Section 45(1) — Charging Section * Any profits or gains arising from the “transfer” of a “capital asset” effected in the previous year shall be chargeable to income-tax under the head “Capital gains” and shall be deemed to be the income of the previous year in which the transfer took place. * Notice these points: * There should be a Capital Asset * It should have been transferred * The gain will be taxable in the year in which the transfer took place.Section 2(14) — Meaning of Capital Asset * Property of any kind (moveable, immovable, tangible, intangible) held by the assessee, whether or not connected with his business or profession + However, the following shall not be treated as Capital Assets © Stock in Trade (Raw Material, Work in Progress, Finished Goods) * Personal Eflects, ¢, moveable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him © Rural Agncultural Land in India * 6%% Gold Bonds, 1977, 7% Gold Bonds, 1980, National Defence Gold Bonds, 1980, Special Bearer Bonds, 1991 ssued by the Central Governme * Gold Depost Bonds issued under Gold Deposit Scheme. 1999/Deposit Certificates sued under Gold Monetization Scheme, 2015/2018 natiied by the Central GovtSection (47) — Meaning of Transfer Transfer includes: + Sale of Capital Asset + Exchange of Capital Asset * Relinquishment of Capital Asset, or Extinguishment of Right in Capital Asset * Conversion of Capital Asset into Stock-in-Trade * Compulsory Acquisition of Capital Asset * Allowing possession of Immovable property * Transfer of Shares of any Co-Operative Society * Redemption of Zero-Coupon Bonds (ZCB)Section 48 — Computation of Capital Gains tn case of STCA In case of LTCA ] Particulars Ts Particulars Lk Full Value of Consideration (FVOC) 0a Full Value of Consideration (FOC) 100 Less: Transfer Expenses mx Less. Transfer Expenses vox Net Consideration ror _Net Consideration 1x Less: Cost of Acquisition (COA) won Less: Indexed Cost of Acquisition (ICOA) 10 Cost of Improvement (CO!) x0 Indexed Cost of Improvement (ICO!) xxx STCG 200K LIcG OK| The Concept of Index Numbers + Every year, the Gavernment of india announces what is known a3 @ Cost Inflation Index + ILis used to estimate the increase in the paces of assets year-by-year due to onflation * For example * Index Number for the PY 2001-02 1s 100 * Index Number for the PY 2002-03 is 105 * Index Number for the PY 2020-21 is 301 * Index Number tor the PY 2021-22 is 317 * and so on| The Concept of Index Numbers * In order to calculate the Capital Gains on Long Term Capital Assets, we need to subtract the indexed cost of acquisition and improvement. Index of the Year of Transfer Indexed COA = COA x Index of the Year of Purchase Index of the Year of Transfer indexed CON'm COl x Index of the Year of Purchase| The Concept of Index Numbers Zz 0102 08-05 07.08 10-13 14 16-17 Zz 02.03 05.06 31a2z 14.15 17.18 22 = 03-03 06.07 09-10 12.13 15-16 1819 21-22| The Concept of Index Numbers * if the asset is purchased before 01-04-2001, then, for the purpose of indexing. it’s original cost or FMV as on 01-04-2001 (whichever is higher) is taken. * If any improvement is done to the asset before 01-04-2001, then it is ignored for the purpose of indexingQuestion 1 Compute the capital gains for assessment year 2022-23 in the following case: Mr. NISH10, a property dealer, sells a commercial plot of land on 01-03-2022 for 2150 lakhs which was acquired by him on 01-08-2018 for %25,50,000 for selling offices constructed therein. He had incurred land development charges of %10,50,000 on 01-10-2018. He incurred 60,000 for selling the plot of land.Question 2 Compute the capital gains for assessment year 2022-23 in the following case: Mr. NISH10 sells his personal motorcar on 11-04-2021 for 24,55,000 which was acquired on 31-1-2018 for %7,50,000. The expenses on transfer are 2% of selling priceQuestion 3 Compute the capital gains for assessment year 2022-23 in the following case: Mr. NISH10 sells his personal residential house on 01-04-2022 for %96,70,000, which was acquired by him on 01-10-2008 for %30,00,000. The expenses on transfer were %50,000.Question 4 Compute the capital gains for assessment year 2022-23 in the following case: Mr, NISH10 sells an agricultural land situated in rural area on 01- 01-2022 for %11,50,000. The population of municipality under which the village is covered is 9,800. The land was acquired on 01-03-2002 for %1,50,000.Question 5 Compute the capital gains for assessment year 2022-23 in the following case: Mrs. Priya sells her gold bracelet on 01-05-2021 for %7,00,000, which was acquired for 850,000 on 01-03-2005. A diamond was fitted onto that bracelet on 01-04-2007 for 820,000.70.200 Less: Indewed Cost of Acquisition (moa Sows Xt Wy Sndexed Cont of improvement wat Xonog< V7 masa (Ban — SagaQuestion 6 NISH10 owns a capital asset which was purchased by him on 01-05- 1999 for %5,00,000. The market value of the said asset as on 01-04- 2001 was %3,00,000. The said asset was sold for %20,00,000 on 30-01- 2022. Expense incurred on transfer amounted to %5,000. Compute capital gain for AY. 2022-23 (Cost inflation index for FY. 2001-02 = 100 and 2021-22 = 317)Question 7 NISH10 owns shares of unlisted company which was purchased by him on 15-10-2021 for %5,00,000. The said asset was sold for %6,80,000 on 30-01-2022. Expense incurred on transfer amounted to %5,000. Compute the capital gain for the assessment year 2022-23.Question 8 NISH10 owns shares of unlisted company which was purchased by him on 15-10-2016 for %5,00,000. The said asset was sold for %6,75,000 on 30-01-2022. Expense incurred on transfer amounted to %5,000. Compute the capital gain for the assessment year 2022-23. (Cost inflation index for FY. 2016-17 = 264 and 2021-22 = 317)Computation of | Gain of NISH1O for A.Y. 2022-23 : £ "30,00,000 _ 600 19,95,000 ‘585000 Long Term Capital Gain __ 410,000Soco £,75,000 390900 75200ic D E F G oH L ‘Computation of Capital Gain of NISHIO for A.Y. 2022-23 | 2 Particulars 7 |__%. 3. Full Value of Consideration 615,000 4 Less: Transfer Expenses 5,900 S_ Net Consideration €,23,900, 6 Less: Indexed Cost of Acquisition 600.378, Z| Fooovex 37 Iw 9 Long Term Capital Gain Gaal 0! 2Question 10 NISH10 owns a capital asset which was purchased by him on 01-05- 1989 for %5,00,000. The fair market value as on 01-04-2001 is %18,00,000. The said asset was sold for %1,00,00,000 during financial year 2021-22. Expense incurred on transfer amounted to 215,000. Compute the capital gain for the assessment year 2022-23. (Cost inflation index for FY. 2001-02 = 100 and 2021-22 = 317) ‘Section 42(2): Conversion of Capital Asset into Stock in Trade * As per Section 45(1), any profits or gains arising from the “transfer” of a “capital asset” effected in the previous year shall be chargeable to income-tax under the head "Capital gains” and shall be deemed to be the “income of the previous year in which the transfer took place”. * However, if a capital asset is converted into Stock-in-trade, then “transfer” takes place in the year of conversion, but capital gain is taxed in the year in which such stock is sold.Question 15 NISH10 converts his capital asset (acquired on May 10, 2002 for 90,000) into stock-in-trade on February 10, 2021. The fair market value on the date of the above conversion was %6,50,000. He subsequently sells the stock-in-trade so converted for %9,00,000 on August 10, 2021. Discuss the year of chargeability of Capital Gain.Section 42(2): Conversion of Capital Asset into Stock in Trade Capital Gain PGBP. Particulars © Particulars © FVOC [FMV as on Date of Conversion) xx_—‘Sale value of Stock 10 Less: Transfer Expenses max | Less: FMV as on date of conversion 0 Net Consideration mx PGBP 1 Less: COA/ICOA wx Less: COICO! max ST/LICG = xxx