maturity are always treated as short-term capital gains, computed as: X = A - B - C, where A = full value of consideration, B = cost of acquisition, C = expenditure wholly and exclusively in connection with transfer/redemption/maturity.
- Time limits: Specified Mutual Fund units: acquired on or after 1st April, 2023; unlisted bonds/debentures: transferred, redeemed, or maturing on or after 23rd July, 2024.
- Monetary limits: Specified Mutual Fund threshold: more than 65% of total proceeds invested in debt and money market instruments.
- Exceptions: Overrides section 2(101) (short-term/long-term classification) and section 72 (normal computation mode); no deduction allowed for securities transaction tax paid under Chapter VII of Finance (No. 2) Act, 2004.
Cross-References
- s072-computation — section 72 expressly overridden for computation of gains on MLDs, specified mutual fund units, and unlisted bonds/debentures.
- Section 2(101) (not yet ingested) — definition of short-term capital asset, expressly overridden by sub-section (1).
Amendment Notes
None noted from the extracted pages.