Income from Capital Gains

Capital Asset Capital Asset is defined to include property of any kind, whether fixed

or circulating, movable or immoveable, tangible or intangible.

The following assets are however excluded from the definition of

Capital Assets:

Any stock in trade, consumable stores or raw materials held for the

purpose of business or profession.

Personal effects of the assessee, i.e. movable property including

wearing apparel and furniture held for his personal use (jewellery,

archeological collections, sculptures, drawings, paintings, etc. are

not considered as personal effects).

Rural Agricultural land.

Classification of Capital Gains

Short Term Capital Gains (STCG):

o Shares: Gain arising on the transfer of capital assets which are held

for a period of less than 12 months.

o Other than Shares: Gain arising on the transfer of capital assets

which are held for a period of less than 36 months.

Long Term Capital Gain (LTCG):

o Shares: Gain arising on the transfer of capital assets which are held

for a period of more than 12 months.

o Other than Shares: Gain arising on the transfer of capital assets

which are held for a period of more than 36 months.

Computation of STCG:

Particulars Rs. Rs.

Full value of Sale Consideration

Less: Selling Expenses

Net Consideration

Less: Cost of Acquisition

Cost of Improvement

Short Term Capital Gains -

XXXX

XXXX

XXXX

XXXX

XXXX

XXXX

XXXX

Computation of LTCG: Particulars Rs. Rs.

Full value of Sale Consideration

Less: Selling Expenses

Net Consideration

Less: Indexed Cost of Acquisition

Indexed Cost of Improvement

Long Term Capital Gains -

XXXX

XXXX

XXXX

XXXX

XXXX

XXXX

XXXX

Indexed Cost of Acquisition = Cost of Acquisition CII of 1981-82 or CII of the year in

which the asset was acquired (whichever is later)

CII of the year in which the asset was transferred

X

Cost of Acquisition of property purchased before 01/04/1981 Actual

Cost or Fair Market Value as on 01/04/1981, whichever is more.

Any costs incurred on improvement of the property prior to 01/04/1981

is to be ignored while computing the capital gains.

Exemptions

Sec 54 CG Arising from the transfer of Residential House Property

The following conditions have to be satisfied to claim the exemption

Only an individual or a HUF can claim exemption.

Exemption is available only if the capital asset which is transferred is a

residential house property irrespective of whether it is SOP or LOP.

The house property should be a long term capital asset.

To claim the exemption the assessee has to purchase a residential house

property (old or new) or construct a residential house property.

Time limit for purchase is 1 year before or 2 years after the date of

transfer.

Time limit for construction is 3 years from the date of transfer.

Sec 54D CG on Compulsory Acquisition of Land and Building forming part of Industrial

Undertaking

The following conditions have to be satisfied to claim exemption

The assessee may be any person.

The capital asset maybe short term or long term.

Such land and/or building was used by the assessee for the purpose of

industrial undertaking for at least 2 years preceding the date of

acquisition.

Assessee should purchase another land or building within 3 years and

use it for setting up or re-establishing an industrial undertaking.

Sec 54EC CG not to be charged on investment in certain bonds

Any long term capital asset is transferred during the P.Y.

Within 6 months from the date of transfer, the assessee should invest

the amount of capital gains in long term specified / notified bonds

eligible for investment u/s. 54EC.

These bonds have a compulsory lock-in period of 3 years.

Bonds are issued by

National Highway Authority of India (NHAI)

Rural Electrification Corporation of India (REC) and

National Bank for Agricultural and Rural Development (NABARD)

Sec 54F CG arising from transfer of Long Term Capital Asset other than

House Property Only an individual or a HUF can claim exemption.

To claim the exemption, the assessee will have to purchase residential

house property (old or new) or construct a residential house property.

Time limit for purchase is 1 year before or 2 years after the date of

transfer.

Time limit for construction is 3 years from the date of transfer.

This exemption is available only if on the date of transfer of the original

asset, the assessee does not own more than 1 residential house

property.

The amount of exemption is -

Cost of New House

Net Sale Consideration

Capital Gains X