32. Shifting base year from 1981 to 2001 for computation of capital gains.
32.1 Before amendment by the Act, the provisions of section 55 of the Income-tax Act provided that for computation of capital gains, an assessee shall be allowed deduction for cost of acquisition of the asset and also cost of improvement, if any. However, for computing capital gains in respect of an asset acquired before 01.04.1981, the assessee had been allowed an option of either to take the fair market value of the asset as on 01.04.1981 or the actual cost of the asset as cost of acquisition. The assessee was also allowed to claim deduction for cost of improvement incurred after 01.04.1981, if any.
32.2 In order to remove the genuine difficulties in computing the capital gains in respect of transfer of a capital asset, especially immovable property acquired before 01.04.1981, due to non-availability of relevant information for computation of fair market value of such asset as on 01.04.1981, section 55 of the Income-tax Act has been amended so as to provide that the cost of acquisition of an asset acquired before 01.04.2001 shall be allowed to be taken as fair market value as on 1st April, 2001 and the cost of improvement shall include only those capital expenses which are incurred after 01.04.2001.
32.3 Consequently, section 48 of the Income-tax Act has also been amended so as to align the provision relating to cost inflation index to the revised base year.
32.4 Applicability: These amendments take effect from 1st April, 2018 and will, accordingly, apply from assessment year 2018-19 and subsequent years.