PREPARED BY:

ABHISHEK KAPOOR
MOHIT MEHTA
An increase in the value of a capital asset (investment or real estate) that gives it
a higher worth than the purchase price.

The gain is not realized until the asset is sold.

A capital gain may be short term (one year or less) or long term (more than one
year) and must be claimed on income taxes.

A capital loss is incurred when there is a decrease in the capital asset value
compared to an asset's purchase price.

Profit that results when the price of a security held by a mutual fund rises above
its purchase price and the security is sold (realized gain).

If the security continues to be held, the gain is unrealized. A capital loss would
occur when the opposite takes place.


The loss incurred when a capital asset (investment or real estate)
decreases in value.

This loss is not realized until the asset is sold for a price that is
lower than the original purchase price.

A capital loss is essentially the difference between the
purchase price and the price at which the asset is sold, where the
sale price is lower than the purchase price.

For example, if an investor bought a house for $250,000 and sold the
house five years later for $200,000, the investor would realize a
capital loss of $50,000.


Almost everything you own and use for personal purposes, pleasure or
investment is a capital asset.

When you sell a capital asset, the difference between the amount you sell it
for and your basis which is usually what you paid for it is a capital gain or
a capital loss.

You must report all capital gains.

You may deduct capital losses only on investment property, not on property
held for personal use.

Capital gains and losses are classified as long-term or short-term,
depending on how long you hold the property before you sell it. If you hold it
more than one year, your capital gain or loss is long-term. If you hold it one
year or less, your capital gain or loss is short-term.

If you have long-term gains in excess of your long-term losses, you have
a net capital gain to the extent your net long-term capital gain is more
than your net short-term capital loss, if any.

The tax rates that apply to net capital gain are generally lower than the
tax rates that apply to other income. For 2010, the maximum capital
gains rate for most people is 15%.

For lower-income individuals, the rate may be 0% on some or all of the
net capital gain. Special types of net capital gain can be taxed at 25% or
28%.

If your capital losses exceed your capital gains, the excess can be
deducted on your tax return and used to reduce other income, such as
wages, up to an annual limit of $3,000, or $1,500 if you are married filing
separately.



CAPITAL
GAIN
LONG
TERM
SHARES
>12 Months
PROPERTY
>36 Months
SHORT
TERM
SHARES
<12 Months
PROPERTY
<36 Months
Capital assets

Transfer of capital assets

Computation of capital gain

It means property of any kind held by an
assesses whether connected with his business,
profession or not.

It may be moveable or immovable, tangible
or intangible, fixed or floating etc.

It includes such as goodwill, leasehold right,
jewellery, manufacturing license etc.


Sale
Relinquishment of the assets
Exchange
Extinguishment of any right in an asset
Conversion of asset into sock-in-trade by the
owner
Maturity or redemption of a zero coupon bond


Short-term capital gain [sec.2(42B)]

STCG = Purchase Value - Current Asset
Value

Long-term capital gain [sec.2(29)B]]

LTCG = Purchase Value - Current Asset
Value

Sales consideration
Less:-selling expenses
Net sale consideration
Consideration
Less:-cost of acquisition
cost of improvement
Short-term Capital Gain

Less:- limited exemptions
Taxable STCG
Sales consideration
Less:-selling expenses
Net sale consideration

Less:-indexed cost of acquisition
indexed cost of improvement
long term capital gain

Less:- All exemptions
Taxable LTCG

Tax on short term capital gain

Tax on long term capital gain
It means transfer of shares on which security transaction tax
has been charged [sec111(A)]
Applicable to
All assessee
Condition to be satisfied
STCA being an equity share in a company or a unit of an equity
oriented fund.
Transaction is chargeable to Security transaction tax.
Tax Rate
STCG shall be taxed @15%+surcharge+education cess including
SHEC.

It means share on which transaction tax has been charged
[sec.10(38)].
Applicable to
All assesssee
Condition to be satisfied
Any income arising from the transfer of a LTCA, being an equity
share in a company or a unit of an equity oriented fund.
Transaction is chargeable to Security transaction tax.
Tax Rate
LTCG arising on transfer of Zero coupon bonds shall be calculated
@10%+surcharge+education cess+SHEC without indexation.


Section
Applicable to
Conditions


Time limit
for
acquisition of
new assets
Deduction

Revocation
of benefit
54 B
Individual or Huf
Assessee must have transferred a capital asset being an
agriculture land. Agriculture land must have been used by the
individual or his parents for agriculture purpose for at least 2 yr.
prior to its transfer.

With in 2 years after the date of transfer.

Investment in the new assets or Capital gain.

If the newly acquired residential house is transferred with in 3
years from the date of acquisition of new assets, then the benefit
availed earlier shall be revoked. Revoked income shall be
reduced from cost of acquisition of new assets.

Section
Applicable to
Conditions

Time limit
for
acquisition of
new assets
Deduction

Revocation
of benefit
54 EC
All assessee
Assessee must have transferred any long-term capital asset.
It acquires long-term specified assets.

Within 6 months after the date of transfer.

Investment in the new assets or capital gain.

Earlier benefit shall be revoked in such bond each transferred
or converted into money within 3 year of its acquisition or a
loan is taken security of the new asset within the said period.
Revoked income shall be reduced from cost of acquisition of
new assets.


Section
Applicable
Conditions


Time limit


Deduction

Revocation
of benefit
54F
Individual or Huf
Assessee must have transferred a long-term capital asset other than a
residential house property. It must acquire a one residential house
within prescribed time limit. It doesnt purchase, within 2yrs, or
construct, within 3yrs of transfer of the original asset
For purchase within a period of 1yr. before, or 2 year after, the date of
transfer.
For construction with in a period of 3 years after the date of transfer.
Investment in the new assets*Capital gain/net sale consideration
Capital gain [net sale consideration=sale consideration exp.on
transfer
If the newly acquired residential house is transferred with in 3 years
after the date of acquisition ,benefit availed earlier shall be revoked.
Another residential house is purchased by the assessee within 2 yr. or
constructed within 3 yrs.after the date of transfer of original asset.
Mrs. S acquired land on 1/4/77 for Rs.10,000. the fair
market value as on 1/4/81 was Rs. 12,500. As on
1/4/2008, she sold such land for Rs. 1,40,000.
Brokerage @1% of sale value was paid by her.
Compute capital gain of Mrs. Ritika for the A.Y.
2009-10.
CII- 2008-09=582
1981-82=100

Working notes:-
Expenses on transfer:-1% of Rs.1,40,000
Indexed cost of acquisition:-Rs.12,500*582/100

PARTICULARS
DETAILS AMOUNT
Sale consideration 1,40,000
Less:-Expenses on transfer 1,400
Net sale consideration 1,38,600
Less:-indexed cost of acquisition 72,750
indexed cost of improvement NIL 72,750
LONG TERM CAPITAL GAIN
(65,850)
Buy a new property
To get the exemption, you need to purchase the new residential
house within a period of one year prior to or two years after
transfer of the original house

As far as under-construction house goes, the construction needs
to be completed within three years from the date of transfer of the
original house
Open a CGAS
You can deposit the capital gains amount in a CGAS before the
due date of filing tax returns (July 31) to save LTCG tax.
The amount has to be parked in CGAS with the intention to use
the funds to buy a new house within two years or to construct one
within three years.
If you fail to buy or construct a new house within the stipulated
period, the entire amount is treated as LTCG and you will have to
pay tax on it.
For instance, let's say, you sold a property in April 2010. The
capital gain made should be used to either buy a house by April
2012 or construct a house by 2013. Until then, you can deposit the
money in a CGAS account before the date of filing returns, which
in this case was be July 31 2011, to save tax.
If you do not acquire the new property till April 2013, the LTCG
would be taxable in the fiscal year 2013-14.

Invest in 54 EC bonds
But what if you don't want to buy a property at all with the LTCG amount?

You can still get tax exemption, but you will have to invest the amount in specific
bonds that fall under section 54EC of the Income-tax Act. These bonds are issued
only by the National Highways Authority of India and Rural Electric Corporation Ltd.

To get the tax benefit, you have to hold these bonds for at least three years. Keep
in mind that as per the said section, capital gains have to be invested in the bonds
and the benefit is allowed to the extent of the amount invested. Therefore, if you've
made LTCG of, say, R30 lakh and have invested it in one of these bonds, the
amount will be exempt from tax. But if you invest only a part, say, R10 lakh, you will
get an exemption only on that part and will have to pay LTCG tax on the remaining
R20 lakh

You can invest a minimum of Rs. 10,000 and a maximum of Rs. 50 lakh. The face
value is Rs. 10,000 per bond and you can buy up to 500 bonds.

The bond is available for three years and can be redeemed only after three years.
They come with a coupon rate of 6%, payable annually.


Donations for charity come under section 80 G of the Income Tax Act, 1961.


This section has classified charity funds under various heads, each of which give the
donor a different kind of tax rebate


The contributions for charity fall under two broad categories :-

A) Those where the total sum donated is deductible from the assesse's gross income. These donations would be
more beneficial to you, in case you wish to donate for charity.

B) Those where only 50% of the amount donated will be deducted from total income.

According to the section 80 G these funds where 100% of the amount donated can be deducted are :-
The Prime Minister's National Relief Fund.
The Prime Minister's Armenia Earthquake Relief Fund.
The Africa (Public Contributions-India) Fund.
The National Foundation for Communal Harmony.
A University or any educational institution of national eminence as maybe approved by the prescribed authority.
Please note that the prescribed authority in the case of a university or non-technical institution. Of national
eminence is Director-General (Income-Tax exemption) in concurrence with the Secretary, University Grants
Commission. In the case of any technical institution of national eminence the prescribed authority is the Director
General (Income-Tax Exemption) in concurrence with the Secretary, All India Council of Technical Education.
The Maharashtra Chief Minister's Earthquake Relief Fund.
Any Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district for the
purpose of improvement of primary education in villages and towns in such a district and for literacy and post
literacy activities.
The national Blood Transfusion Council or any State Blood Transfusion council whose sole objective is the control,
supervision, regulation or encouragement in India of the services related to operation and requirements of blood
banks.
Any fund set up by a State Government to provide medical relief to the poor.
The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund
established by the armed forces of the Union for the welfare of the past and present members of such forces or
their dependants.
The Andhra Pradesh Chief Minister's Cyclone Relief Fund, 1996.
The National Illness Assistance Fund.
The Chief Minister's Relief Fund or the Lieutenant Governor's Relief Fund in any State or Union Territory.
The Government, or any local authority, institution or association as maybe approved by the Central Government
for the purpose of promoting family planning.

The funds under which donations will qualify for deductions only upto
50% of the amount donated are :-
The National Defence Fund set up by the Central Government.
The Jawaharlal Nehru Memorial Fund.
The Prime Minister's Drought Relief Fund.
The Indira Gandhi Memorial Trust.
The Rajiv Gandhi Foundation.
The National Sports Fund to be set up by the Central Government.
The National Cultural Fund.
The fund for Technology Development and Application set up by the
Central Government.