CAPITAL GAIN

SACHIN(3243)
ROHIT(3242)
 WHAT IS CAPITAL GAIN??


ANY PROFIT OR GAIN ARISING FROM



THE TRANSFER OF CAPITAL ASSET.



Ø Profits or gains arising from the transfer of a

capital asset made in a previous year is
taxable as capital gains .



 CHARGEABLITY


 The important ingredients for capital gains are,

therefore
• existence of a capital asset,
• transfer of such capital asset, and
• profits or gains that arise from such transfer.
 Capital Asset
Ø Capital asset means property of any kind held
by the assessee, except the following :
• consumable stores or raw-materials.
• Agricultural land in India.
• Gold deposit bonds.
• Personal effects like wearing apparel,
furniture, motor vehicles etc
•
•
 Types of Capital Assets
Short term Capital Assets
 Long term Capital Assets


• The asset held by the

assessee for not more
• The asset hold by
than 36 months. the assessee for
• Exceptions : more than 36
i. Equity or
preferenc months
e shares
ii.Securities
like
debentur
es, govt.
securities
.
 Transfer
Includes:-


• Sale, exchange or relinquishment of a capital

asset.
• Extinguishment of any rights in a capital asset.
• Compulsory acquisition of the capital asset.
• Transfer of rights in immovable properties
 COMPUTATION(of gain)
 Depends upon the nature of the gain
i.e. short term or long term.
 Method:-
1.Find the full value of consideration.
2.Deduct the following:
– expenditure connected with the
transfer
– cost of acquisition(indexed in case of
long term)
– cost of improvement(indexed in case
of long term)
3.Deduct the exemption provided by
sections 54B,54D,54G &54 GA from
 Full Value of Consideration
•
•
• Full value means whole price
receivable by the transferor(without
deduction) either in cash or in
kind(fair market value)

 Expenditure on Transfer
• “Wholly and Exclusively “,deduct it
from the full value.
•
• Examples are:-brokerage or
commission paid for securing or
purchasing, cost of stamp,
registration fees, travelling
expenses etc.
 Costs

Cost of Acquisition:



The value for which the asset was
acquired by the assessee. The
expenses of capital nature for
completing or acquiring the title to
the property are included in the cost
of acquisition.

 Costs contd….
Cost of improvement: it is the capital


expenditure incurred by the assessee

in making any
additions/improvement to capital
asset

special provision(s):
1.expenditure before
April 1,1981 is not
considered.
•
 Indexed costs

Of acquisition:- the amount which bears to th

cost of acquisition in the same proportion a
cost inflation index for the year of transfer.
cost of acquisition of the purchasing year ×cost inflation inde
transferred year
inflation index of the purchasing year
 Indexed cost contd….

Of improvement:- the amount which bears to

the cost of improvement in the same
proportion as cost inflation index for the
year of transfer.
ost of improvement of the purchasing year ×cost inflation index o
transferred year
inflation index of the purchasing year
 Gains Exempted From Tax
•
•
• Sections 54,54B,54D,54G,54GA
 Section 54
Transfer of Residential House
• Basic conditions:
üWho can claim:individual,HUF
üshould be a long term capital asset
üa new property should be purchased
within one year before or 2 years
after the date of transfer
 OR
 should be constructed within 3
years from the date of transfer.
 Section 54
Transfer of Residential House
• Amount of Exemption: -
 a)amount of capital gain generated
 b)Amount invested in purchasing or
constructing new residential
property(whichever is lower)


Ø if new property is transferred within 3

years of acquisition, no
exemption.

 Section 54 B
Transfer of Agricultural Land
Basic conditions:-


– Only individual can claim

– May be long term or short term asset
– Land should be in use for at least 2
years immediately preceding the
previous year.
– The taxpayer has purchased another
agricultural land within 2 years from
the date of transfer.
–
 Section 54 D
Acquisition of Land or building
part of industry
Basic conditions:


– May be for Individual,HUF,Firm or

company
– May be short term or long term
– Such property is used by the assessee
for at least 2 years preceding the
compulsory acquisition
– The assessee has purchased any
other such property within 3 years
of acquisition
 Section 54 G
shifting of industrial
undertaking from an urban
area
 Basic conditions:
– The asset is transferred to some non
urban area
– The assessee has within one year
before or 3 years after the
transfer:-
1.Purchased new machinery
or plant for using in
shifted area
2.Constructed building for
 Section 54 GA
Shifting to SEZs


 Same as 54 G
 How charged to tax?
Long term capital gains is Short term capital gains are
taxable at a flat rate of 20%. taxable at the rate of 15%.
In some cases it is charged at the

rate of 10%.


 Thank you