2. TREATMENT OF ADVANCE MONEY
• Advance is to be
reduced to find out the
cost of acquisition.
Advance money is
received by the
current owner for
transferring the
property
• Advance received or
forfeited is not to be
reduced for calculating
cost of acquisition.
Advance money is
received by previous
owner of the
property for
transferring the
property
THIS PROVISION WAS
APPLICABLE FOR ADVANCE
RECEIVED OR FROFEITED
DURING 13-14
OR BEFORE A.Y. 2014-15.
3. TREATMENT OF ADVANCE
MONEY
• Received or forfeited during P.Y. 2014-15 OR
AFTERWARDS.
• Treated under head INCOME FROM OTHER
SOURCES. Taxable in the year of receipt. No
subsequent treatment allowed when subsequently sold.
• NOT DEDUCTED for calculating the cost of acquisition.
4. TREATMENT OF ADVANCE
MONEY
Before 1/4/14: The advance money earlier
forfeited will be deducted from COA, before giving
the benefit of indexation.
Any advance or money forfeited during P.Y. 13-14
or before shall be reduced from cost of
acquisition even if such capital asset is
sold/transferred during P.Y. 2014-15 or onwards.
In case the advance money forfeited is more than
COA then the COA shall be reduced to NIL and
the excess of such advance money forfeited over
COA shall be capital receipt NOT taxable.
5. EXAMPLE:
Where money forfeited after P.Y. 2014- 15.
X decided to sell a property to Y for which he
received 50000 as advance on 1/4/15. The deal
could not be completed and X seized the money.
50000 will be income from other sources for 15-
16.
Later he sells the property to Z on 1/1/16 for
16,75,000. COA of X was 7,00,000, purchased on
5/5/5. Calculate the capital gain in the hands of
X.
8. SECTION 54 F
EXEMPTION OF CAPITAL GAIN ON TRANSFER OF
LONG TERM CAPITALASSETS IN CASE OF
INVESTMENT IN RESIDENTIAL HOUSE
In case any individual or HUF sells or transfers any long term
capital asset (other than a residential house the income of
which is taxable under the head Income from house property)
and constructs a residential house within 3 years after the sale
or purchases another residential house within 1 year before or
2 years after the sale, so much of capital gain shall be exempt
as in proportion of amount invested to net consideration.
9. SECTION 54 F
Exemptions available only if certain conditions are
fulfilled:
i. Assessee is only an individual or HUF.
ii. Assessee does not own more than one residential
house on the date of transfer of above mentioned
assets.
iii. Assessee transfers the asset and there is a long
term capital gain.
iv. Assessee invests the net sale consideration of the
asset to construct a residential house within 3 years
of sale of the asset or purchases an already built
house within 1 year before or 2 years after the sale.
v. Assessee is not required to purchase another
residential house within a period of 1 year after or
constructs within a period of 3 years after the sale
10. EXEMPTION AMOUNT UNDER
SECTION 54 F
Person invests the full
amount of consideration in
purchase or construction
of residential house
Full amount
exempted
Person invests part amount of
consideration in purchase or
construction of residential house
Only invested
amount
exempted
Amount deposited in
capital gain account
scheme up to the last
date of filing return
Must be utilized to construct
or purchase the house within
stipulated period
11.
12. AMOUNT EXEMPT UNDER
SECTION 54F
Money should be spent for construction or
purchase of new residential house including cost
of land.
CASE I: Where investment exceeds the amount
capital gain, the whole amount is exempt from
tax.
CASE II: W here the value of house property is
less than the consideration then the amount of
exemption is calculated as:
Amount invested + Deposited * amount of capital
13. CLAIM OF EXEMPTION IF MORE
THAN 1 ASSET IS SOLD
Where there is a sale of more than 1 capital asset that are
transferred and the sale proceeds are used for purchase or
to construct a residential house then the exemption is
available from capital gains of all long term capital assets.
Assessee has 2 options:
(i) He may calculate the exemption under each asset
separately and then compare the most beneficial alternative
(ii) Follow procedure as:
(a) calculate capital gain for each asset separately.
(b) calculate % of LTCG to net consideration.
(c) allow exemption u/s 54F out of LTCG of that asset whose
% is higher.
(d) if amount invested in house is more than net consideration
of 1 asset the balance investment is to be taken up from that
asset whose % is next highest .
14.
15.
16.
17. SECTION 54G
CAPITAL GAIN ON SHIFTING OF INDUSTRIAL
UNDERTAKING FROM URBAN AREAS TO NON URBAN
AREAS
In case following conditions are fulfilled:
(i)Capital asset is transferred due to shifting of industrial unit
from urban to rural area.
(ii)Capital gain is reinvested within a period of 1 year or 3
years after the date in:
A- purchase of plant and machinery for the purpose of
business of the industrial undertaking in the area to which
the undertaking is shifted.
B- acquiring land and building for the purpose of business.
C- shifting the original asset and transferring the establishment
of such undertaking to such area.
D-incurred expenses n such other purposes as may be
specified in a scheme framed by the central government
for this section.
18. AMOUNT OF EXEMPTION UNDER
SECTION 54G
The exemption cannot exceed the amount of capital
gain.
Where the cost of investment is more than the capital
gain there the whole amount is exempt from tax but
incase of gain from new investment within 3 years of
purchase the cost of investment is to be reduced by
the amount of capital gain.
Where the investment is less than capital gain there
the excess amount has to be deposited in the relevant
scheme to be used within stipulated period to gain
exemption or else the income will be treated as income
of previous year. In case of gain from new investment
19.
20. SECTION 54GA
EXEMPTION ON CAPITAL GAIN ON TRANSFER OF
ASSETS IN CASE OF SHIFTING OF INDUSTRIAL
UNDERTAKING FROM URBAN AREA TO ANY SEZ
This is available to those undertakings that shift from
urban areas to SEZ:
A- There is transfer of assets or any right in building or
land of an industrial undertaking situated in any urban
area.
B- The transfer has been made with an intention of
shifting to a SEZ.
C- Transfer of an industrial unit – assessee should
establish an industrial unit within 1 year before or 3
21. EXEMPTION UNDER SECTION
54GA
Least of the 2 amounts shall be exemption amount:
A- Amount of capital gain earned on the transfer of the
asset.
B – Amount spent on the purchase, construction etc. of
the new asset in SEZ within specified time frame.
The asset so created shall not be transferred within 3
years of such expense other wise the capital gain
will become taxable in the year of transfer.
22. SECTION 54 GB
LONG TERM CAPITAL GAIN ON TRANSFER OF
RESIDENTIAL PROPERTY IF NET
CONSIDERATION IS INVESTED IN THE EQUITY
SHARES OF ELIGIBLE COMPANY
Allowed to only individual or HUF.
Gain must be on a house or plot of land transferred on
long term capital gain on or after 1-4-12 but on or
before31-3-17, where the amount is utilized for the
purchase of shares before the date of filing of return
and the company receiving the proceed purchases
plant and machinery before filing of the return by the
assessee or else the amount is utilized in accordance
with any scheme which may be notified by the central
government.
23. AMOUNT OF EXEMPTION UNDER
SECTION 54 GB
If net consideration > cost of new asset, then amount of
exemption=
LTCG * Cost of new asset
Net Consideration
If net consideration < cost of new asset then, amount of
exemption is equal to whole amount of LTCG.
Exemption stands forfeited if the shares of the company
acquired by the individual or HUF or the new plant and
machinery acquired by the company are sold or
transferred within a period of 5 years from the date of
purchase.
24. SECTION 54 H
In case there is transfer of asset due to
compulsory acquisition under any law and the
amount of compensation awarded for such
acquisition is not received by the assessee on the
date of such transfer the period or period
available for depositing the amount under any of
the section 54, 54B, 54D, 54EA 54EB, 54EC, 54F
, I relation to such compensation is reckoned from
the date of receipt of such compensation.
Enhanced compensation is taxable in the year it
is received and if the assessee wants to avail
exemption under 54, 54B,54D,54EC,54F etc. the
time limit shall be determined from the date and
year of receipt of enhanced compensation.
25. TREATMENT OF CAPITAL LOSS
U/S 74
SHORT TERM CAPITAL LOSS CAN BE SET FROM
EITHER SHORT TERM CAPITAL GAIN OR LONG
TERM CAPITAL GAIN, WHILE LONG TERM CAPITAL
LOSS CAN BE SET OFF ONLY FROM LONG TERM
CAPITAL GAIN.
Loss on transfer of long term equity shares cannot be
set off against any other long term capital gain and
hence it is ignored and the long term capital gain on the
transfer of equity shares subject to STT is exempted
26. TAX ON CAPITAL GAINS
A. SHORT TERM CAPITAL ASSETS
1- Short term capital asset being equity shares in a company or units of
equity oriented fund where transaction are covered under securities
transaction tax act:
(i) Rate of tax on gain from short term capital asset being equity shares in
a company or units of equity oriented fund where transaction is
covered under STT shall be 15% of such gain
(ii) Such gain will be reduced out of the total income and balance income
shall be deemed as total income on which the schedule of rates as
applicable to an individual shall be applied.
(iii) For allowing deductions under section 80 c to 80 u the total of all the
deduction should not exceed gross total income as reduced by an
amount of capital gain.
(iv) In case the balance income which is deem as total income is less than
the exempted income of 2,50,000 in case of both male and females
and 3,00,000 incase of senior citizen the amount equal to the exempt
income and balance deemed total income shall be reduced from gain
27. LONG TERM CAPITAL GAIN
Long term capital asset being equity shares in a
co. or units of equity oriented fund where
transaction is covered under securities
transaction is covered under STT is fully
exempted u/s 10(38).
Long term capital asset being listed security
where STT has not been paid-
Long term capital gain from such asset shall be
subject to tax
i. 10% of such gain if such gain is computed
without indexing the cost of acquisition
Ii. 20% of such gain if such gain is computed after
indexing the cost of acquisition which ever is less.
28. LONG TERM CAPITAL GAIN
Iii. Long term capital gain other than as mentioned in above:
A. long term capital gain shall be assessed at 20% of such
gain for all assesses.
B. such gain shall be reduced out of the total income and
balance income shall be deemed as total income on which
the schedule of rates as applicable to an individual shall be
applied.
In case balance income which is deemed as total income is
less than the exempted limit of 2,50,000 or 3,00,000 in case
of senior citizen the amount equal to the difference between
the exempted limit and balance deemed total income shall
be reduced from gain on long term capital asset and
balance gain on long term capital asset shall be assed to
tax at rate of 20%.
