Cost with reference to certain modes of acquisition
[Section-73 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 73(1) of Income Tax Act 2025
73(1) In the case of a capital asset specified in column B of the Table below, the cost of acquisition of the asset shall be deemed to be the cost as mentioned in column C of the said Table.
Table
| Sl No. | Description of the capital asset | Cost of acquisition |
|---|---|---|
| A | B | C |
| 1 | If the capital asset became the property of the assessee–– under a gift or will; or by succession, inheritance or devolution; or on any distribution of assets on the liquidation of a company; or under a transfer to a revocable or an irrevocable trust; or being a Hindu undivided family, by the mode referred to in section 99(3) after the 31st December, 1969; or under any such transfer as is referred to in section 70(1)(a), (c), (d), (e), (g), (h), (i), (j), (l), (m), (n), (o), (t), (u), (v), (w), (zd), (ze) or (zf). | The cost for which the previous owner of the property acquired it, as increased by the cost of any improvement incurred or borne by the previous owner or the assessee |
| 2 | Capital asset, being a share or shares in an amalgamated company which is an Indian company that became the property of the assessee in consideration of a transfer referred to in section 70(1)(f). | The cost of acquisition to him of the share or the shares in the amalgamating company. |
| 3 | Capital asset being a share or debenture of a company, which became the property of the assessee in consideration of a transfer referred to in section 70(1)(z) or (za). | That part of the cost of debenture, debenture-stock, bond or deposit certificate for which such asset is acquired by the assesse. |
| 4 | Capital asset, being specified security or sweat equity shares, referred to in section 17(2). | Fair market value taken into account for the purposes of the said clause. |
| 5 | Capital asset, being rights of a partner referred to in section 42 of the Limited Liability Partnership Act, 2008 (6 of 2009), which became the property of the assessee on conversion as referred to in section 70(1)(ze). | The cost of acquisition of the share or shares in the company immediately before its conversion. |
| 6 | Capital asset, being share or shares of a company acquired by a non-resident assessee on redemption of Global Depository Receipts referred to in section 209(1) (Table: Sl. No. 2) held by such assessee. | The price of the said share or shares prevailing on any recognised stock exchange on the date on which a request for redemption was made. |
| 7 | Capital asset, being a unit of a business trust, which became the property of the assessee in consideration of a transfer as referred to in section 70(1)(zi). | The cost of acquisition of the share referred to in the said clause |
| 8 | Capital asset, being a unit or units in a consolidated scheme of a mutual fund, which became the property of the assessee in consideration of a transfer referred to in section 70(1)(zj) | The cost of acquisition of the unit or units in the consolidating scheme of the mutual fund. |
| 9 | Capital asset, being equity share of a company, which became the property of the assessee in consideration of a transfer referred to in section 70(1)(zb). | That part of the cost of the preference shares in relation to which such asset is acquired. |
| 10 | Capital asset, being a unit or units in a consolidated plan of a mutual fund scheme, which became the property of the assessee in consideration of a transfer referred to in section 70(1)(zk). | The cost of acquisition of the unit or units in the consolidating plan of the scheme of the mutual fund. |
| 11 | Capital asset being a unit or units in the segregated portfolio. | Computed as per the following formula:–– X = A x B / C, where,–– X = cost of acquisition of the unit or units in segregated portfolio; A = cost of acquisition of unit or units in the total portfolio; B = Net Asset Value of the asset transferred to the segregated portfolio; and C = Net Asset Value of the total portfolio immediately before segregation. |
| 12 | Capital asset being original units held by the unit holder in the main portfolio. | The cost of acquisition as reduced by the amount as so arrived at under serial number 11. |
| 13 | Capital asset, being shares as referred to in section 70(1)(zl) which became the property of the assessee. | The cost of acquisition to it of the interest in the joint venture referred to in the said clause. |
| 14 | Shares in the resulting company as a result of demerger. | Computed as per the following formula:–– X = A x B / C, where,–– X = cost of acquisition of shares in the resulting company; A = cost of acquisition of shares in demerged company; B = net book value of assets transferred in demerger; and C = net worth of demerged company immediately before demerger. |
| 15 | Original shares held by the shareholder in the demerged company. | As reduced by the amount so arrived at under serial number 14. |
| 16 | Capital asset deemed to be chargeable to tax according to the provisions of section 71(1). | Cost for which such asset was acquired by the transferee company. |
| 17 | Capital asset being property, where the capital gain arises from the transfer of such property the value of which has been subject to income-tax under section 92(2)(m). | The value taken into account under section 92(2)(m). |
| 18 | Capital asset declared under the Income Declaration Scheme, 2016, where the tax, surcharge and penalty have been paid as per the provisions of such Scheme on the fair market value as on the date of the commencement of that Scheme | The fair market value of the asset taken into account for the purposes of the said Scheme. |
| 19 | Specified capital asset referred to in clause (c) of the Explanation to section 10(37A) of the Income-tax Act, 1961 (43 of 1961), which has been transferred after the expiry of two years from the end of the tax year in which the possession of such asset was handed over to the assessee | The stamp duty value as on the last day of the second tax year after the end of the tax year in which the possession of the said specified capital asset was handed over to the assessee. |
| 20 | Capital asset, being share in the project, in the form of land or building, or both, under section 67(14). | The amount deemed as full value of consideration under section 67(14). |
| 21 | Capital asset, being the asset held by a trust or an institution in respect of which accreted income has been computed and tax paid thereon as per section 352. | The fair market value of the asset considered for computation of accreted income as on specified date as per section 352(3). |
| 22 | Capital asset referred to in section 26(2)(j). | The fair market value for section 26(2)(j). |
| 23 | Capital asset, being an Electronic Gold Receipt issued by a Vault Manager, which became the property of the person as consideration of a transfer, as referred to in section 70(1)(y). | The cost of gold for the person in whose name Electronic Gold Receipt is issued. |
| 24 | Capital asset being gold released against an Electronic Gold Receipt, which became the property of the person as consideration for a transfer as referred to in section 70(1)(y) | The cost of the Electronic Gold Receipt for such person. |
Section 73(2) of Income Tax Act 2025
73(2) For the purposes of the Table in sub-section (1), in respect of the entries against––
- (a) serial number 1, “previous owner of the property” for any capital asset owned by an assessee, means the last previous owner of the capital asset who acquired it by a mode of acquisition other than that referred to in column B thereof;
- (b) serial numbers 11 and 12, “main portfolio”, “segregated portfolio” and “total portfolio” shall have the same meanings as respectively assigned to them in the Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/160, dated the 28th December, 2018, issued by the Securities and Exchange Board of India;
- (c) serial numbers 14 and 15, “net worth” means the total of the paid-up share capital and general reserves as appearing in the books of account of the demerged company immediately before the demerger;
- (d) serial numbers 2, 14 and 15, the provisions as contained therein, shall, as far as may be, also apply in relation to business reorganisation of a co-operative bank as referred to in section 65.
FAQs on Section 73 of Income Tax Act 2025
1. What does Section 73(1) of the Income Tax Act, 2025, specify?
Section 73(1) specifies the cost of acquisition for certain capital assets under specific modes of acquisition, as listed in a detailed table.
2. When is Section 73 of the Income Tax Act, 2025, effective from?
Section 73 is effective from 1st April, 2026.
3. What is the cost of acquisition for assets acquired through gift, will, inheritance, or succession?
It is the cost for which the previous owner acquired the asset, increased by any improvement cost borne by the previous owner or the assessee.
4. What is considered the “previous owner” under Section 73(2)(a)?
The “previous owner” is the last person who acquired the asset through a mode other than the modes listed in Column B of the Table.
5. How is the cost determined for shares received during an amalgamation under Section 70(1)(f)?
It is the cost of acquisition of the shares in the amalgamating company.
6. How is the cost determined for shares or debentures received under Section 70(1)(z) or (za)?
It is that part of the cost of the original debenture, debenture-stock, bond, or deposit certificate relating to the new asset acquired.
7. What is the cost of acquisition for specified securities or sweat equity shares under Section 17(2)?
It is the fair market value considered for purposes of taxation under Section 17(2).
8. How is the cost determined for rights of a partner under Section 70(1)(ze)?
It is the cost of acquisition of the shares immediately before the conversion into an LLP.
9. What is the cost for shares acquired on redemption of Global Depository Receipts (GDRs)?
It is the price prevailing on a recognized stock exchange on the date of the redemption request.
10. How is the cost determined for units of a business trust acquired under Section 70(1)(zi)?
It is the cost of acquisition of the corresponding share referred to in the transfer.
11. How is the cost determined for units in a consolidated scheme of a mutual fund under Section 70(1)(zj)?
It is the cost of acquisition of the units in the original consolidating scheme.
12. How is the cost of acquisition computed for equity shares received under Section 70(1)(zb)?
It is the part of the cost of the preference shares relating to which the equity share is acquired.
13. What is the cost of acquisition for units in a consolidated plan of a mutual fund scheme under Section 70(1)(zk)?
It is the cost of acquisition of the units in the consolidating plan of the mutual fund scheme.
14. How is the cost determined for units in a segregated portfolio?
The cost is computed using the formula: X = A × B / C, where A is the cost of acquisition of the total portfolio, B is the NAV of the segregated asset, and C is the total NAV before segregation.
15. How is the cost determined for original units remaining in the main portfolio after segregation?
It is the original cost reduced by the amount allocated to the segregated portfolio under the formula at serial number 11.
16. What is the cost of acquisition for shares received under Section 70(1)(zl) involving joint ventures?
It is the cost of acquisition of the interest in the joint venture.
17. How is the cost determined for shares in a resulting company after a demerger?
It is computed using the formula: X = A × B / C, where A is the cost of shares in the demerged company, B is the net book value of transferred assets, and C is the net worth of the demerged company.
18. How is the cost adjusted for original shares in a demerged company?
The cost is the original acquisition cost reduced by the amount allocated to the resulting company under the demerger formula.
19. How is the cost determined for assets deemed chargeable under Section 71(1)?
It is the cost for which the asset was acquired by the transferee company.
20. How is the cost determined for property taxed under Section 92(2)(m) for transfer pricing?
It is the value taken into account under Section 92(2)(m).
21. What is the cost of acquisition for assets declared under the Income Declaration Scheme, 2016?
It is the fair market value considered for purposes of the scheme after tax, surcharge, and penalty are paid.
22. What is the cost of acquisition for specified capital assets referred to in Section 10(37A)?
It is the stamp duty value as of the last day of the second tax year after possession was handed over.
23. What is the cost of acquisition for shares received in exchange under Section 67(14)?
It is the amount deemed as full value of consideration under Section 67(14).
24. What is the cost of acquisition for assets of a trust/institution where accreted income is taxed under Section 352?
It is the fair market value considered for computing the accreted income.
25. What is the cost of acquisition for assets referred to in Section 26(2)(j)?
It is the fair market value as per Section 26(2)(j).
26. What is the cost of acquisition for an Electronic Gold Receipt (EGR) issued under Section 70(1)(y)?
It is the cost of the gold for the person to whom the EGR is issued.
27. What is the cost of acquisition for gold released against an Electronic Gold Receipt?
It is the cost of the EGR for such person.
28. What do “main portfolio,” “segregated portfolio,” and “total portfolio” mean in context of segregated mutual fund units?
They have the meanings assigned under SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2018/160 dated 28th December, 2018.
29. What does “net worth” mean in relation to demerger cases under serial numbers 14 and 15?
Net worth means the total paid-up share capital and general reserves of the demerged company immediately before the demerger.
30. Does Section 73 also apply to cooperative bank reorganizations?
Yes, the provisions relating to amalgamation and demerger under serial numbers 2, 14, and 15 also apply to business reorganisation of co-operative banks as referred to in Section 65.
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