This document discusses taxation of capital gains in India. It defines short-term and long-term capital assets as those held for less than 36 months and more than 36 months respectively. It outlines what is considered a capital gain and how short-term and long-term capital gains are taxed differently. Specifically, it notes that short-term capital gains are added to one's income and taxed accordingly, while long-term capital gains are taxed at a lower rate after indexing the cost of acquisition and improvement for inflation. The document also lists some capital gains that are exempted from taxation.

1. Taxation
CAPITAL GAINS

2.  Capital assets include property of any
kind whether fixed or circulating;
movable or immovable; tangible or
intangible.
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3. Section 44 to 55 deals with
capital gains
 Profit arising on account of movable or
immovable property is known as capital gains.
Such gains may be of short term and long
term.
 The term transfer of ‘capital assets’ include sale,
exchange, relinquishment of assets or
extinguishment of any right or the compulsory
acquisition thereof under any law.
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4. Capital
Assets
Short Term Capital Asset Long Term Capital Asset
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It means a capital assets,
which has been transferred by
assesses before the expiry of
36 months from the date of its
acquisition.
It means a capital assets,
which has been transferred by
assesses after the expiry of 36
months from the date of its
acquisition.

5. From the assessment year 1997-98, in the following
cases on asset held not for more than 12 months is
treated as short term capital asset.
 Equity or preference shares in company (whether
shares are quoted or not)
 Securities like debentures, government securities listed
in a recognised stock exchange in India.
 Unit of UTI (whether quoted or not)
 Unit of mutual fund specified under section 10 (23D)
(whether quoted or not)
 Zero coupon bond (quoted or not quoted). Assets
other than a short term capital asset is regarded as a
long term capital asset.
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6. Capital Gain Exempted
from the Tax
 Any distribution of capital assets in kind by a H.U.F.
to its members at the time of total or partial partition.
 Distribution of assets in kind by a company to its
shareholders at the time of its liquidation.
 Any transfer of a capital asset under a gift or a will or
an irrevocable trust.
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7.  Any transfer of agriculture land in India effected
before March, 1970.
 Any transfer of capital asset, being any work of art,
archaeological, scientific or art collection to the
government, university or museum or national art
gallery.
 Any transfer by way of conversion of bonds or
debentures of a company into shares of that
company.
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8. Computation of Capital Gain
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9. Short term Capital Gain
 According to section 48 of Income Tax act,
1961 the short term capital gain are computed
as under:
 Out of the transfer price or consideration
received on transfer of short term capital asset
the following amount are deductable.
1. Cost of capital asset.
2. Cost of improvement of capital asset.
3. The expenses in relation to transfer of capital assets.
Eg. Stamp registration fee, brokerage, advocate fee
etc.
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10. Long-term Capital Gain
 With effect from assessment year 1996-97 the computation of long
term capital gain is done as under as per section – 48(2)
 The following amount shall be deductible from the transfer of long
term capital asset:
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The fair market value of the asset
on April 1st,, 1981 or cost of
acquisition, whichever is more
Cost inflation index for the year in
which the asset is transferred
Cost inflation index for the year in which acquisition
Cost of improvement
Cost of inflation index for the year
in which the asset is transferred
Inflationary cost of improvement