0
COMPUTATION OF CAPITAL GAINS
• Section – 45 chargeability
• Section - 47 Transactions not regarded as
transfer
• Section -...
Chargeability u/s 45
• Profits or gains arising from the transfer of a
capital asset is chargeable to tax in the year in
w...
Capital Asset u/s. 2(14)
•
1.
2.
a.
b.
c.
d.
e.
f.
3.

"capital asset" means property of any kind held by an assessee, whe...
Transfer u/s. 2(47)
• Transfer, in relation to a capital asset, include
sale, exchange or relinquishment of the asset
or t...
Transactions which do not constitute transfer (sec 47)

1.
2.
3.
4.
5.
6.

Distribution of capital asset on total or parti...
Not to be considered as transfer
 Transfer of any work of art, archaeological, scientific or art
collection, book, manusc...
Computation of capital gains (48)
The Capital Gains have been divided in two parts
under Income Tax Act 1961.
Short term c...
1. Short Term Capital Gain
• When Capital asset is sold within 36 months (Shares or
securities within 12 months) of its pu...
Long Term Capital Gain
• When Capital Asset is held for more than 36
months (12 months in case of shares or
securities) is...
Cost of indexation

03/02/14

sanjaydessai@gmail.com

10
Taxability of short term capital
gains
• Section 111A of the Income tax Act provides that
those equity shares or equity or...
Taxability of short term capital
gains
• The short term capital gains other than those
u/s 111A shall be added to the inco...
• If an Assessee does the business of buying and
selling of shares in that case he cannot take
advantage of section 111A o...
Taxation of Long term capital
gains:
• The long term capital gains are taxed @ 20%
after the benefit of indexation. No ded...
Taxation of long term capital gains
• Section 112(1) provides that any capital gain arising from a
long term capital asset...
Tax on long term capital gains
• The long term capital gain on equity shares or
units of equity oriented mutual fund which...
Computation of short term capital gains
1. Find out full value of consideration
2. Deduct the following
a. Expenditure inc...
Computation of long term capital gains
1. Find out full value of consideration
2. Deduct the following
a. Expenditure incu...
Capital gains exempt from tax
1.
2.

Section 54 Capital gains arising from transfer of residential house.
Section 54B capi...
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Computation of Capital gains under Income Tax Act 1961

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Lecture notes for undergraduate students of Commerce on Computation of Capital gains under Income Tax Act 1961

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Transcript of "Computation of Capital gains under Income Tax Act 1961"

  1. 1. COMPUTATION OF CAPITAL GAINS • Section – 45 chargeability • Section - 47 Transactions not regarded as transfer • Section - 48 Methods of computation of capital gains 03/02/14 sanjaydessai@gmail.com 1
  2. 2. Chargeability u/s 45 • Profits or gains arising from the transfer of a capital asset is chargeable to tax in the year in which transfer take place under the head "Capital Gains". 03/02/14 sanjaydessai@gmail.com 2
  3. 3. Capital Asset u/s. 2(14) • 1. 2. a. b. c. d. e. f. 3. "capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include following Any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession; Personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes— jewellery archaeological collections drawings paintings sculptures or Any work of art. Agriculture land in India provided that it is not situated a) in any area within the territorial jurisdiction of a municipality or a cantonment board, having a population of 10,000 or more ; or b) in any notified area. 03/02/14 sanjaydessai@gmail.com 3
  4. 4. Transfer u/s. 2(47) • Transfer, in relation to a capital asset, include sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law. (Inclusive definition) 03/02/14 sanjaydessai@gmail.com 4
  5. 5. Transactions which do not constitute transfer (sec 47) 1. 2. 3. 4. 5. 6. Distribution of capital asset on total or partial partition of HUF Transfer of capital asset under a gift or will or an irrevocable trust Transfer of capital asset by a company to its 100 percent subsidiary company. Transfer of capital asset by a company to its 100 percent holding company. Transfer of capital asset in a scheme of amalgamation Transfer of capital asset by a demerged company to the resulting company 03/02/14 sanjaydessai@gmail.com 5
  6. 6. Not to be considered as transfer  Transfer of any work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print, to Government/University/National museum/National Art Gallery/National Archives or any other notified public institution/museum  Conversion of bonds or debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company. 03/02/14 sanjaydessai@gmail.com 6
  7. 7. Computation of capital gains (48) The Capital Gains have been divided in two parts under Income Tax Act 1961. Short term capital gain and Long term capital gain 03/02/14 sanjaydessai@gmail.com 7
  8. 8. 1. Short Term Capital Gain • When Capital asset is sold within 36 months (Shares or securities within 12 months) of its purchase then the gain arising out of its sales after deducting there from the expenses of sale (Commission etc.) and the cost of acquisition and improvement is treated as short term capital. 03/02/14 sanjaydessai@gmail.com 8
  9. 9. Long Term Capital Gain • When Capital Asset is held for more than 36 months (12 months in case of shares or securities) is a long term capital asset and the gain arising from sale of asset is a long term capital gain. • Long term capital gains are arrived at after deducting from the net sale consideration of the long term capital asset the indexed cost of acquisition and the indexed cost of improvement of the asset. 03/02/14 sanjaydessai@gmail.com 9
  10. 10. Cost of indexation 03/02/14 sanjaydessai@gmail.com 10
  11. 11. Taxability of short term capital gains • Section 111A of the Income tax Act provides that those equity shares or equity oriented funds which have been sold in a stock exchange and securities transaction tax is chargeable on such transaction of sale then the short term capital gain arising from such transaction will be chargeable to tax @15% from assessment year 2009-10 onwards. 03/02/14 sanjaydessai@gmail.com 11
  12. 12. Taxability of short term capital gains • The short term capital gains other than those u/s 111A shall be added to the income of the assessee and will be taxed normally at slab rates applicable to the assessee. 03/02/14 sanjaydessai@gmail.com 12
  13. 13. • If an Assessee does the business of buying and selling of shares in that case he cannot take advantage of section 111A or section 10(38). In this case income will be treated as business income. 03/02/14 sanjaydessai@gmail.com 13
  14. 14. Taxation of Long term capital gains: • The long term capital gains are taxed @ 20% after the benefit of indexation. No deduction is allowed from the long term capital gains from section 80C to 80U. 03/02/14 sanjaydessai@gmail.com 14
  15. 15. Taxation of long term capital gains • Section 112(1) provides that any capital gain arising from a long term capital asset being the listed securities which are sold outside the stock exchange the long term capital gain shall be calculated on such securities as below: • a) Tax arrived at @ 20% on such long term capital gain after indexation u/s 48 or b) Tax arrived at @ 10 % on such long term capital gain without indexation Whichever is less. 03/02/14 sanjaydessai@gmail.com 15
  16. 16. Tax on long term capital gains • The long term capital gain on equity shares or units of equity oriented mutual fund which are sold in the stock exchange and on which securities transaction tax is paid, is exempt u/s 10(38). 03/02/14 sanjaydessai@gmail.com 16
  17. 17. Computation of short term capital gains 1. Find out full value of consideration 2. Deduct the following a. Expenditure incurred wholly and exclusively in connection with such transfer b. Cost of acquisition c. Cost of improvement 3. Balance amount is short term capital gain 03/02/14 sanjaydessai@gmail.com 17
  18. 18. Computation of long term capital gains 1. Find out full value of consideration 2. Deduct the following a. Expenditure incurred wholly and exclusively in connection with such transfer b. Indexed cost of acquisition c. Indexed cost of improvement 3. Balance amount is long term capital gain 03/02/14 sanjaydessai@gmail.com 18
  19. 19. Capital gains exempt from tax 1. 2. Section 54 Capital gains arising from transfer of residential house. Section 54B capital gains arising from the transfer of land used for agriculture purpose. 3. Section 54D Capital gains on compulsory acquisition of land and building forming part of industrial undertaking . 4. Section 54 EC Capital gains not to be charged on investment in certain bonds. 5. Section 54ED Capital gains on transfer of certain listed securities / units not to be charged to tax in certain cases.(up to assessment year 200708). 6. Section 54 F Capital gains on transfer of a long term capital asset other than a house property . 7. Section 54G capital gains on transfer of assets in case of shifting of industrial undertaking from urban area. 8. Section 54GA Capital gains on transfer of assets in cases of shifting of industrial undertaking from urban area to any special economic zones . 19 03/02/14 sanjaydessai@gmail.com
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