Capital gains

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Capital gains

  1. 1. CAPITAL GAINS - Manohar Prasad www.manohar-prasad.blogspot.com
  2. 2. Computation Of Total Income  Income from Salaries xxxx  Income from House Property xxxx  Profits & Gains of Business/Profess. xxxx  Capital Gains (Sec 45) xxxx  Income from Other Sources xxxx
  3. 3. CHARGEABILITY Any profits or Gains arising from the transfer of a Capital Asset during the previous year is Chargeable to Tax under this head of income. Conditions  There Should be a Capital Asset  Capital Assets should be transferred during the previous year.  Profit/Gains should have arisen.  Such Profit/Gains should be liable for tax.
  4. 4. What are Capital Assets? It includes all type of assets Whether movable/immovable, tangible/intangible etc., It excludes the following:-  Stock in trade, consumable stores/raw materials held for business/profession.  Personal effects including wearing apparel and furniture. it should be held for personal use and it should not be Jewellary, archaeological collections, drawings, paintings, sculptures, or any work of art  Agricultural Land (Conditions on Situation applies)  Certain Specified Gold Bonds  Special Bearer Bonds  Gold Deposit Bonds
  5. 5. TYPES OF CAPITAL ASSETS  SHORT TERM If the asset is held for Less than 36 Months then they are Short Term capital assets. In case of Equity/Preference Shares in a Company, Securities such as Debentures/Government Securities and Units of UTI and Units of Mutual funds and Zero Coupon bonds the term is 12 instead of 36 months.  LONG TERM If the asset is held for More than 36 Months then they are Long Term Capital Assets.
  6. 6. TAX Computation  SHORT TERM CAPITAL GAINS  determine the Value of Consideration  deduct expenditure incurred for the transfer  deduct the cost of acquisition.  deduct cost of improvement.  avail exemption u/s 54 B, 54 D, 54 G.  The balance amount is Short Term Capital Gains.  Short Term Capital Gains are chargeable to Tax based on SLAB RATES.  LONG TERM CAPITAL GAINS  determine the Value of Consideration  deduct expenditure incurred for the transfer.  deduct indexed cost of acquisition  deduct indexed cost of improvement.  avail exemption u/s 54, 54 B,54 D, 54 EC, 54F, 54 G  The balance amount is Long Term Capital Gains.  Long Term Capital Gains are chargeable to Tax on Flat Rate i.e 20%
  7. 7. INDEXATION BENEFIT  What is Indexation:- Indexation is nothing but working out the value of asset based on cost inflation index. Cost inflation index for the year 1981-82 is 100 Cost inflation index for the year 2008-09 is 582. If an assessee had purchased an asset during the year 81-82 for a sum of Rs.100.00. The same asset’s value will be 582f purchased during the year 2008-09 based on cost inflation index. Therefore the assessee gets additional benefit by deducting 582 instead of 100.
  8. 8. EXEMPTED CAPITAL GAINS  Section 54  Section 54 B  Section 54 D  Transfer of a Long Term Residential House Property and Purchasing/Constructing a New Residential House Property.  Transfer of Agricultural Land and acquires a new land for agricultural purpose.  Compulsory acquisition of land and buildings forming part of industrial undertaking and again invested.
  9. 9. EXEMPTED CAPITAL GAINS  Section 54 EC  Section 54 F  Section 54 G  Transfer of Long Term Capital Asset and investing in specified Long Term Bonds.(National Highway Authority of India Bonds or Rural Electrification Corporation Ltd.Bonds)  Transfer of a Long Term Capital Asset other than a House Property and investing in Long Term Residential House Property.  Transfer of Assets in shifting of industrial undertakings from urban area to rural area.
  10. 10. EXEMPTED CAPITAL GAINS  Section 54 GA  Capital Gains from Transfer of assets in cases of Shifting of industrial undertaking from urban area to any special economic zone
  11. 11.  Problems-  1. Mr.Ravi has purchased a house in F.Y.1983-84(Cost inflation Index is 116) for Rs.3Lakhs and sold it in F.Y.08-09 for Rs. 20 lakhs.  Compute the Long term Capital Gain for Mr.Ravi A.Y.09-10.  Answer:  Sales Consideration 20,00,000  Less-Indexed Cost of acquisition (3,00,000*582/116) 15,05,172  Long Term Capital Gain 4,94,828
  12. 12.  Problems-  1. Mr.Kavi has purchased a house on 23rd June-06(Cost inflation Index is 519) for Rs.3Lakhs and sold it in 07th March-09 for Rs. 10 lakhs. During 07-08 he has constructed a 2nd floor for Rs. 1 Lakh.  Compute the Short term Capital Gain for Mr.Kavi A.Y.09-10.  Answer:  Sales Consideration 10,00,000  Less-Cost of acquisition 03,00,000  Less-Cost of improvement 01,00,000  Short Term Capital Gain 6,00,000
  13. 13. Thank you ! www.manohar-prasad. blogspot.com 13 Thanks! Find me on:

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