Income Under the Head Capital Gains

Any Gain arising on a sale or transfer of a capital asset is chargeable to tax under section 45, if it is not eligible for exemption under section 54,54B,54D,54EC,54ED,54F, & 54G. Incidence of tax on capital gains,however, depend upon whether capital gain is a short or long term capital gain.

What is a Capital Asset?

Any kind of property whether fixed, circulating, movable or immovable, tangible or intangible is included in capital asset Exceptions are: Stock in trade 6.5% Gold bonds 1977. Personal effects. special bearer bonds (excluding jewellery).. gold deposit bonds, Rural Agri land 1999.

Capital gains exempt u/s 10

Any Capital gain on the transfer of US64 if transfer takes place on or after 1-4-2002 Any CG on compulsory acquisition of urban agricultural land arising to any individual or HUF LTCG on transfer of securities not chargeable to tax in cases covered by Transaction Tax.

TRANSFER
Transfer includes: i) Sale, exchange or relinquishment of a capital asset ii) Extinguishments of any rights in a capital asset iii) Compulsory acquisition of the capital asset under any law iv) Conversion of a capital asset into stock-in-trade v) Part performance of a contract of sale vi) Transfer of rights in immovable properties through the medium of co-operative societies, companies etc.

vii)Transfer by a person to a firm or other or Body ofa person to a AOP/BOI viii) Distribution of capital assets on Dissolution ix) Distribution of money or other assets by a Company on liquidation

Transactions not regarded as Transfer

Distribution of capital assets on the total or partial , partition of a Hindu Undivided Family; of a capital asset under a gift or will or an irrevocable trust except transfer under a gift or an irrevocable trust, of shares, debentures or warrants allotted by a company to its employees under Employees' Stock Option Plan or Scheme; transfer of a capital asset by a company to its 100% Indian subsidiary company, & vice versa

 in a scheme of amalgamation, transfer of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company transfer of shares of an Indian Company by an amalgamating foreign company to the amalgamated foreign company, in a demerger : transfer of a capital asset by the demerged company to the resulting company, if the resulting company is an Indian company; transfer of bonds or Global Depository Receipts, purchased in foreign currency, by a non-resident to another nonresident outside India

 transfer of agricultural land in India effected before first of March,'70. transfer of any work of art, archeological, scientific or art collection, book, manuscript,drawing, painting, photograph or print, to the Government or a University or the National Museum, National Art Gallery, National Archives or any such other public museum or institution notified by the Central Government in the Official Gazette to be of national importance or to be of renown throughout any State or States.

Computation of Capital Gains

Short term capital gains
Full value of consideration
Deduct 1. Cost of acquisition 2. Cost of improvement 3. Expenditure incurred wholly and exclusively for such transfer From resulting amt deduct exemptions u/s 54B, 54D, &54G

Long term capital gains

Full value of consideration
Deduct 1. Indexed Cost of acquisition 2. Indexed Cost of improvement 3. Expenditure incurred wholly and exclusively for such transfer From resulting amt deduct exemptions u/s 54, 54B, 54D, 54EC, 54ED,54F &54G

Balance is STCG

Balance is LTCG

LTCG
. Tax liability on LTCG to be taken at 20%. If total income other than LTCG is less than zero slab, LTCG over the zero slab only attracts tax at 20%. No deduction u/s 80C-80U is not to be given for tax on LTCG.

Computation of indexed COA and COI

Case 1 Where capital asset is acquired by the assesse before 1- April 1981 FMV as on 1-4-1981 or CII of the yr in which * asset is trfd COA,whichever is more CII of 1981-82

Computation of indexed COA and COI

Case 2 Where capital asset is acquired by the assesse on or after April 1981in one of the modes referred u\s49(1) but it was originally acquired by the previous owner before 1-4-1981 FMV as on 1-4-1981 or COA, to the previous owner CII of the yr in which whichever is more * asset is trfd CII of 1981-82

Computation of indexed COA and COI

Case 3 Where capital asset is acquired by the assesse before April 1981in one of the modes referred u\s49(1) and the same was originally acquired by the previous owner before 1-4-1981 FMV as on 1-4-1981 or COA to the previous owner whichever is more * CII of 1981-82

CII of the yr in which asset is trfd

Computation of indexed COA and COI

Case 4 Where capital asset is acquired by the assesse in one of the modes referred u\s49(1) on or after1-4-1981

COA * CII for the yr in which asset is acquired

CII of the yr in which asset is trfd

Computation of indexed COA and COI

Case 5 Where capital asset is acquired by the assesse in one of the modes referred u\s49(1) on or after1-4-1981

COA * CII for the yr in which asset is acquired

CII of the yr in which asset is trfd

Section 54
-Any LTCG arising to individual and HUF from the transfer of Resd.HP shall be exempted to the extent it is used for purchase of another Resd HP within the period of one yr before or within two yrs after the date of transfer or has constructed a resd HP within a period of 3 yrs after the date of transfer -If the money is not spent before the last date of filing the return of income, it must be deposited under CG account Scheme with public sector bank. -If this amt remains unutilised after the expiry of stipulated period ,it shall be treated as LTCG -if new HP is transferred within a period of 3 yrs,New CG along with old CG shall be chargeable to tax as STCG.

Section 54B
-Any CG arising to individual from the transfer of Agricultural land if it was used by the individual or his parents for agricultural purposes during at least 2 yrs immediately prior to transfer shall be exempted to the extent it is used for purchase of another Agri land within the period of two yrs after the date of transfer -If the money is not spent before the last date of filing the return of income, it must be deposited under CG account Scheme with public sector bank. -If this amt remains unutilised after the expiry of stipulated period ,it shall be treated as LTCG -if new Afri land is transferred within a period of 3 yrs,New CG along with old CG shall be chargeable to tax as STCG.

Section 54D
-Any CG arising to any person from the transfer of Land and building forming part of industrial undertaking which is compulsory acquired by govt and which is used during two yrs for industrial purposes prior to its acquisition shall be exempted to the extent it is used for purchase of Land and building for industrial purposes within the period of 3 yrs after the date of transfer -If the money is not spent before the last date of filing the return of income, it must be deposited under CG account Scheme with public sector bank. -If this amt remains unutilised after the expiry of stipulated period ,it shall be treated as LTCG -if new asset is transferred within a period of 3 yrs,New CG along with old CG shall be chargeable to tax as STCG.

Section 54EC
-Any LTCG arising to any person from the transfer of any LT capital asset trfd after 31.3.2000 shall be exempted to the extent it is invested in LT specified Assets within the period of 6 months from the date of transfer -If the money is not spent before the last date of filing the return of income, it must be deposited under CG account Scheme with public sector bank. -If this amt remains unutilised after the expiry of stipulated period ,it shall be treated as LTCG -if new asset is transferred or converted into money or any loan , advance is taken on security of these assets within a period of 3 yrs,New CG along with old CG shall be chargeable to tax as LTCG.

Section 54EC
LONG TERM SPECIFIED ASSET MEAN

Any bond redeemable after 3 yrs issued 1. On 1-4-2000 by NABARD or National Highway Authority of India 2. On or before 1-4-2001, by REC ltd 3. On or before 1-4-2002, by National Housing Bank Or by SIDBI

Section 54ED
-Any LTCG arising to any person from the transfer of any LT capital asset being units, listed shares or securities shall be exempted to the extent it is invested in specified Equity Shares within the period of 6 months from the date of transfer -If the money is not spent before the last date of filing the return of income, it must be deposited under CG account Scheme with public sector bank. -If this amt remains unutilised after the expiry of stipulated period ,it shall be treated as LTCG -if new asset is transferred or converted into money or any loan , advance is taken on security of these assets within a period of 1 yr,New CG along with old CG shall be chargeable to tax as LTCG.

Section 54F
-Any LTCG arising to individual and HUF from the transfer of any LT capital asset (other than Resd HP) provided on the date of transfer the taxpayer does not own more than one Resd HP shall be exempted in proportion to the net consideration to the extent it is used for purchase of another Resd HP within the period of one yr before or within two yrs after the date of transfer or has constructed a resd HP within a period of 3 yrs after the date of transfer -If the money is not spent before the last date of filing the return of income, it must be deposited under CG account Scheme with public sector bank. -If this amt remains unutilised after the expiry of stipulated period ,it shall be treated as LTCG -if new HP is transferred within a period of 3 yrs,New CG along with old CG shall be chargeable to tax as STCG.

Section 54G
-Any CG arising to any person from the transfer of Land,Building, plant or machinery in order to shift an industrial undertaking from urban area to rural area shall be exempted to the extent it is used for purchase of another Land,Building, plant or machinery in order to shift an industrial undertaking area to rural area within the period of one yr before or within 3 yrs after the date of transfer -If the money is not spent before the last date of filing the return of income, it must be deposited under CG account Scheme with public sector bank. -If this amt remains unutilised after the expiry of stipulated period ,it shall be treated as LTCG -if new asset is transferred within a period of 3 yrs,New CG along with old CG shall be chargeable to tax as STCG.

Section 54GA
-Any CG arising to any person from the transfer of Land,Building, plant or machinery in order to shift an industrial undertaking from urban area to SEZ shall be exempted to the extent it is used for purchase of another Land,Building, plant or machinery in order to shift an industrial undertaking area to SEZ within the period of one yr before or within 3 yrs after the date of transfer