Capital Gains Tax — Income Tax Act, 2025
Section 90: Calculation of Cost of Purchase of Capital Assets under the Income Tax Act, 2025
Everything you need to know about cost of acquisition and cost of improvement under Section 90 of the Income Tax Act, 2025.
CA Sagar Batra
Practising Chartered Accountant — Capital Gains Tax Specialist
CA Sagar Batra is a practising Chartered Accountant with deep expertise in Indian capital gains tax, business restructuring, and the Income Tax Act, 2025. The guidance in this blog is authored and verified by CA Sagar Batra, ensuring accuracy for Indian taxpayers dealing with Section 90 cost computations — from ancestral property to listed shares to business goodwill.
Section 90 — Income Tax Act, 2025
Introduction: What is Section 90 of the Income Tax Act, 2025 — and Why Does It Matter?
Section 90 of the Income Tax Act, 2025 is the primary legal provision that defines cost of acquisition and cost of improvement for capital assets. It is the direct and reorganised successor to Section 55 of the Income-tax Act, 1961 — rewritten for clarity and updated for the new tax framework.
Capital gains tax often turns on one core question: what is your cost of acquisition? If that cost is taken incorrectly, the final tax figure can change sharply — in either direction. That is why Section 90 and the calculation of cost of purchase of capital assets is so critical for every Indian taxpayer selling property, shares, or business assets.
When you sell a capital asset, the taxable gain is broadly: Sale Price − Cost of Acquisition − Cost of Improvement − Transfer Expenses. Section 90 governs exactly what amounts are allowed as cost in each situation.
Key 2025 Act change: The term "Assessment Year" is replaced by "Tax Year" throughout the Income Tax Act, 2025. Tax Year refers to the financial year in which income is earned and assessed — not the following year as under the old 1961 Act. Always adjust your reading when comparing old and new provisions.
Section 90 and the cost of acquisition rules under the Income Tax Act, 2025 are especially important for:
- Taxpayers selling land, buildings, shares, or business assets
- Business owners transferring goodwill, trademarks, or rights
- Finance teams handling mergers, conversions, and share restructuring events
- Families dealing with inherited, gifted, or ancestral property
- Investors computing capital gains on listed equity and mutual fund units
Old Law vs New Law
Section 55 (Income-tax Act, 1961) vs Section 90 (Income Tax Act, 2025) — Detailed Comparison
Many tax professionals and taxpayers are familiar with Section 55 of the 1961 Act. The Easy Return Team has prepared this detailed comparison to help you map old references to the new law correctly — critical for filing accurate capital gains returns.
Comparative Table: Section 55 (Old) vs Section 90 (New, 2025 Act)
| Particulars | Section 55 — Income-tax Act, 1961 | Section 90 — Income Tax Act, 2025 |
|---|---|---|
| Core subject | Cost of acquisition & improvement for capital gains | Same — reorganised and clarified under new structure |
| Year reference | Assessment Year (income in Year 1 assessed in Year 2) | Tax Year (income earned and assessed in same year) |
| Section numbering | Section 55, old sequence | Section 90, new 2025 codification |
| Intangible assets | Nil cost / nil improvement for goodwill, business rights etc. | Same treatment continues under Clause 90(3) |
| Gift / will / inheritance | Previous owner's cost via Section 49 + Section 55 | Previous owner's purchase price via Section 73 + Clause 90(3) |
| Pre-1 April 2001 option | FMV as on 1 April 2001 or actual cost (land/building capped at stamp duty value) | Same FMV option retained — stamp duty value cap continues |
| Pre-1 Feb 2018 shares (grandfathering) | Higher of actual cost and lower of FMV / sale price | Same grandfathering protection under Section 90 |
| Goodwill depreciation adjustment | Purchase price reduced by depreciation claimed (retrospective) | Specifically codified — reduce by depreciation claimed before 1 Apr 2020 |
| Rights / bonus shares | Nil-cost rules for bonus; renouncee logic in separate rules | Same rules — clarified clauses for each scenario |
| Local applicability | Income-tax Act, 1961 with amendments | Income Tax Act, 2025 — latest framework for Indian taxpayers |
Easy Return Team note: When citing provisions in your ITR or responding to a tax notice, always use Section 90 of the Income Tax Act, 2025 — not the old Section 55. Incorrect section references can create unnecessary complications in assessments.
Core Provision
Clause 90(3): The Most Important Sub-Section for Cost of Acquisition of Capital Assets
If you remember only one sub-section of Section 90 related to the calculation of cost of purchase of capital assets, remember Clause 90(3). This is the foundational rule for computing cost of acquisition for specified capital assets under the Income Tax Act, 2025.
Assets covered by Clause 90(3)
- Goodwill of a business or profession
- Trade mark or brand name associated with a business or profession
- Any other intangible asset
- Right to manufacture, produce, or process any article or thing
- Right to carry on any business or profession
- Tenancy rights, stage carriage permits, loom hours
- Any other similar right
The three-bucket approach under Clause 90(3)
Under Clause 90(3), the cost of acquisition of any specified capital asset falls into one of three categories — what the Easy Return Team calls the "three-bucket approach":
Purchase Price
You directly bought the asset — cost = actual amount paid for purchase
Previous Owner's Cost
Asset came through covered transfer mode AND the previous owner had purchased it
Deemed Nil
Neither of the above applies — cost is legally deemed to be ₹0
Warning: Many taxpayers estimate or fabricate a cost figure for intangible assets that fall in Bucket 3. If the law deems cost as nil, inserting any other figure is a tax error and can result in scrutiny, additions, and penalties. Always verify with the Easy Return Team before filing.
Key Distinction
Intangible vs Tangible Capital Assets Under Section 90 — Complete Comparison
One of the most important distinctions under Section 90 of the Income Tax Act, 2025 is between intangible assets (goodwill, trademarks, tenancy rights, etc.) and tangible assets (land, building, plant, machinery). The rules for cost of acquisition and cost of improvement differ significantly between the two categories.
Section 90: Intangible vs Tangible Asset Rules
| Feature | Intangible Assets | Tangible Assets |
|---|---|---|
| Examples | Goodwill, trademark, brand name, tenancy rights, manufacturing rights | Land, building, plant, machinery, other physical property |
| Cost of acquisition rule | Clause 90(3): purchase price / previous owner's purchase price / nil | Actual purchase price; FMV on 1 April 2001 if held before that date |
| Cost of improvement | Nil — even if substantial money was spent on enhancement | Capital expenditure incurred after asset became property |
| Pre-1 April 2001 FMV option | Not applicable in the same manner | Available — compare actual cost vs FMV; choose higher |
| Stamp duty value cap | Not applicable | Applies for land/building when using FMV on 1 April 2001 |
| Self-generated / arising without purchase | Cost = nil (falls in Bucket 3 of Clause 90(3)) | Actual capital expenditure may form cost |
| Inherited/gifted asset | Previous owner's purchase price if applicable; else nil | Previous owner's cost; FMV on 1 April 2001 option available |
| Double-deduction restriction | Cost of improvement always nil — no question of double deduction | Expenditure claimed under other income heads cannot be reclaimed as cost of improvement |
Inheritance & Gift
Calculating Cost of Acquisition for Inherited, Gifted, and Ancestral Property Under Section 90
One of the most common and costly misunderstandings in capital gains tax is assuming that property received as a gift, will, or inheritance has zero cost. Under Section 90 read with Section 73 of the Income Tax Act, 2025, the previous owner's cost principle applies in most such cases — and the allowable cost can be significantly higher than taxpayers expect.
Section 90: Cost of Acquisition When Asset Is Received by Gift, Will, or Inheritance
| Mode of Receipt | Asset Type | Applicable Cost for Capital Gains |
|---|---|---|
| Will / inheritance | Land or building (held before 2001) | Previous owner's cost OR FMV on 1 April 2001 (capped at stamp duty value) — whichever is beneficial |
| Gift from parent / relative | Listed equity shares | Previous owner's actual purchase price (with pre-Feb 2018 grandfathering if applicable) |
| Gift from parent / relative | Trademark / goodwill | Previous owner's purchase price if they purchased it; otherwise nil |
| Inheritance | Tenancy rights (not purchased by previous owner) | Nil — previous owner did not purchase, so Clause 90(3) Bucket 3 applies |
| Family settlement / partition | Property held pre-2001 | Previous owner's cost or FMV on 1 April 2001 as applicable and beneficial |
| Previous owner's cost unknown | Any asset | Fair market value on the date property became property of the previous owner |
Easy Return Team tip: Always trace the complete ownership chain before computing cost in inheritance or gift cases. The legally allowable cost base is often significantly higher than the date-of-receipt market value, reducing your capital gains tax substantially. Our experts can help reconstruct historical cost data from old records.
Old Asset Relief
Fair Market Value as on 1 April 2001 — When It Applies and How to Calculate It
Section 90 of the Income Tax Act, 2025 continues the important relief available for old assets through the FMV as on 1 April 2001 option. This provision is one of the most powerful tools available to taxpayers selling pre-2001 property to reduce capital gains tax legally.
1 April 2001 FMV Option — Quick Reference Under Section 90
| Condition | Rule under Section 90 |
|---|---|
| Asset acquired / held before 1 April 2001 | Taxpayer may choose: actual cost of acquisition OR FMV as on 1 April 2001 |
| Asset is land or building or both | FMV as on 1 April 2001 cannot exceed the stamp duty value on that date (where available) |
| Asset is an intangible asset | 1 April 2001 FMV option not available in the same way as for tangible assets |
| Asset received from previous owner who held it before 1 April 2001 | Same FMV option may apply — trace back to the previous owner's holding position |
| FMV as on 1 April 2001 exceeds sale price | Cost is restricted to sale price — no artificial loss can be created using FMV |
Worked Example — Pre-2001 Inherited Land
Father bought plot in 1995 for ₹2,00,000. You inherit and sell in Tax Year 2025–26 for ₹45,00,000. FMV on 1 April 2001: ₹8,00,000. Stamp duty value on 1 April 2001: ₹7,00,000.
| Option | Cost Taken (₹) | Capital Gain (₹) | Better for Taxpayer? |
|---|---|---|---|
| Actual cost (1995) | 2,00,000 | 43,00,000 | No |
| FMV on 1 Apr 2001 (without cap) | 8,00,000 | 37,00,000 | Not allowed — exceeds stamp duty value |
| FMV on 1 Apr 2001 (capped at stamp duty value) | 7,00,000 | 38,00,000 | Yes — best legal option |
Equity Shares
Pre-1 February 2018 Shares — Grandfathering Under Section 90 of the Income Tax Act, 2025
Section 90 continues the grandfathering protection for equity shares of listed companies, equity-oriented fund units, and business trust units acquired before 1 February 2018. This rule ensures that gains that had already accrued before the re-introduction of long-term capital gains tax on listed shares are protected.
Grandfathering Formula — Cost of Acquisition for Pre-1 Feb 2018 Listed Assets
| Component | What It Is |
|---|---|
| A — Actual cost of acquisition | Your original purchase price per share |
| B — FMV as on 31 January 2018 | Highest quoted price on a recognised stock exchange on 31 January 2018; if no trading that day, nearest earlier trading date |
| C — Full value of consideration | Actual sale price per share |
| Step 1: Lower of B and C | min(FMV on 31 Jan 2018, Sale Price) |
| Cost of acquisition | Higher of A and (lower of B and C) → max(A, min(B, C)) |
Worked Example — Grandfathering of Listed Shares
Bought listed shares in 2016 at ₹100/share. FMV on 31 Jan 2018: ₹160. Sold in FY 2025–26 at ₹150/share.
| Step | Amount (₹ per share) |
|---|---|
| Actual cost (A) | 100 |
| FMV on 31 Jan 2018 (B) | 160 |
| Sale price (C) | 150 |
| Lower of B and C → min(160, 150) | 150 |
| Cost = Higher of A and 150 | ₹150 |
| Capital Gain per share | ₹150 − ₹150 = ₹0 (no taxable gain) |
Financial Assets
Rights Issues, Bonus Shares, and Renunciation — Cost of Acquisition Rules Under Section 90
Section 90 contains detailed and specific rules for capital assets received because you hold another financial asset — including rights issues, bonus allotments, and renunciation scenarios. These rules are frequently misunderstood, and the Easy Return Team frequently helps clients correct errors in these computations.
Section 90: Cost of Acquisition for Rights, Bonus, and Renunciation Events
| Situation | Person Involved | Cost of Acquisition Under Section 90 |
|---|---|---|
| Original financial asset (shares bought at IPO or market) | Original investor | Amount actually paid for acquisition |
| Right to subscribe (rights entitlement received) | Existing shareholder | Nil — right arose from holding, not by purchase |
| Subscribed to rights issue (paid company directly) | Existing shareholder | Amount actually paid to the company |
| Right renounced in favour of another person | Renouncer (original shareholder) | Nil — right arose from holding |
| Asset bought by renouncee (paid original holder + company) | Renouncee (new buyer) | Amount paid to the renouncer + amount paid to the company |
| Bonus shares allotted without payment | Existing shareholder | Nil — no consideration paid |
| Additional financial assets allotted free of charge | Existing holder | Nil — no consideration paid |
Worked Example — Rights Issue and Renunciation
You hold 1,000 shares. Company announces a rights issue. You renounce your entitlement to Mr. X for ₹20,000. Mr. X pays the company ₹50,000 to get shares allotted.
| Party | Transaction | Cost of Acquisition | Capital Gain / Tax Impact |
|---|---|---|---|
| You (renouncer) | Received ₹20,000 for rights entitlement | ₹0 (nil cost — right arose from holding) | ₹20,000 fully taxable as capital gain |
| Mr. X (renouncee) | Paid ₹20,000 + ₹50,000 = ₹70,000 | ₹70,000 (total of both payments) | Cost base for future sale = ₹70,000 |
Business Asset
Goodwill Depreciation Adjustment Under Section 90 — Critical Compliance Point
Goodwill has a special additional rule under Section 90 of the Income Tax Act, 2025. If your capital asset is goodwill of a business or profession and depreciation was claimed on it under the old Income-tax Act, 1961 before the Tax Year beginning 1 April 2020, the purchase price must be reduced accordingly to arrive at the correct cost of acquisition.
Goodwill Cost Adjustment Formula — Section 90
| Step | Amount |
|---|---|
| Purchase price of goodwill (original) | ₹X |
| Less: Total depreciation claimed before Tax Year beginning 1 April 2020 | (₹Y) |
| Adjusted cost of acquisition under Section 90 | ₹X − ₹Y (minimum: ₹0) |
Worked Example — Goodwill Depreciation Adjustment
Business purchased goodwill for ₹12,00,000 in FY 2015–16. Depreciation of ₹4,00,000 claimed before April 2020. Goodwill sold for ₹20,00,000 in Tax Year 2025–26.
| Item | Amount (₹) |
|---|---|
| Purchase price of goodwill | 12,00,000 |
| Less: Depreciation claimed before 1 April 2020 | 4,00,000 |
| Adjusted cost of acquisition | 8,00,000 |
| Sale consideration | 20,00,000 |
| Capital Gain (before exemptions) | 12,00,000 |
Easy Return Team alert: Many businesses overlook old depreciation records when computing goodwill cost under Section 90. This is one of the most common errors that gets flagged in tax assessments. Our team can help reconstruct your complete depreciation history and compute the correct adjusted cost.
Tax Calculation
Complete Capital Gains Income and Tax Calculation — End-to-End Examples
The Easy Return Team presents three complete worked examples showing full income calculation and tax computation using Section 90 cost rules — from property to bonus shares to inherited assets.
Example A: Sale of Inherited Land — Long-Term Capital Gain (with Indexation)
Father bought land in 1990 for ₹3,00,000. You inherit and sell in FY 2025–26 for ₹60,00,000. FMV on 1 April 2001: ₹9,00,000. Stamp duty value on 1 April 2001: ₹8,50,000.
| Step | Particulars | Amount (₹) |
|---|---|---|
| 1 | Sale consideration | 60,00,000 |
| 2 | Cost of acquisition (FMV on 1 April 2001, capped at stamp duty value) | 8,50,000 |
| 3 | Indexed cost (CII FY 2025–26 / CII FY 2001–02 = 363/100 = 3.63) → ₹8,50,000 × 3.63 | 30,85,500 |
| 4 | Cost of improvement (capital expenditure on renovation, if any — say ₹2,00,000 indexed) | 2,00,000 |
| 5 | Transfer expenses (brokerage, registration etc.) | 50,000 |
| 6 | Long-Term Capital Gain (LTCG) | 26,64,500 |
| 7 | LTCG tax @ 20% (with indexation, land/building) | 5,32,900 |
| 8 | 4% Health and Education Cess on tax | 21,316 |
| 9 | Total tax payable (approximate) | 5,54,216 |
Example B: Sale of Bonus Shares — Short-Term Capital Gain
Received 500 bonus shares in July 2024. Sold them in February 2025 at ₹200 per share. STT paid on sale.
| Step | Particulars | Amount (₹) |
|---|---|---|
| 1 | Sale consideration (500 × ₹200) | 1,00,000 |
| 2 | Cost of acquisition (bonus shares — nil under Section 90) | 0 |
| 3 | Cost of improvement | 0 |
| 4 | Short-Term Capital Gain (STCG) | 1,00,000 |
| 5 | STCG tax on listed shares @ 20% (STT paid) | 20,000 |
| 6 | 4% Cess | 800 |
| 7 | Total tax payable | 20,800 |
Example C: Sale of Purchased Trademark — Capital Gains on Intangible Asset
Founder purchased trademark for ₹5,00,000 in FY 2019–20. Sold in Tax Year 2025–26 for ₹30,00,000. Held for more than 36 months.
| Step | Particulars | Amount (₹) |
|---|---|---|
| 1 | Sale consideration | 30,00,000 |
| 2 | Cost of acquisition (Clause 90(3) — purchased, so purchase price applies) | 5,00,000 |
| 3 | Cost of improvement (intangible asset — nil under Section 90) | 0 |
| 4 | Transfer expenses | 25,000 |
| 5 | Long-Term Capital Gain | 24,75,000 |
| 6 | LTCG tax | As per applicable rate (Consult Easy Return) |
Quick Tool
Quick Capital Gains Estimator — Section 90 Cost Rules
Use this quick estimator to get an indicative capital gain figure under Section 90. For accurate, compliant ITR filing, always use the Easy Return Team's expert CA review.
Capital Gain Estimator
* Indicative only. Does not account for indexation, surcharge, specific exemptions (54, 54EC, 54F), set-off of losses, or other provisions. Contact Easy Return Team for accurate computation and compliant ITR filing.
Get Expert CA Review — ₹1,100/- →Corporate Events
Special Cases: Liquidation, Share Subdivision, Consolidation, and Conversion
Section 90 of the Income Tax Act, 2025 also provides specific cost rules for capital assets arising from various corporate events. The Easy Return Team regularly handles these computations for business clients.
Section 90: Cost of Acquisition in Corporate and Restructuring Events
| Event | How Cost of Acquisition Is Determined |
|---|---|
| Asset received on company liquidation | FMV on the date of distribution (where assessee has been taxed in the prescribed manner) |
| Share subdivision (stock split) | Original aggregate cost spread proportionally over all new shares (total cost unchanged) |
| Share consolidation (reverse split) | Aggregate cost of original shares forms cost of consolidated shares |
| Conversion of shares into stock | Cost derived with reference to original share cost |
| Reconversion of stock into shares | Cost derived from original stock cost |
| Conversion of preference shares to equity | Cost derived from original preference share cost |
Example — Share Subdivision (Stock Split)
100 shares bought for ₹1,00,000
(₹1,000 per share)
1,000 shares now held
Total cost remains ₹1,00,000
Cost per new share: ₹1,00,000 ÷ 1,000 = ₹100 per share
*Holding period of original shares continues for new shares.
Nil Cost Cases
When Is Cost of Acquisition Nil Under Section 90? — Complete Summary
The deemed nil cost rule under Section 90 catches many taxpayers off guard. The Easy Return Team has compiled all nil-cost situations in one place.
All Nil-Cost Situations Under Section 90 — Income Tax Act, 2025
| Asset / Situation | Why Cost Is Nil Under Section 90 | Tax Impact |
|---|---|---|
| Bonus shares allotted without payment | No consideration paid by shareholder | Entire sale price becomes taxable capital gain |
| Right to renounce — in the renouncer's hands | Right arose from existing shareholding, not by purchase | Entire renunciation amount is capital gain |
| Additional financial assets allotted free of charge | No consideration paid by holder | Full sale value is capital gain |
| Self-generated goodwill / intangible not purchased | Clause 90(3): no purchase + no previous owner purchase = nil | Full sale price is capital gain |
| Tenancy rights not acquired by purchase | Falls in Bucket 3 of Clause 90(3) | Full sale price is capital gain |
| Trading/clearing rights in demutualisation | Specific provision — nil cost prescribed | Full consideration is capital gain |
| Manufacturing/business rights arising without purchase | Clause 90(3) — no purchase mode applies | Full consideration taxable |
Critical warning from Easy Return Team: When cost is nil, the entire sale price becomes your capital gain. This can result in very high tax liability. If you are selling any of the above assets, contact Easy Return Team before the transaction — advance planning can sometimes help you structure the transaction or avail eligible exemptions to reduce the tax impact legally.
How-To Guide
Step-by-Step: How to Apply Section 90 Cost of Acquisition Rules in Your Case
The Easy Return Team recommends this six-step approach for every capital gains computation under Section 90 of the Income Tax Act, 2025:
Identify the asset type and category
Is it a tangible asset (land, building, shares) or an intangible (goodwill, trademark, tenancy rights, manufacturing rights)? This determines which cost rules apply.
Determine the mode of acquisition
Did you purchase it? Inherit it? Receive it as a gift, bonus allotment, or rights issue? The mode directly determines which of the three Clause 90(3) buckets applies.
Apply the Clause 90(3) three-bucket test for intangibles
Purchase → purchase price. Covered transfer mode + previous owner purchased → previous owner's purchase price. Neither → nil. Do not guess or estimate.
Check the 1 April 2001 FMV option for old assets
If the asset (or the previous owner) held it before 1 April 2001, compare actual cost vs FMV on that date. Select the more beneficial option, subject to the stamp duty cap for land/building.
Apply all applicable special rules
Pre-Feb 2018 shares grandfathering, goodwill depreciation adjustment, bonus shares nil cost, renouncee cost formula, share split proportional cost — check each one that could apply to your case.
Compute capital gain and applicable tax
Sale consideration minus allowable costs. Apply correct tax rate (STCG or LTCG), indexation where eligible, and check all available exemptions under applicable provisions. File accurate ITR with Easy Return Team.
Avoid These Errors
8 Common Capital Gains Mistakes That Cost Taxpayers Money — and How Easy Return Team Fixes Them
These are the most frequent Section 90 errors the Easy Return Team sees in capital gains tax returns. Each one can result in incorrect tax, penalties, or unwanted scrutiny notices.
Common Section 90 Errors and Correct Approach
| # | Common Mistake | Correct Approach Under Section 90 |
|---|---|---|
| 1 | Using market value on date of inheritance as cost of acquisition | Use previous owner's cost or FMV on 1 April 2001 (with stamp duty cap) as applicable |
| 2 | Inserting an estimated figure for self-generated intangibles | Cost is nil by law under Clause 90(3) — no figure can be inserted |
| 3 | Missing the 1 April 2001 FMV option for old assets | Always evaluate — it often significantly reduces taxable gain for pre-2001 property |
| 4 | Overstating FMV for land/building beyond stamp duty value | FMV must be capped at stamp duty value on 1 April 2001 where available |
| 5 | Ignoring goodwill depreciation adjustment | Reduce purchase price by all depreciation claimed on goodwill before 1 April 2020 |
| 6 | Treating bonus shares as having a purchase cost | Bonus shares allotted without payment have nil cost of acquisition under Section 90 |
| 7 | Claiming cost of improvement for intangible assets | Cost of improvement for all specified intangible assets is nil — no deduction allowed |
| 8 | Citing old Section 55 instead of Section 90 in returns | Always reference Section 90 of the Income Tax Act, 2025 in all ITR filings and communications |
Connected Provisions
Provisions Related to Section 90 — Income Tax Act, 2025
| Provision | Relevance to Section 90 Capital Gains Computation |
|---|---|
| Section 73 — Modes of acquisition | Defines which transfers activate the "previous owner's cost" rule under Clause 90(3) |
| Capital gains computation provisions (2025 Act) | Section 90 allowable costs feed directly into these capital gain calculation sections |
| Cost Inflation Index (CII) notifications | Applied to eligible cost of acquisition for indexation on long-term assets |
| Exemption provisions (Section 54 equivalents) | Capital gain computed using Section 90 costs qualifies for reinvestment exemptions |
| TDS on property sale | Buyer deducts TDS on consideration; seller uses Section 90 cost to compute actual net gain |
| Stamp duty valuation provisions | Used to cap FMV on 1 April 2001 for land/building; also deemed sale consideration in certain cases |
| Registered valuer provisions | FMV certificates from registered valuers required for substantiating 1 April 2001 FMV claims |
FAQs
Frequently Asked Questions on Section 90 — Income Tax Act, 2025
Is Section 90 of the Income Tax Act, 2025 the same as old Section 90 about DTAA?
No. Under the Income Tax Act, 2025, Section 90 specifically governs the calculation of cost of acquisition and cost of improvement for capital gains computation. DTAA relief is addressed under a different provision. Always verify the statute year before citing any section number — the same number can mean different things under the 1961 Act vs the 2025 Act.
What is the difference between "Tax Year" and "Assessment Year"?
Under the Income-tax Act, 1961, income earned in one financial year was "assessed" in the next year, called the Assessment Year. Under the Income Tax Act, 2025, the term Assessment Year is replaced by "Tax Year" — which now refers to the same financial year in which income is earned and assessed. This affects form filings, deadlines, and how you reference old records and case law.
Can cost of acquisition under Section 90 ever be negative or below zero?
No. The adjusted cost of acquisition cannot fall below nil. In the goodwill depreciation adjustment case, even after subtracting all depreciation claimed, the minimum cost is zero — it cannot go negative.
Can I add renovation costs to improve my house to the cost of improvement?
Capital expenditure incurred after the asset became your property may be eligible as cost of improvement for tangible assets like buildings. However, any amount already claimed as a deduction under "Income from house property" or any other head cannot again be claimed as cost of improvement — the law prevents double benefit.
Which ITR form must I use for reporting capital gains computed under Section 90?
Capital gains must typically be reported in ITR-2 (individuals and HUFs with capital gains but no business income) or ITR-3 (individuals and HUFs with business/profession income plus capital gains). The Easy Return Team can identify the correct form based on your complete income profile for the Tax Year.
What documents do I need to prove cost of acquisition under Section 90?
Purchase deeds or agreements, share certificates and demat statements, old ITRs of the previous owner (for inheritance cases), stamp duty valuation documents for pre-2001 assets, depreciation schedules for goodwill, FMV certificate from a registered valuer where applicable, and sale/transfer agreements. The Easy Return Team helps clients assemble complete documentation before filing.
How does Easy Return Team help with Section 90 capital gains filing?
Easy Return Team provides end-to-end support: identifying the correct cost of acquisition under Section 90, evaluating the 1 April 2001 FMV option for old assets, applying grandfathering for pre-Feb 2018 shares, adjusting goodwill cost for past depreciation, computing the final capital gain, identifying available exemptions, and filing the accurate ITR — all for a flat fee of ₹1,100/-.
Why Choose Us
Why Trust Easy Return Team for Your Section 90 Capital Gains ITR Filing?
Deep working knowledge of Section 90 of the Income Tax Act, 2025 — including all Clause 90(3) nuances and special cases
Accurate cost of acquisition computation for land, listed shares, business goodwill, inherited assets, trademark, and rights
Optimises your allowable cost base legally — FMV elections on 1 April 2001, grandfathering for pre-2018 shares, and indexation benefits
Handles complex capital gains scenarios: business restructuring, family settlements, pre-2001 ancestral property, and share events
Government-authorised CA-backed platform with full compliance track record
Transparent, all-inclusive flat fee of ₹1,100/- — no hidden charges, no surprises
Expert CA discussion before and after filing — all your queries answered
Complete documentation support and representation in case of tax notices
Ready to file?
File Your Capital Gains ITR Accurately — Starting at ₹1,100/-
Don't let Section 90 cost computation errors increase your tax liability or trigger notices. The Easy Return Team handles your complete capital gains ITR filing — land, shares, goodwill, inherited assets, and more — with full CA expert review.
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Professional Disclaimer
This blog is a general educational guide for understanding Section 90: Calculation of Cost of Purchase of Capital Assets under the Income Tax Act, 2025. It is authored and reviewed for accuracy, but it is not a substitute for professional legal or tax advice. Tax outcomes depend on the exact facts, complete document trail, asset type, transfer mode, and the interaction of multiple related provisions.
Before filing a return, planning a sale, or taking any tax position on capital gains, verify the applicable treatment with a qualified Chartered Accountant or legal adviser. The Easy Return Team is available to provide expert, personalised guidance for your specific capital gains situation.
Tax laws in India are subject to annual amendments, CBDT notifications, and judicial interpretations. Readers are strongly encouraged to verify the legal position applicable in their specific Tax Year before making any financial or compliance decisions.