Capital Gains (Income Tax Act)
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1. The document discusses the classification of assets into capital assets and non-capital assets. It defines capital assets and lists some examples. 2. Capital gains are profits from the sale of capital assets. It distinguishes between short term capital gains from assets held for less than 3 years and long term capital gains from assets held for more than 3 years. 3. The tax treatment of capital gains depends on whether short term or long term, and whether Securities Transaction Tax was paid. Long term gains may be tax exempt if STT was paid.
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Capital Gains (Income Tax Act)
- 1. Made By :- Rohit Singh
- 2. House Business/ Capital Other Salary Property Profession Gains Sources
- 4. Any asset like land, motor car, plant and machinery, furniture and fixture, shares, debentures etc.
- 5. Exceptions:- Stock-In-Trade Movable items of PERSONAL USE Example:- TV, AIR CONDITIONER, GENERATOR, PERSONAL MOTOR CAR etc. BUT, These Four Movable Items Which Will Be Considered As Capital Asset:- I. Jewellery II. Archaeological collections III.Drawings IV.Sculptures Agriculture Land In Rural Area Gold Deposit Bonds (Bond Issued Against Security Of Gold)
- 6. CAPITAL NON CAPITAL ASSET ASSET Immovable items Stock in trade Movable items personal use Movable items personal use:- Agriculture Land 1. Jewellery 2. Archaeological collection ( Rural Area) 3. Drawings 4. sculptures Gold Deposit Bonds
- 7. CAPITAL ASSET SHORT LONG TERM TERM CAPITAL CAPITAL ASSET ASSET
- 8. Capital Asset Sold Within A Period Of 3 Yrs From The Date Of Purchase Is Considered As Short Term Capital Asset.
- 9. Capital Asset Sold After 3 Yrs From The Date Of Purchase Is Considered As Long Term Capital Asset.
- 10. PERIOD OF 3 YEARS WILL BE TAKEN AS 1 YEAR IN THE FOLLOWING CASES:- Shares In Any Company Units Of Mutual Funds Zero Coupon Bond • Issued For A Minimum Period Of 10 Yrs And Max Period Of 20yrs •No Regular Returns •Additional Amount Received On Maturity Will Be Considered As Capital Gain Any Other Listed Securities like Debentures, Bonds Etc.
- 11. Shares Units Of 3yrs Will Zero Mutual Be Taken Coupon Funds As 1yr Bond Any Other Listed Securities
- 12. Profit or gains on the sale of capital asset shall be considered as capital gain.
- 14. Capital Gain SHORT TERM LONG TERM CAPITAL CAPITAL GAIN GAIN STT STT NOT STT STT NOT PAID PAID PAID PAID *STT (SECURITY TRANSACTION TAX)
- 15. CASE 1 (LONG TERM CAPITAL GAIN) 1.STT PAID - EXEMPT U/S 10(38) 2.STT NOT PAID - TAXABLE @20%
- 16. CASE 2 (SHORT TERM CAPITAL GAIN) 1.STT PAID – TAXABLE @15% U/S 111A 2.STT NOT PAID – TAXABLE @SLAB RATE
- 17. PARTICULARS AMOUNT Full Value Of Consideration xxxx (-) Cost Of Acquisition xxxx (-) Cost Of Improvement xxxx (-) Selling Expenses xxxx Short Term Capital Gain xxxx
- 18. Computation Of Long Term Capital Gain PARTICULARS AMOUNT Full Value Of Consideration xxxx (-) Indexed Cost Of Acquisition xxxx (-) Indexed Cost Of Improvement xxxx (-) Selling Expenses xxxx Long Term Capital Gain xxxx
- 19. HOW TO DO INDEXATION…??? Inflation Index Of Current Year Amount Inflation Index Of Base Year
- 21. Mr. X Purchased Shares For Rs 2 Lacs In July 2011. Then He Sold Those Shares In Feb 2012 For Rs 5 Lacs. Selling Expenses Are Rs 20k. What Will Be His Income U/H Capital Gain in assessment year 2012-13?
- 22. SOLUTION PARTICULARS AMOUNT Full Value Of Consideration 500000 (-) Cost Of Acquisition 200000 (-) Selling Expenses 20000 Short Term Capital Gain 111A 280000
- 23. Mr. X Is Engaged In The Business Of Sale And Purchase Of Shares. He Sold Shares Of Rs 50 Lacs In A Year And Has Paid STT @ .25% Of Sale Price And Cost Of These Shares Purchased In Aug 2010 Was Rs20 Lacs. What Will Be His Income U/H Capital Gain For Assessment Year Year 2012-13?
- 24. Income U/H Capital Gain Will Be Zero Because Shares Will Considered As Stock-in-trade Because Business Man Is Doing Business With These Shares. Therefore, It Will Not Be Considered As Capital Asset. Hence There Will Not Be Any Income U/H Capital Gain.
- 25. Mr. X purchased shares for Rs 2lacs in July 1995. Then he sold those shares in Feb. 2012 for Rs 30lacs. Selling expenses are Rs 40k. What will be his income u/h capital gain in assessment year 2012-2013?
- 26. SOLUTION PARTICULARS AMOUNT Full Value Of Consideration 3000000 (-) Indexed Cost Of Acquisition 558719 (-) Selling Expenses 40000 Long Term Capital Gain 2401281
- 27. CALCULATION OF INDEX COST OF ACQUISITION 785 Rs 200000 Rs 558719 281
Editor's Notes
- short term nd long term can be furthher sub divided into two ways one where Stt is paid on securities and the other one is where Stt is not paid on securities