5.capital gains

8/3/2019 5.Capital Gains

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Income Under the Head Capital

GainsAny Gain arising on a sale ortransferof a

capital assetis chargeable to tax under

section 45, if it is not eligible for exemption

under section 54,54B,54D,54EC,54ED,54F,

& 54G. Incidence of tax on capital

gains,however, depend upon whethercapital gain is ashort or long term capital

gain.


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What is a Capital Asset?

Any kind of property whether fixed, circulating,

movable or immovable, tangible or intangible is

included in capital asset

Exceptions are: Stock in trade

Personal effects.

(excluding jewellery)..

Rural Agri land

6.5% Gold bonds

1977.

special bearer bonds

gold deposit bonds,

1999.


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Capital gains exempt u/s 10

Any Capital gain on the transfer of US64 if

transfer takes place on or after 1-4-2002Any CG on compulsory acquisition of urban

agricultural land arising to any individual or HUF

LTCG on transfer of securities not chargeable

to tax in cases covered by Transaction Tax.


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TRANSFER

Transfer includes:

i) Sale, exchange or relinquishment of a

capital asset

ii) Extinguishments of any rights in a capital asset

iii) Compulsory acquisition of the capital asset

under any law

iv) Conversion of a capital asset into stock-in-trade

v) Part performance of a contract of sale

vi) Transfer of rights in immovable properties

through the medium of co-operative societies,

companies etc.


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vii)Transfer by a person to a firm or other

or Body ofa person to a AOP/BOI

viii) Distribution of capital assets on Dissolutionix) Distribution of money or other assets

by a Company on liquidation


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Transactions not regarded as

Transfer Distribution of capital assets on the total or partial ,

partition of a Hindu Undivided Family;

of a capital asset under a gift or will or an irrevocable trustexcept transfer under a gift or an irrevocable trust,

of shares, debentures or warrants allotted by a company to

its employees under Employees' Stock Option Plan or

Scheme; transfer of a capital asset by a company to its 100% Indian

subsidiary company, & vice versa


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in a scheme of amalgamation, transfer of a capital asset bythe amalgamating company to the amalgamated companyif the amalgamated company is an Indian company

transfer of shares of an Indian Company by anamalgamating foreign company to the amalgamatedforeign company,

in a demerger : transfer of a capital asset by the demerged

company to the resulting company, if the resultingcompany is an Indian company;

transfer of bonds or Global Depository Receipts, purchasedin foreign currency, by a non-resident to another non-resident outside India


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transfer of agricultural land in India effected before first of

March,'70.

transfer of any work of art, archeological, scientific or artcollection, book, manuscript,drawing, painting,

photograph or print, to the Government or a University or

the National Museum, National Art Gallery, National

Archives or any such other public museum or institution

notified by the Central Government in the Official Gazetteto be of national importance or to be of renown throughout

any State or States.


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Computation of Capital GainsShort term capital gains

Full value of consideration

Deduct

1. Cost ofacquisition

2. Cost ofimprovement

3. Expenditure incurred whollyand exclusively for suchtransfer

From resulting amt deduct exemptionsu/s 54B, 54D, &54G

Balance is STCG

Long term capital gains

Full value of consideration

Deduct

1. IndexedCost ofacquisition

2. IndexedCost ofimprovement

3. Expenditure incurred whollyand exclusively for such transfer

From resulting amt deduct exemptionsu/s 54, 54B, 54D, 54EC,54ED,54F &54G

Balance is LTCG


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LTCG.

Tax liability on LTCG to be taken at 20%.

If total income other than LTCG is less than zeroslab, LTCG over the zero slab only attracts tax at

20%.

No deduction u/s 80C-80U is not to be given for

tax on LTCG.


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Computation ofindexedCOAandCOI

*

Case 1Where capital asset is acquired by the assesse before 1- April

1981

CII of the yr in which

asset is trfd

FMV as on 1-4-1981 or

COA,whichever is more

CII of 1981-82


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Case 2

Where capital asset is acquired by the assesse on or after

April 1981in one of the modes referred u\s49(1) but it

was originally acquired by the previous owner before 1-4-1981FMV as on 1-4-1981 or COA,

to the previous owner

whichever is more

CII of 1981-82


asset is trfd*


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Case 3Where capital asset is acquired by the assesse before

April 1981in one of the modes referred u\s49(1) and the same

was originally acquired by the previous owner before 1-4-1981

FMV as on 1-4-1981 or COA

to the previous owner

whichever is more

CII of 1981-82


asset is trfd*


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Case 4Where capital asset is acquired by the assesse

in one of the modes referred u\s49(1) on or after1-4-1981

COA

CII for the yr in which

asset is acquired


asset is trfd*


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Case 5Where capital asset is acquired by the assesse

in one of the modes referred u\s49(1) on or after1-4-1981

COA

CII for the yr in which

asset is acquired


asset is trfd*


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Section 54

-Any LTCG arising to individual and HUF from the transferofResd.HP shall be exempted to the extent it is used for

purchase ofanother Resd HP within the period ofone yr

before or within two yrs after the date oftransfer or has

constructeda resd HP within aperiod of3 yrs after the date

oftransfer

-If the money is not spent before the lastdate of filing the

return of income, it must be deposited underCGaccount

Scheme with public sector bank.

-If this amt remains unutilised after the expiry of stipulatedperiod ,it shall be treatedas LTCG

-ifnew HP is transferred within a period of 3 yrs,New CG

along with old CG shall be chargeable to tax as STCG.


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Section 54B

-Any CG arising to individual from the transfer ofAgricultural land if it was used by the individual or his parents

for agricultural purposes during at least 2 yrs immediately prior

to transfer shall be exempted to the extent it is used for purchase

ofanother Agri landwithin the period oftwo yrs after the

date oftransfer




-If this amt remains unutilised after the expiry of stipulatedperiod ,it shall be treatedas LTCG

-ifnew Afri landis transferred within a period of 3 yrs,New

CG along with old CG shall be chargeable to tax as STCG.


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Section 54D

-Any CG arising to any person from the transfer ofLandandbuilding forming part ofindustrial undertaking which is

compulsory acquired by govtand which is usedduring two

yrs for industrial purposes prior to its acquisition shall be

exempted to the extent it is used for purchase ofLandand

building for industrial purposes within the period of3 yrs

after the date oftransfer



Scheme with public sector bank.-If this amt remains unutilised after the expiry of stipulated

period ,it shall be treatedas LTCG

-ifnew assetis transferred within a period of 3 yrs,New CG



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Section 54EC

-Any LTCG arising to any person from the transfer ofany LTcapital asset trfd after 31.3.2000 shall be exempted to the extent

it is investedin LT specifiedAssets within the period of6

months fromthe date oftransfer




-If this amt remains unutilised after the expiry of stipulated


-ifnew assetis transferred or convertedinto money or anyloan , advance is taken on security ofthese assets within a

period of3 yrs,New CG along with old CG shall be chargeable

to tax as LTCG.


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Section 54EC

LONG TERM SPECIFIED ASSET MEAN

Any bond redeemable after 3 yrs issued

1. On 1-4-2000 by NABARD or National

Highway Authority of India2. On or before 1-4-2001, by REC ltd

3. On or before 1-4-2002, by National Housing

Bank Or by SIDBI


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Section 54ED

-Any LTCG arising to any person from the transfer ofany LTcapital asset being units, listed shares or securities shall be

exempted to the extent it is investedin specifiedEquity Shares

within the period of6 months fromthe date oftransfer






-ifnew assetis transferred or convertedinto money or anyloan , advance is taken on security ofthese assets within a

period of1 yr,New CG along with old CG shall be chargeable

to tax as LTCG.


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Section 54F

-Any LTCG arising to individual and HUF from the transferofany LT capital asset (other than Resd HP)provided on the

date of transfer the taxpayer does not own more than one Resd

HP shall be exempted in proportion to the net consideration to

the extent it is used for purchase ofanother Resd HP within the

period ofone yr before or within two yrs after the date of

transfer or has constructeda resd HP within aperiod of3 yrs

after the date oftransfer


return of income, it must be deposited underCGaccountScheme with public sector bank.



-ifnew HP is transferred within a period of 3 yrs,New CG



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Section 54G

-Any CG arising to any person from the transfer ofLand,Building, plant or machinery in order to shiftan

industrial undertaking from urban areato rural area shall be

exempted to the extent it is used for purchase ofanother

Land,Building, plant or machinery in order to shiftan

industrial undertaking areato rural areawithin the period of

one yr before or within 3 yrs after the date oftransfer



Scheme with public sector bank.-If this amt remains unutilised after the expiry of stipulated


-ifnew assetis transferred within a period of 3 yrs,New CG



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Section 54GA

-Any CG arising to any person from the transfer of

Land,Building, plant or machinery in order to shiftanindustrial undertaking from urban areato SEZ shall be

exempted to the extent it is used for purchase ofanother

Land,Building, plant or machinery in order to shiftan

industrial undertaking areato SEZwithin the period ofone yr

before or within 3 yrs after the date oftransfer

5.capital gains

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