What is Cost of Acquisition in Income Tax?

The

cost of acquisition definition income tax act

refers to the amount spent by an individual or entity to acquire a capital asset, such as real estate, stocks, or other investments.

It is used to calculate the capital gains tax liability when the asset is sold or transferred. Here are some key points related to the Cost of Acquisition income tax:

• For assets through purchase, it is the actual purchase price paid for the asset. It includes the actual cost of the asset, any additional expenses, and any renovations made to the asset.

• In the case of inherited assets, it is considered to be the fair market value of the asset as of the date of inheritance or the original cost to the previous owner, whichever is higher.

• If an asset is received as a gift, it is the same as the cost to the previous owner.

• In the case of long-term capital assets (assets held for more than 24 months), taxpayers can adjust the Cost of Acquisition for inflation using the Cost Inflation Index (CII). It helps in reducing the capital gains tax liability.

This is all about the

cost of acquisition definition income tax act

.

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Hi, Buddy,

Do you want to know, what is cost of acquisition in income tax? Let me assist you with this.

The term "cost of acquisition" refers to any capital expense incurred at the time of acquiring the capital asset under transfer, including the purchase price, expenses incurred before the acquisition date in the form of registration, storage, and other expenses, as well as expenses incurred after the transfer is completed.

The indexed cost of purchase is determined by the country's inflation rate. Simply put, the cost of acquisition is the cost of purchasing a property. If you keep the property for more than three years, you can calculate the cost using the inflation rate. The Cost Inflation Index, or CII, is used to calculate the acquisition cost.

• When you sell a home, you either make a profit or lose money. You can index the cost of a property that is a long-term capital asset for the selling year if it is a long-term capital asset.

• When Capital Gains are not charged on a capital asset transfer between a subsidiary and a holding company or vice versa, but the requirements are later breached and Capital Gains are levied, the cost of acquisition to the transferee firm is the cost at which the asset was purchased.

• The cost of acquisition is the purchase price paid by the assessee when the capital asset is the goodwill of a business or a Trade Mark or Brand Name associated with a business, right to manufacture, produce, or process any article or thing, right to carry on any business, tenancy rights, stage carriage permits, or loom hours, and it is nil if no such purchase price is paid.

I hope this answer suffices for your query about what is cost of acquisition in income tax.

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