Capital Gains -Theory

1. Mr. K. GANESHA MOORTHY

2. DEFINITION: According to section 2(14), a capital
asset means-
1. A property of any kind held by an assessee,
whether or not connected with his business or
profession
2. Any securities held by a foreign institutional
investor which has invested in such in
accordance with the SEBI regulations.

4. However it does not include,
 Stock in trade
 Rural agricultural land
 Specified gold bonds
 Special Bearer Bonds,1991
 Gold Deposit Bonds and

5.  Personal effects other than,
 Jewellery
 Archaelogical collections
 Drawings
 Paintings and sculptures

6.  There are two types of capital assets. They are as
follows
o Short term capital asset
o Long term capital asset
 Definition: As per section 2(42A),short term
capital asset held by an assessee for not more
than 36 months immediately preceding the date of
its transfer.
 As per section 2(29A),long term capital asset
which is not a short term capital asset.

7.  thus, a capital asset held by an assessee for
more than 36 months immediately preceding
the date of its transfer is a long term capital
asset.
 EXEMPTIONS: A security (other than a unit)
listed in recognised stock exchange or a unit
of an equity oriented fund or a unit of the
Unit Trust of India or a Zero Coupon Bond
will, however, be considered as a long term
capital asset if the same is held for more than
12 months immediately preceding the date of
its transfer.

8.  The shares of the company (not listed in recognised stock
exchange) or an immovable property, being land and
building or both would be considered as a short term
capital asset if it was held by an assessee for not more
than 24 months immediately preceding the date of its
transfer.
 PERIOD OF HOLDING:
Short Term Capital Asset if held for lesser than or equal to
12 month& Long term capital asset, if held for greater than
12 months:
 Security(other than unit) listed in recognised stock
exchange.
 Unit of equity oriented fund/ Unit of UTI
 Zero Coupon bond

9.  Short Term Capital Asset, if held for less than or
equal to 24 months and Long Term Capital Asset,
if held for greater than 24 months:
 Unlisted shares
 Land or building or both
 Short Term Capital Asset, if held for less than or
equal to 36 month and Long Term Capital Asset, if
held for greater than 36 months:
 Unit of debt oriented fund
 Unlisted securities other than shares
 Other capital assets