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TAXATION
( M.Com- Part I)
-: CAPITAL GAINS :-
-: Complied By :-
Prof. Rajesh Jain
rmjainca@gmail.com
1CAPITAL GAIN
CAPITAL GAIN
 Chargeability [Sec.45 ] :
Profits & Gains arising from the transfer of a Capital Asset is
chargeable to tax in the year in which transfer takes place
under the head “Capital Gain”.
2CAPITAL GAIN
CAPITAL GAIN
-: Definitions :-
 Transfer [Sec 2(47) ]
Transfer in relation to capital assets includes :-
(i) Sales, exchange or relinquishment of the assets, or
(ii) The extinguishment of right therein; or
(iii) The compulsory acquisition thereof under any law; or
(iv) Conversion of the asset by the owner in stock in trade of a business carried
on by him; or
(v) Redemption of zero coupon bond or
(vi) Any transaction involving the allowing of the possession of any immovable
property to be taken or retained in part performance of the contract of the
nature referred to in Section 53A of the Transfer of Property Act,1882 or
(vii) Any transaction, whether by way of becoming member of or acquiring
shares in co-operative society, company or other AOP.
3CAPITAL GAIN
CAPITAL GAIN
-: Definitions contd..:-
 Capital Assets [Sec 2(14) ]
Capital asset means property of any kind ( fixed, circulating,
movable, immovable, tangible or intangible ) whether or not
connected with business or profession.
Except :-
a) Stock-in-trade
b) Personal effects of the assessee
c) Agri.Land in rural area. (definition of agri land has been
amended by the Finance Act 2013, wef 1st Apr’2014 )
d) 6.5% Gold Bond,1977 or 7% Gold Bond 1980 or National
Defence Bonds, 1980 issued by Central Govt.
e) Special Bearer Bonds,1991 issued by CG.
f) Gold Deposit Bonds issued under Gold Deposit Scheme 1999.
4CAPITAL GAIN
CAPITAL GAIN
-: Types of Capital Assets :-
5CAPITAL GAIN
Capital Asset
Short Term Capital Asset
Sec 2(42A)
Held by an assessee for not
more than 36 months
preceding the date of transfer.
Long Term Capital Asset Sec
2(29A)
Held by an assessee for more
than 36 months preceding the
date of transfer.
CAPITAL GAIN
-: Types of Capital Assets Exception :-
 Exception :
Following will be STCA if held for not more than 12 months :-
• Equity/Preference Shares
• Any other Security listed in recognised stock exchange.
• Zero Coupon Bond.
6CAPITAL GAIN
CAPITAL GAIN
-: Computation :-
7CAPITAL GAIN
SHORT TERM CAPITAL GAIN Rs Rs
Full Value of Consideration xxx
Less : a) Exp incurred wholly & exclusively
in connection with such a transfer xx
b) Cost of Acquisition xx
c) Cost of Improvement xx xx
Gross Short term Capital Gain xx
Less : Exemption, if available,
u/s 54B/54D/54G/54GA
xx
Taxable Short Term Capital Gain xx
CAPITAL GAIN
-: Computation :-
8CAPITAL GAIN
LONG TERM CAPITAL GAIN Rs Rs
Full value of Consideration xxx
Less : a) Exp incurred wholly & exclusively
in connection with such a transfer xx
b) Indexed Cost of Acquisition xx
c) Indexed Cost of Improvement xx xx
Gross Long term Capital Gain xx
Less : Exemption, if available,
u/s 54/ 54B/54D/54EC/54F/54G/54GA/54GB x
Taxable Long Term Capital Gain xx
-: Transactions Not regarded as transfer :-
[ Sec 47 ]
Some of the transactions are listed herein below :-
• Transfer on Total or partial partition of HUF.
• Under gift or will or an irrevocable trust except ESOP.
• Transfer by Holding ( H ) Co. to Subsidiary (S) Co. Subject to
certain conditions.
• Transfer by ( S ) Co. to ( H ) Co, subject to certain conditions.
• Transfer in a Scheme of amalgamation by amalgamating Co. to
amalgamated Co.
• Transfer in a demerger by demerged co. to resulting Co.
• On Conversion of a Company into LLP subject to T & C.
• On Succession of a sole proprietary by a Co. Subject to T &C.
9CAPITAL GAIN
-: Year of Chargeability to tax :-
Capital gains are generally charged to tax in the year in which
transfer takes place.
Exception :-
(a) Sec 45(1A) : Insurance Claim – In the year of receipt.
(b) seC 45(2) : Conversion of Capital asset into stock-in-trade – in
the year of actual sale of stock.
(c) Sec.45(5) : Compulsory acquisition –When consideration or
part thereof is first received. Enhanced Compensation is
chargeable to tax in the year of receipt.
10CAPITAL GAIN
-: Exempt Capital Gain under Section 10 :-
10 ( 33 ) : Transfer of US64 on or after April 1, 2002.
10 ( 37 ) : Compulsory acquisition of Urban Agri Land where
consideration is received after March 31, 2004.
10 ( 38 ) : Long term capital gain arising on transfer of equity
shares or units of equity oriented mutual fund and the STT is
paid at the time of transfer. ( wef Oct 1, 2004 onwards..)
11CAPITAL GAIN
-: Capital Gain on Transfer of Depreciable Assets :-
[ Sec 50 ]
(i) Where entire block of depreciable asset is transferred. i.e.
Block ceases to exist.
If the value of the consideration exceeds the aggregate of cost of
acquisition & the exp of transfer, there will be short term capital
gain. On the other hand, it will be a short term capital loss.
(ii) Where part of block of depreciable asset is transferred. i.e.
Block does not cease to exist.
If the value of the consideration exceeds the aggregate of cost of
acquisition & the exp of transfer, there will be short term capital
gain. On the other hand, if the value of the consideration of the
part transferred is less than the cost of acquisition, then the
balance left is the WDV of the block on which depreciation will
be charged u/s 32. 12CAPITAL GAIN
-: Cost Inflation Index :-
13CAPITAL GAIN
F.Y. Cost
Inflation
Index
F.Y. Cost
Inflation
Index
F.Y. Cost
Inflation
Index
F.Y. Cost
Inflation
Index
1981-82 100 1990-91 182 1999-
2000
389 2008-09 582
1982-83 109 1991-92 199 2000-01 406 2009-10 632
1983-84 116 1992-93 223 2001-02 426 2010-11 711
1984-85 125 1993-94 244 2002-03 447 2011-12 785
1985-86 133 1994-95 259 2003-04 463 2012-13 852
1986-87 140 1995-96 281 2004-05 480 2013-14 939
1987-88 150 1996-97 305 2005-06 497 2014-15 1024
1988-89 161 1997-98 331 2006-07 519
1989-90 172 1998-99 351 2007-08 551
14CAPITAL GAIN

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CAPITAL GAINS

  • 1. TAXATION ( M.Com- Part I) -: CAPITAL GAINS :- -: Complied By :- Prof. Rajesh Jain rmjainca@gmail.com 1CAPITAL GAIN
  • 2. CAPITAL GAIN  Chargeability [Sec.45 ] : Profits & Gains arising from the transfer of a Capital Asset is chargeable to tax in the year in which transfer takes place under the head “Capital Gain”. 2CAPITAL GAIN
  • 3. CAPITAL GAIN -: Definitions :-  Transfer [Sec 2(47) ] Transfer in relation to capital assets includes :- (i) Sales, exchange or relinquishment of the assets, or (ii) The extinguishment of right therein; or (iii) The compulsory acquisition thereof under any law; or (iv) Conversion of the asset by the owner in stock in trade of a business carried on by him; or (v) Redemption of zero coupon bond or (vi) Any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of the contract of the nature referred to in Section 53A of the Transfer of Property Act,1882 or (vii) Any transaction, whether by way of becoming member of or acquiring shares in co-operative society, company or other AOP. 3CAPITAL GAIN
  • 4. CAPITAL GAIN -: Definitions contd..:-  Capital Assets [Sec 2(14) ] Capital asset means property of any kind ( fixed, circulating, movable, immovable, tangible or intangible ) whether or not connected with business or profession. Except :- a) Stock-in-trade b) Personal effects of the assessee c) Agri.Land in rural area. (definition of agri land has been amended by the Finance Act 2013, wef 1st Apr’2014 ) d) 6.5% Gold Bond,1977 or 7% Gold Bond 1980 or National Defence Bonds, 1980 issued by Central Govt. e) Special Bearer Bonds,1991 issued by CG. f) Gold Deposit Bonds issued under Gold Deposit Scheme 1999. 4CAPITAL GAIN
  • 5. CAPITAL GAIN -: Types of Capital Assets :- 5CAPITAL GAIN Capital Asset Short Term Capital Asset Sec 2(42A) Held by an assessee for not more than 36 months preceding the date of transfer. Long Term Capital Asset Sec 2(29A) Held by an assessee for more than 36 months preceding the date of transfer.
  • 6. CAPITAL GAIN -: Types of Capital Assets Exception :-  Exception : Following will be STCA if held for not more than 12 months :- • Equity/Preference Shares • Any other Security listed in recognised stock exchange. • Zero Coupon Bond. 6CAPITAL GAIN
  • 7. CAPITAL GAIN -: Computation :- 7CAPITAL GAIN SHORT TERM CAPITAL GAIN Rs Rs Full Value of Consideration xxx Less : a) Exp incurred wholly & exclusively in connection with such a transfer xx b) Cost of Acquisition xx c) Cost of Improvement xx xx Gross Short term Capital Gain xx Less : Exemption, if available, u/s 54B/54D/54G/54GA xx Taxable Short Term Capital Gain xx
  • 8. CAPITAL GAIN -: Computation :- 8CAPITAL GAIN LONG TERM CAPITAL GAIN Rs Rs Full value of Consideration xxx Less : a) Exp incurred wholly & exclusively in connection with such a transfer xx b) Indexed Cost of Acquisition xx c) Indexed Cost of Improvement xx xx Gross Long term Capital Gain xx Less : Exemption, if available, u/s 54/ 54B/54D/54EC/54F/54G/54GA/54GB x Taxable Long Term Capital Gain xx
  • 9. -: Transactions Not regarded as transfer :- [ Sec 47 ] Some of the transactions are listed herein below :- • Transfer on Total or partial partition of HUF. • Under gift or will or an irrevocable trust except ESOP. • Transfer by Holding ( H ) Co. to Subsidiary (S) Co. Subject to certain conditions. • Transfer by ( S ) Co. to ( H ) Co, subject to certain conditions. • Transfer in a Scheme of amalgamation by amalgamating Co. to amalgamated Co. • Transfer in a demerger by demerged co. to resulting Co. • On Conversion of a Company into LLP subject to T & C. • On Succession of a sole proprietary by a Co. Subject to T &C. 9CAPITAL GAIN
  • 10. -: Year of Chargeability to tax :- Capital gains are generally charged to tax in the year in which transfer takes place. Exception :- (a) Sec 45(1A) : Insurance Claim – In the year of receipt. (b) seC 45(2) : Conversion of Capital asset into stock-in-trade – in the year of actual sale of stock. (c) Sec.45(5) : Compulsory acquisition –When consideration or part thereof is first received. Enhanced Compensation is chargeable to tax in the year of receipt. 10CAPITAL GAIN
  • 11. -: Exempt Capital Gain under Section 10 :- 10 ( 33 ) : Transfer of US64 on or after April 1, 2002. 10 ( 37 ) : Compulsory acquisition of Urban Agri Land where consideration is received after March 31, 2004. 10 ( 38 ) : Long term capital gain arising on transfer of equity shares or units of equity oriented mutual fund and the STT is paid at the time of transfer. ( wef Oct 1, 2004 onwards..) 11CAPITAL GAIN
  • 12. -: Capital Gain on Transfer of Depreciable Assets :- [ Sec 50 ] (i) Where entire block of depreciable asset is transferred. i.e. Block ceases to exist. If the value of the consideration exceeds the aggregate of cost of acquisition & the exp of transfer, there will be short term capital gain. On the other hand, it will be a short term capital loss. (ii) Where part of block of depreciable asset is transferred. i.e. Block does not cease to exist. If the value of the consideration exceeds the aggregate of cost of acquisition & the exp of transfer, there will be short term capital gain. On the other hand, if the value of the consideration of the part transferred is less than the cost of acquisition, then the balance left is the WDV of the block on which depreciation will be charged u/s 32. 12CAPITAL GAIN
  • 13. -: Cost Inflation Index :- 13CAPITAL GAIN F.Y. Cost Inflation Index F.Y. Cost Inflation Index F.Y. Cost Inflation Index F.Y. Cost Inflation Index 1981-82 100 1990-91 182 1999- 2000 389 2008-09 582 1982-83 109 1991-92 199 2000-01 406 2009-10 632 1983-84 116 1992-93 223 2001-02 426 2010-11 711 1984-85 125 1993-94 244 2002-03 447 2011-12 785 1985-86 133 1994-95 259 2003-04 463 2012-13 852 1986-87 140 1995-96 281 2004-05 480 2013-14 939 1987-88 150 1996-97 305 2005-06 497 2014-15 1024 1988-89 161 1997-98 331 2006-07 519 1989-90 172 1998-99 351 2007-08 551