Section 76 — Special provision for computation of capital gains in case of Market Linked Debenture. Successor to s.50AA of the 1961 Act.
Section 76 is in Chapter IV — Computation of Total Income, which runs from section 13 to section 95.
Sub-section (1) overrides both section 2(101) (the short-term holding period definition) and section 72, and treats the gain on transfer, redemption or maturity of the assets listed in sub-section (2) as short-term capital gains however long they were held. Sub-section (2) lists those assets: a unit of a Specified Mutual Fund acquired on or after 1 April 2023 or a Market Linked Debenture; and an unlisted bond or unlisted debenture transferred, redeemed or maturing on or after 23 July 2024. Sub-section (3) gives the computation as a formula, X = A − B − C, being full value of consideration less cost of acquisition less expenditure wholly and exclusively incurred in connection with the transfer, redemption or maturity. Sub-section (4) denies any deduction for securities transaction tax paid under Chapter VII of the Finance (No. 2) Act, 2004. Sub-section (5) defines "Market Linked Debenture" and "Specified Mutual Fund", the latter turning on a 65% investment test measured on the annual average of daily closing figures.
These instruments give a debt-like or market-linked return but were capable of being held long enough to attract the long-term regime; the section removes that possibility by deeming the gain short-term regardless of holding period. The cut-off dates confine the treatment to acquisitions and events after the dates Parliament chose.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Acquisition date from which a Specified Mutual Fund unit is caught | 1 April 2023 | The unit must have been acquired on or after this date; the date of transfer is irrelevant for this limb | Sub-section (2)(a) |
| Date from which an unlisted bond or debenture is caught | 23 July 2024 | The bond or debenture must be transferred, redeemed or mature on or after this date; acquisition date is irrelevant for this limb | Sub-section (2)(b) |
| Investment test for a Specified Mutual Fund | More than 65% of total proceeds | In debt and money market instruments; or a fund investing 65% or more of total proceeds in units of such a Mutual Fund. Measured with reference to the annual average of the daily closing figures | Sub-section (5)(b) |
Holding period does not help with these assets — the gain is short-term whenever the transfer, redemption or maturity occurs, and no indexation or long-term treatment under section 72 is available. Compute the gain by the sub-section (3) formula only: consideration, less cost, less transfer expenditure, with no deduction for securities transaction tax. The two limbs of sub-section (2) test different dates, so check acquisition date for Specified Mutual Fund units and the transfer, redemption or maturity date for unlisted bonds and debentures.
An individual buys a Market Linked Debenture for Rs. 10 lakh and holds it to maturity four years later, receiving Rs. 13.5 lakh and paying Rs. 20,000 of charges on redemption. Holding period does not help: sub-section (1) overrides both section 2(101) and section 72, so the whole of X = Rs. 13.5 lakh less Rs. 10 lakh less Rs. 20,000, that is Rs. 3.3 lakh, is short-term capital gain. The same result follows for an unlisted debenture bought years earlier if it is redeemed or matures on or after 23 July 2024, that being the trigger date for the sub-section (2)(b) limb — while for a Specified Mutual Fund unit the date that matters is acquisition on or after 1 April 2023. Any securities transaction tax paid is not deductible in arriving at the Rs. 3.3 lakh, sub-section (4) shutting that out expressly.
In the capital gains schedule of the return, where the gain has to be reported as short-term whatever the holding period, and in the redemption or maturity statement from the issuer or broker that supplies the consideration and cost. A dispute usually reaches the taxpayer as an assessment recharacterising a gain he had claimed as long-term.
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
See the full 1961 to 2025 concordance.