The document outlines the provisions related to capital gains taxation, including definitions, exemptions, and computation methods for different types of capital assets. It details the classification of assets as long-term or short-term, the concept of transfer, transaction exceptions, and specific sections related to computation and tax liability. Additionally, it describes conditions for capital gains exemptions, particularly concerning residential properties and investments in specified assets.

1. 1

2. Relevant Sections
 Definitions: 2(14), 2(29A), 2(29B),
2(42A), 2(42B) & 2(47)
 Exemption: 10 (38)
 Computation: 45 to 55A
 Tax: 111A, 112
2

3. CHARGE
 Section 45 (1)
 Any profits or gains arising from the transfer
of a Capital Asset effected in the previous year
shall, save as otherwise provided in sections be
charged to income-tax under the head “Capital
gains”, and shall be deemed to be the income
of the previous year in which the transfer took
place.
3

4. Capital Asset … …
 Section 2(14)
 “Capital Asset” means property of any kind held by
an assessee, whether or not connected with his
business or profession, but does not include
i. Any stock-in-trade, consumable stores or raw
materials held for the purpose of his business &
profession;
ii. Personal effects, that is to say, movable property
(including wearing apparel and furniture), held
for personal use by the assessee or any member of
his family dependent on Him but excludes
 Jewellery, archaelogicla collections; drawings;
paintings; sculptures OR any work of art 4

5. ……. Jewellery ……
 Explanation – For the purpose of this sub-
clause “jewellery” includes –
a. Ornaments made of gold, silver, platinum or any
other precious or any alloy containing one or more
of such precious or semi precious metals, whether
or not containing any precious or semi precious
stone
b. Precious or semi-precious stones, whether or not set
in any furniture, utensil or other article or worked
or sewn into any wearing apparel. 5

6. ……. Does not include ……
iii. Agricultural land in India, not being land
situated-
a. In any area which is comprised within the jurisdiction of a
municipality (whether known as a municipality, municipal
corporation, notified area committee, town area committee,
town committee, or by any other name) or a cantonment
board and which has a population of not less than ten
thousand according to the last preceding census of which
the relevant figures have been published before the first
day of the previous year; or
b. In any area within such distance, not being more than eight
km, from the local limits of any municipality or
cantonment board referred to in item (a), as the Central
Government may, having regard to the extent of, and scope
for, urbanisation of that area and other relevant
considerations, specify in this behalf by notification in the
6

7. ……. Does not include
iv. 6 ½ per cent Gold Bonds, 1977; or 7 per
cent Gold Bonds, 1980; or National
Defence Bonds, 1980 issued by the
Central Government.
v. Special Bearer Bonds, 1991 issued by the
Central Government.
vi. Gold Deposit Bonds issued under the
Gold Deposit Scheme, 1999 notified by
the Central Government.
7

8. Sum up
CAPITAL ASSET NOT A CAPITAL ASSET
 Land Personal Effects
 Building Agricultural Land
 Plant & Machinery Specified Bonds
 Motor Car if used in B&P
Personal Motor Car
 Jewellery
Watch not studded with stones
 Silver Utensil
 Share
 Watch Studded with stones
8

9. Different types of Assets
C A P IT A L A S S E T
L O N G T E R M S H O R T T E R M
C A P IT A L A S S E T C A P IT A L A S S E T
 Section 2(29A)
o Long Term Capital Asset means a capital asset which is
not a Short Term Capital Asset
 Section 2(42A)
o Short Term Capital Asset means a capital asset held by
an assessee for not more than thirty six months, in case
of shares the period of holding shall be not more than
9
twelve months.

10. Transfer
 Section 2(47)
 Transfer in relation to a capital asset, includes,-
i. The sale, exchange or relinquishment of the asset;
ii. The compulsory acquisition thereof under any law;
iii. In a case where the asset is converted by the owner thereof into,
or treated by him as, stock-in-trade of a business carried on by
him, such conversion or treatment
iv. Any transaction involving the allowing of the possession of any
immovable property to be taken or retained in part
performance of a contract of the nature referred to in section
53A of the TOP Act;
v. Any transaction (whether by way of becoming a member of, or
acquiring shares in, a co-operative society, company or other
association of persons or by way of any agreement or any
arrangement or in any other manner whatsoever) which has the
effect of transferring, or enabling the enjoyment of, any 10
immovable property

11. Exceptions …
 45 (1A) - When Compensation is received from an
Insurance company – CG is chargeable in the year of
receipt.
 45((2) – When a CA is converted into stock-in-trade – CG
will be charged in the year of sale – NSC will be the FMV
of the asset on date of such conversion.
 45(3) – When CA is transferred to Firm/AOP/BOI/
Partnership as capital contribution - CG is chargeable in
the year of transfer – NSC will be the book value of the
asset in the books of the firm.
 45(4) – When CA is transferred by Firm/AOP/BOI/
Partnership to a person - NSC will be the FMV of the
11
asset.

12. … Exceptions
 45 (5) - When Compensation is received from RBI /
Central Government – CG is chargeable in the year of
receipt.
 If the compensation is enhanced then the entire amount
of such enhanced compensation is to be charged to tax
and the NSC will be treated as NIL. In case of death of
the receiver of such compensation then the actual
recipient will be liable to pay the tax.
 But if the amount of enhanced compensation is
reduced, CG will be recomputed.
 45((6) – No indexation is to be allowed in case at the time
of repurchase of units covered u/s 80CCB(2)
12

13. Section 45 (2A)
 Capital Gains to be charged in the hand of
the beneficial owner not in the hand of the
depository.
13

14. Section 47
 Transactions not regarded as transfer
Any distribution of capital asset on the total or
partial partition of HUF
Any transfer under gift or will or irrevocable trust
Any transfer from a holding company to a
subsidiary company and vise versa
Any transfer in a scheme of amalgamation or
demerger of companies or conversion of
firm/proprietary concern into a company
 Withdrawal of exemption in certain cases 14

15. Section 48
 Mode of Computation
Full Value of Consideration
Less
Cost of Acquisition
+ Cost of Improvement
+ Exp. incurred in connection with such transfer
In case of Long Term Capital Asset CA & CI
would be replaced by ICA & ICI 15

16. Section 49
 Cost with reference to certain mode of acquisition
 Any distribution of capital asset by :::: Succession ::::
Inheritance
 Any distribution of capital asset :::: On the total or partial
partition of HUF :::: Dissolution of Firm or AOP or
BOI :::: Liquidation of a Company :::: Under a Transfer
to a revocable or irrevocable trust.
 The CA of the asset shall be the cost for which the
previous owner acquired the property plus the cost of any
improvement incurred by the previous owner or the
assessee.
 Indexation to be allowed on the basis of the years in
16
which the actual possession was taken.

17. Self Generated Assets Sec. 55
Self Generated Sale COA COI Exp. on Capital
Assets Cons. Trf. Gain
Goodwill Actual Nil Nil Actual Sale Cons.
– Exp.
Tenancy Right & Actual Nil Actual Actual Sale Cons –
Route Permit (COI+Exp.)
Right to Actual Nil Nil Actual Sale Cons.
Manufacture, – Exp.
Produce or
Process any article
17

18. Section 50
 Special Treatment for Computation of CG in
case of Depreciable Assets
All gains shall be treated as Short Term Capital
Gain so no question of Indexation
Will be calculated on the entire block
18

19. EXAMPLE
1. WDV of ten Motor Cars is Rs. 1,50,000/-
on 01-04-2003
2. Six Cars are sold at a price of Rs.
4,80,000/- on 01-07-2003.
3. Brokerage paid Rs. 10,000/-
4. On 01-03-2004 one car was purchased at a
price of Rs. 3,00,000/-.
19

20. … CONTINUED
Rs. Rs.
• Sale Consideration 4,80,000
Less : Brokerage 10,000
• Net Sale Consideration 4,70,000
 Less
• WDV as on 01-04-2003 1,50,000
Add : Addition
on 01-03-2004 3,00,000 4,50,000
• Short Term Capital Gain 20,000
• WDV as on 01-04-2004 NIL
Year of Purchase of the cars are of no significance
20

21. Section 50C
o CA/ICA of a building : Rs. 6,40,000/-
o Sales Consideration received : Rs. 7,00,000/-
o Incidental Expenses : Rs. 10,000/-
o Value adopted by the ‘stamp Rs. 7,50,000/-
valuation authority :
 NSC actually received : Rs. 7,00,000/-
 STCG/LTCG (before S 50C) : Rs. 50,000/-
 Deemed NSC as per S 50C : RS. 7,50,000/-
 STCG/LTCG as per S 50C : Rs. 1,00,000/-
21

22. Remedy
 Condition :
i. The ‘a’ claims before the A.O. that value adopted by
SVA exceeds the FMV of the property.
ii. The value so adopted has not been disputed before
any other authority / Court.
 The valuation of the asset shall be referred to a
valuation Officer.
 The lesser of the two valuation will be accepted
as Full Consideration
22

23. 23

24. Section 54 [Res. HP Res. HP]
 Entitlement :
 Individual & HUF
 Residential Building & Land appurtenant thereto (OA)
 Long Term Capital Asset
 Investment in :
 A Residential House Property (NA)
 Investment within:
 Purchased
o One Year before or Two years after the date of tr.
 Constructed
o Three years after the date of tr.
 Deduction available :
 Amount of investment to be deducted from LTCG24

25. …… Investment …
 Unutilised amount to be invested in Capital
Gains Accounts Scheme, 1988 of a Public Sector
Bank on or before the due date for filing of
Return.
o Evidence to be filed with the return of income
 Amount to be utilised
i. Within 2 years from tr. in case of purchase
ii. Within 3 years from tr. in case of construction
 Amount not untilised within the above time limit
o To be charged as LTCG in the P.Y. in which the
period of 3 years from the date of transfer of OA
expires 25

26. … If NA is transferred
 If the New Asset is transferred after 3 Years of
Purchase/construction
 Regular Treatment of ICA
 If the New Asset is transferred within 3 Years of
Purchase/construction
 If CA of NA < LTCG arising out of transfer of OA
oCA of NA = NIL
 If CA of NA > LTCG arising out of transfer of OA
oCA of NA = CA of NA - LTCG
 CG on transfer of NA + Deduction availed earlier
 Entire amount of Gain is treated as STCG 26

27. Section 54 EC [Cap. Asset Spec. Asset]
 Entitlement :
 Any assessee
 Any Long Term Capital Asset (OA) transferred on
or after 01-04-2000
 Investment in :
 Specified Long Term Asset (NA)
o NHAI, RECL & No 80C Max. 50L in a F.Y.
 Investment within:
 Within 6 months from the date of transfer of the OA
 Minimum Period of Holding of NA : 3 Years
 Deduction available :
27
 Amount of investment to be deducted from LTCG

28. Section 54F [Any CA Res. HP]
 Entitlement :
 Individual & HUF
 Any Long Term Capital Asset
 Investment in :
 A Residential House Property (NA)
 Investment within:
 Purchased
o One Year before or Two years after
 Constructed
o Three years after
 Deduction Available :
 Proportionate to net consideration received
28

29. …… Calculation …
Amount Invested
Deduction LTCG
= X
Net Consideration
29

30. …… Investment …
 Unutilised amount to be invested in Capital
Gains Accounts Scheme, 1988 of a Public Sector
Bank on or before the due date for filing of
Return.
o Evidence to be filed with the return of income
 Amount to be utilised
i. Within 2 years in case of purchase
ii. Within 3 years in case of construction
 Amount not utilised within the above time limit
o To be charged as LTCG in the P.Y. in which the
period of 3 years from the date of transfer of30 OA
expires

31. … Amount not utilised …
 To be charged as LTCG in the P.Y. in which
the period of 3 years from the date of
transfer of OA expires.
Quantum of
such LTCG
=
Unutilised Amount
Amount of
original LTCG
X
Net Sale Consideration
31

32. … Conditions …
i. Must not own more than one Residential House Property
(OA), on the date of transfer, other than NA.
ii. Must not purchase any Residential House Property
within 1 year from the date of transfer, other than NA.
iii. Must not construct any Residential House Property
within 3 years from the date of transfer, other than NA.
 No deduction will be allowed in the first place, if
condition (i) is not fulfilled.
 Failure to maintain either condition (ii) or (iii) means the
entire amount of deduction will be charged as LTCG in
the P.Y. in which the condition is broken. 32

33. … If NA is transferred
 If the New Asset is transferred after 3 Years of
Purchase/construction
 Regular Treatment of ICA
 If the New Asset is transferred within 3 Years of
Purchase/construction
 Exemption allowed earlier will now be taxed as
LTCG in the P.Y. in which the NA is transferred
 Plus
 Capital Gain on transfer of NA as STCG
33

34. Please remember
Exemption are either LTCG based
or
NSC based
 In case of NSC based exemption the
quantum of exemption is allowed on pro
rata basis
34

35. Other Important Sections
 Sec. 51 Treatment of retained advance
 WDV or CA will be reduced by the quantum of such
confiscated advance before Indexation is done
 Sec. 55A Reference to Valuation Officer
 Sec. 10(38) No CG on transfer of any equity
shares sold on or after in 01-04-2004 and is a
LTCA
35

36. CALCULATION OF TAX …
 For shares or unit of equity oriented fund
traded through a recognised stock exchange.
1. STCG is to be taxed @ 10%. Sec. 111A.
2. LTCG is exempt. Sec. 10(38).
 Other than shares
1. STCGs are to be taxed at normal rate.
2. LTCGs are to be taxed @ 20% Sec. 112.
36

37. … CALCULATION OF TAX
 For STCG on shares and all LTCG - where
special rates are applicable
1. No Deduction under Chapter VIA.
 However
1. Benefit of basic exemption is available.
37

38. 38