CAPITAL GAIN

 Gain on transfers of capital assets is capital gain.

 Transfer includes sale or exchange or compulsory acquisition,
etc.
 All assets are capital in nature except the following:
1. Agriculture land in rural area
2. Personal movable effects of the assessee (except Jewellery,
art work etc.)
3. Stock in trade
4. Special bearer bonds, gold bonds and Defense bond
 Types of capital assets
1. Long Term Capital Assets : (shares and securities held for
more than 1 year, unlisted shares, Land and Building held for
more than 2 years and other capital assets held for more than 3
year before they are sold)
 2. Short Term Capital Assets: (shares and securities held for
less than 1 year and other capital assets held for less than 3
years before they are sold)
 Long term capital gains are taxed at a flat rate of 20 percent
and are eligible for indexing i.e. calculating the present value of
the assets calculated on the basis of Cost Inflation Index (CII)
 Indexing is not applicable on Bonds and debentures even if
they are long term
 Short term capital gains are taxed as per the slab rates
applicable and are not eligible for indexing
 Computation of Long Term Capital Gains
Particulars Amount
Gross Consideration (sale price) xxx
Less: Transfers expenses (selling xxx
expenses) xxx
 Net Consideration xxx
Less: Indexed Cost of Acquisition xxx xxx
Indexed Cost of Improvement xxx
Long Term Capital Gains xxx
Exemption u/s 54, 54B, 54D, 54EC etc xxx
Taxable Long Term Capital Gains
 Cost of Acquisition:
Acquired before 1-4- Acquired on or Gifted or inherited
2001 after 1-4-2001 property
COA = Higher of the COA = Original COA = COA to the
following: Original Cost previous owner
Cost or Fair Market
Value as on 1-4-2001
 Indexed Cost of Acquisition:
Acquired before 1-4- Acquired on or Gifted or inherited
2001 after 1-4-2001 property
ICOA = COA ICOA = COA ICOA = COA ×
×(317÷100) ×(317÷ purchase (317÷ gifted year
year CII) CII)
 Cost of Improvement:
Improved before 1-4-2001 Improved after 1-4-2001
COI = Nil (ignore the COI = Actual cost of
expenditure) improvement (capital
expenditure)
 Indexed Cost of Improvement:
Improved before 1-4-2001 Improved after 1-4-2001
 ICOI = Nil ICOI = COI × (317 ÷
Improvement year CII)
Note: Cost of Improvement before 1-4-2001 should be ignored
and FMV after 1-4-2001 should be ignored (except in cases like
conversion of capital asset into stock etc.)

 Computation of Short Term Capital Gain

Particulars Amount
Gross consideration xxx
Less: Transfer expense xxx
xxx
Net consideration xxx
Less: Cost of Acquisition & Cost of Improvement xxx
Short Term Capital Gain xxx
 Less: Exemptions xxx
Taxable STCG xxx

 Depreciable Assets [always treated as Short term capital assets]

Particulars Amount
Gross consideration xxx
Less: Transfer expenses xxx
xxx
Net consideration xxx
Less: Written Down Value xxx
Short Term Capital Gain

 Exemption u/s 54
Asset New Asset Exemption Amount Minimum
Transferred acquired lock in
period
Long Term Residential Least of the following:
Residential House (i) Long Term Capital 3 years
House property Gain
property purchased or or
constructed (ii) Cost of new asset
including amount
deposited under Capital
Gain Account Scheme of
public sector bank
  Exemption u/s 54 B
Asset New Asset Exemption Amount Minimum
Transferred acquired lock in
period
Long term Agricultural Least of the
or short Land in following: 3 years
term rural or (i) Long Term Capital
Agricultura urban area Gain
l Land in or
urban area (ii) Cost of new asset
including amount
deposited under
Capital Gain Account
Scheme of public
sector bank
  Exemption u/s 54 D
Asset New Asset Exemption Amount Minimum
Transferred acquired lock in
period
Long term Land and Least of the following:
or short Building (i) Long Term Capital Gain 3 years
term for or
compulsory industrial (ii) Cost of new asset including
acquisition purpose amount deposited under Capital
of land and Gain Account Scheme of public
building sector bank
used for
industrial
undertakin
g

 Exemption u/s 54 EC
Asset New Asset Exemption Amount Minimum
Transferred acquired lock in
period
Long term Investment Least of the following:
Land or in (i) Long Term Capital Gain 5 years
Building or specified or
both assets (ii) Actual amount invested
(bonds) or
(iii) Rs.50,00,000
  Exemption u/s 54 F
Asset New Exemption Amount Mini
Transferred Asset mum
acquire lock
d in
perio
d
Long term Residen
Any capital tial = Capital Gain × Cost of the new 3
asset other house house/ years
than Net Consideration
residential Note: maximum deduction cannot
house exceed LTCG

 Transfer of Long term securities in a recognized stock

exchange, (where securities transaction tax is paid) is exempted
upto Rs.1,00,000
 Cost of Bonus shares received before 1.4.2001 is the Fair
Market Value as on 1-4-2001 and cost of bonus shares received
after 1.4.2001 will be nil