1. CAPITAL GAIN
Dr. NGPASC
COIMBATORE | INDIA
Dr. N.G.P. ARTS AND SCIENCE COLLEGE
(An Autonomous Institution, Affiliated to Bharathiar University, Coimbatore)
Approved by Government of Tamil Nadu and Accredited by NAAC with 'A' Grade (2nd Cycle)
Dr. N.G.P.- Kalapatti Road, Coimbatore-641048, Tamil Nadu, India
Web: www.drngpasc.ac.in | Email: info@drngpasc.ac.in | Phone: +91-422-2369100
3. Dr. NGPASC
COIMBATORE | INDIA
Capital Gain
• Profits or gains arising from transfer of a
capital asset are called “Capital Gains” and
are charged to tax under the head "Capital
Gains".
4. Dr. NGPASC
COIMBATORE | INDIA
Capital Asset
• Any kind of property held by an assesse,
whether or not connected with business or
profession of the assessee.
• Any securities held by a FII which has invested
in such securities in accordance with the
regulations made under the SEBI Act, 1992.
5. Dr. NGPASC
COIMBATORE | INDIA
Items not included in Capital Asset
• Stock in Trade: Any stock-in-trade (other than securities referred to in (b) above), consumable stores or
raw materials held for the purposes of his business or profession.
• Personal effects, that is, movable property (including wearing apparel and furniture) held for personal
use by the taxpayer or any member of his family dependent on him, but excludes.
– Jewellery
• Ornaments made of gold, silver, platinum or any other precious metal or any alloy containing
one or more of such precious metals, whether or not containing any precious or semi-
precious stones, and whether or not worked or sewn into any wearing apparel.
• Precious or semi-precious stones, whether or not set in any furniture, utensil or other article
or worked or sewn into any wearing apparel.
– Archaeological collections
– Drawings
– Paintings
– Sculptures
– Any work of art
6. Dr. NGPASC
COIMBATORE | INDIA
Items not included in Capital Asset
• Rural Agricultural Land : Agricultural Land in India, not being a land situated:
– Within jurisdiction of municipality, notified area committee, town area committee,
cantonment board and which have a population of not less than 10,000.
– Within range of following distance measured aerially from the local limits of any
municipality or cantonment board:
• Not being more than 2 KMs, if population of such area is more than 10,000 but
not exceeding 1 lakh
• Not being more than 6 KMs, if population of such area is more than 1 lakh but
not exceeding 10 lakhs, or
• Not being more than 8 KMs, if population of such area is more than 10 lakhs.
Population is to be considered according to the figures of last preceding census
of which relevant figures have been published before the first day of the year.
7. Dr. NGPASC
COIMBATORE | INDIA
Items not included in Capital Asset
• Specified Gold Bonds : 61/2 per cent Gold Bonds,1977 or
7 per cent Gold Bonds, 1980 or National Defence Gold
Bonds, 1980 issued by the Central Government
• Special Bearer Bonds, 1991
• Gold Deposit Bonds issued under the Gold Deposit
Scheme 1999 or deposit certificates issued under the
Gold Monetization Scheme, 2015
• Sovereign Gold Bond Scheme issued by RBI are 100% tax
free at the time of redemption.
9. Dr. NGPASC
COIMBATORE | INDIA
Capital Gain
• Income from capital gains is classified as
"Short Term Capital Gains" and "Long Term
Capital Gains".
10. Dr. NGPASC
COIMBATORE | INDIA
Short Term Capital Gain
• In respect of certain assets like shares (equity or
preference) which are listed in a recognized stock
exchange in India (listing of shares is not mandatory
if transfer of such shares took place on or before July
10, 2014), units of equity oriented mutual funds,
listed securities like debentures and Government
securities, Units of UTI and Zero Coupon Bonds, the
period of holding to be considered is 12
months instead of 36 months.
11. Dr. NGPASC
COIMBATORE | INDIA
Short Term Capital Gain
• Period of holding to be considered as 24
months instead of 36 months in case of unlisted
shares of a company or an immovable property being
land or building or both.
• Any other capital asset held by the taxpayer for a
period of not more than 36 months immediately
preceding the date of its transfer will be treated as
short-term capital asset.
12. Dr. NGPASC
COIMBATORE | INDIA
Long Term Capital Gain
• Any capital asset held by the taxpayer for
a period of more than 36
months immediately preceding the date
of its transfer will be treated as long-term
capital asset.
13. Dr. NGPASC
COIMBATORE | INDIA
Long Term Capital Gain
• In respect of certain assets like shares (equity or
preference) which are listed in a recognized stock
exchange in India (listing of shares is not mandatory
if transfer of such shares took place on or before July
10, 2014), units of equity oriented mutual funds,
listed securities like debentures and Government
securities, Units of UTI and Zero Coupon Bonds, the
period of holding to be considered is 12 months
instead of 36 months.
14. Dr. NGPASC
COIMBATORE | INDIA
Long Term Capital Gain
• In case of unlisted shares, period of holding is
to be considered as 24 months instead of 36
months.
• An immovable property being land or building
or both, period of holding is to be considered
as 24 months from AY 2018-19. Before AY
2018-19, the holding period is 36 months.
15. Dr. NGPASC
COIMBATORE | INDIA
Classification
Listed Shares
Unlisted Shares &
Immovable
property
Other Capital
Asset
STCG LTCG
< 12 M
> 36 M< 36 M
> 24 M< 24 M
> 12 M
17. Dr. NGPASC
COIMBATORE | INDIA
Short Term Capital Gain
Particulars Rs.
Full value of consideration (i.e., Sales consideration of
asset)
XXXXX
Less: Expenditure incurred wholly and exclusively in
connection with transfer of capital asset (E.g., brokerage,
commission, etc.)
(XXXXX)
Net sale consideration XXXXX
Less: Cost of acquisition (i.e. Purchased cost of asset) (XXXXX)
Less: Cost of improvement, if any (XXXXX)
Short-Term Capital Gain XXXXX
18. Dr. NGPASC
COIMBATORE | INDIA
Long Term Capital Gain
Particulars Rs.
Full value of consideration (i.e., Sales consideration of asset) XXXXX
Less: Expenditure incurred wholly and exclusively in
connection with transfer of capital asset (E.g., brokerage,
commission, etc.)
(XXXXX)
Net sale consideration XXXXX
Less: Indexed cost of acquisition (i.e. Purchased cost of asset
with indexation )
(XXXXX)
Less: Indexed cost of improvement, if any (*) (XXXXX)
Long-Term Capital Gain XXXXX
20. Dr. NGPASC
COIMBATORE | INDIA
Indexation
• Indexation is the process that takes into
account inflation from the time taxpayer
bought the asset to the time taxpayer sell it.
The way it works is that it allows taxpayer to
inflate the purchase price of the asset to take
into account the impact of inflation. The end
result is that you get the benefit of lowering
your tax liability.
21. Dr. NGPASC
COIMBATORE | INDIA
Indexation
Formula for calculating the indexation:
Cost of acquisition X Cost inflation index of the
year of transfer of capital asset
Cost inflation index of the year of acquisition
29. Dr. NGPASC
COIMBATORE | INDIA
Indexed cost
1. Cost of acquisition in 2003-2004 Rs 1,20,000.
Find out the indexed cost if sold in 2019-
2020.
Solution
Indexed cost = (1,20,000*289)/109
= 3,18,165
30. Dr. NGPASC
COIMBATORE | INDIA
Indexed cost
2. Find out the indexed cost of following long term
capital assets if they are sold during the previous year
2019-2020.
31. Dr. NGPASC
COIMBATORE | INDIA
Solution
1. Jewellery
Indexed cost = (80000*289)/113
= 2,04,602
2. Bonds
No Indexing
34. Dr. NGPASC
COIMBATORE | INDIA
Computation of capital gain
Particulars ₹ ₹
Sale Price 15,00,000
Less: Cost of Acquisition 4,50,000
(-) Advanced Money Forfeited 20,000
Net Cost 4,30,000
Indexed Cost 430000*289/100 12,42,700
Indexed cost of improvement 50000*289/122 1,18,443 13,61,143
LTCG 1,38,857
