Group 10
   Why charged differently ?   Benefit to long term investors / encourages    safer investments   Buffett (15% slab) vs...
   Should be a capital asset (in view of assessee)   Transfer takes place; during previous year   Profit is realized  ...
   Stock in trade, consumables, raw material   Personal effects like clothes, furniture   Agricultural land in India (e...
   Held by assessed for not more than 36    months is short term capital asset; longer    than that is long term capital ...
   Distribution of assets during liquidation   Partition of family   Gift     Under gift rules     By will     Under...
   Find full value of consideration   Deduct following costs     Expenditure incurred for transfer (stamp duty      pap...
   In money, in kind, in reverse transfers   Not necessarily market value, maybe more    maybe less   Consideration rec...
   Brokerage, stamp duty    paid, papers, registration fees, travel    expenses etc   Vague claims not accepted eg reloc...
   Cost of asset to previous owner     Purpose important     Son inheriting house worth 50,000 bought at     value 10,0...
   Depreciable assets always under short term    capital gains   Bonus shares, rights   Advance money, forfeiture     ...
   Additions to the capital asset   Added to expenditure for subtraction while    calculating capital gains
   Adjusting acquisition and improvement prices to    reflect inflation effect; to protect assessed from    unfair taxati...
   When capital asset is converted to stock in    trade (45(2))     Fair value taken in the year of conversion     Capi...
   Compulsory acquisition     Taxable as long term gain; cost of acquisition is     fair market value of asset   Enhanc...
 Gains counted in same currency in which  shares/debentures acquired and reconverted to  INR No benefit of indexation H...
   For self generated assets eg.    Goodwill, process patent, manufacturing    right etc     Purchase price considered a...
   Liquidation   Transfer in demat form   Insurance claim on damage/destruction   Share buybacks
   State governments set aside value given by    Stamp duty authority to prevent income-    degradation   Consideration ...
   Residential house property for-     Individual or HUF     Long term house property is transferred ONLY IF     Anoth...
   Transfer of agricultural land for agricultural    purposes only   Compulsory acquisition   Bonds
   Asset other than house property     Cap gain on any asset can be set-off against      acquiring a house property with...
   Long term gains     For shares and securities – 10%     Others – 20%    Short term gains     On shares zero, if STT ...
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Group 10

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Group 10

  1. 1. Group 10
  2. 2.  Why charged differently ? Benefit to long term investors / encourages safer investments Buffett (15% slab) vs his secretary (30-40% slab)
  3. 3.  Should be a capital asset (in view of assessee) Transfer takes place; during previous year Profit is realized Not exempted under any section 54 and other 54s
  4. 4.  Stock in trade, consumables, raw material Personal effects like clothes, furniture Agricultural land in India (except in municipality) Gold bonds, National defense bonds etc Special bearer bonds Gold deposit bonds under Gold deposit scheme 1999
  5. 5.  Held by assessed for not more than 36 months is short term capital asset; longer than that is long term capital asset  For shares period is 12 months
  6. 6.  Distribution of assets during liquidation Partition of family Gift  Under gift rules  By will  Under irrevocable transfer Transfer from holding to subsidiary domestic company and vice-versa Scheme of amalgamation, amalgamation of banking company, demerger And many others
  7. 7.  Find full value of consideration Deduct following costs  Expenditure incurred for transfer (stamp duty papers etc)  Cost of acquisition (Indexed for long term)  Cost of improvement (Indexed for long term) Deduct exemptions under sections 54B,D,G,GA,EC,F
  8. 8.  In money, in kind, in reverse transfers Not necessarily market value, maybe more maybe less Consideration received may not be accepted by AO Accrual not receipt considered
  9. 9.  Brokerage, stamp duty paid, papers, registration fees, travel expenses etc Vague claims not accepted eg relocation charges or food consumed at court Cannot be same as heads allowed for deduction under exemption under sec 54
  10. 10.  Cost of asset to previous owner  Purpose important  Son inheriting house worth 50,000 bought at value 10,000 is capital gains exempt. But if son sells house for 65,000 total capital gains would be 65,000 realization minus 10,000 cost of acquisition = 55,000 Cost of asset being fair market value  Actual cost or cost on 1/4/1981 as fair market value
  11. 11.  Depreciable assets always under short term capital gains Bonus shares, rights Advance money, forfeiture  Deducted from cost of acquisition  Not free money, government closes window of tax free money transfer
  12. 12.  Additions to the capital asset Added to expenditure for subtraction while calculating capital gains
  13. 13.  Adjusting acquisition and improvement prices to reflect inflation effect; to protect assessed from unfair taxation If asset is acquired before 1/4/81  Indexed cost = (Fair market value of asset on 1/4/81 or cost of acquisition whichever is higher / cost inflation index of 1981-82) * Cost inflation index of previous year or year of transfer If asset acquired after 1/4/81  Indexed cost = (Cost of acquisition / Cost inflation index of year of acquisition) * Cost inflation index of year of transfer
  14. 14.  When capital asset is converted to stock in trade (45(2))  Fair value taken in the year of conversion  Capital gain for total period of asset holding  Business gain there-after Capital asset transferred from partnership firm to partners Transfer on dissolution of firm
  15. 15.  Compulsory acquisition  Taxable as long term gain; cost of acquisition is fair market value of asset Enhanced compensation  No re-consideration of cost of acquisition or improvement considered Receipt is reduced by court after being appreciated  Assessee can re-open previous assessment
  16. 16.  Gains counted in same currency in which shares/debentures acquired and reconverted to INR No benefit of indexation How to compute-  Sale consideration, cost of acquisition & improvement taken on average conversion rate of the previous year from State Bank of India  All amounts would be converted into INR and the capital gain is Sale consideration (-) cost of acquisition (-) cost of improvement
  17. 17.  For self generated assets eg. Goodwill, process patent, manufacturing right etc  Purchase price considered as cost of acquisition Bonus shares, rights etc. Holding period from allotment date to sale date, cost of acquisition is zero, for rights cost of acqu. Is amount paid
  18. 18.  Liquidation Transfer in demat form Insurance claim on damage/destruction Share buybacks
  19. 19.  State governments set aside value given by Stamp duty authority to prevent income- degradation Consideration value shall be greater than or equal to the value adopted by stamp duty authority (jantri)
  20. 20.  Residential house property for-  Individual or HUF  Long term house property is transferred ONLY IF  Another house is purchased within 1 year before transfer or 2 years after transfer  Constructed 3 years within transfer  Amount not less than consideration
  21. 21.  Transfer of agricultural land for agricultural purposes only Compulsory acquisition Bonds
  22. 22.  Asset other than house property  Cap gain on any asset can be set-off against acquiring a house property with same conditions as above;  Exemptions limited to amount of capital gain When any industrial undertaking transfers from urban to rural area, exemption upto investment in new asset or capital gain, whichever is lower
  23. 23.  Long term gains  For shares and securities – 10%  Others – 20% Short term gains On shares zero, if STT has been paid

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