This document summarizes key aspects of capital gains and income tax law in India. It discusses that capital gains are profits from the transfer of capital assets and outlines what qualifies as a capital asset. It then explains the different types of capital assets and how to calculate short-term and long-term capital gains. The document also summarizes the taxation of other sources of income not covered under other heads. It discusses allowable deductions and situations where income may be clubbed or losses can be set off. The overall summary provides an overview of capital gains taxation and other income tax concepts in India.

1. INCOME TAX LAW AND
ACCOUNTS - II
MUTHUMON.T.R
Assistant Professor
Department of Commerce
NSS College Pandalam

2. CAPITAL GAINS
Main points
• Profits or gains earned from the transfer of
capital assets are assessed under this head
• Elements essential for a transaction to be
assessed under this head
– There should be transfer of asset
– The transferred asset should be a capital asset
– The transfer must be effected during the P/yr

3. • Assets
• Assets not considered as capital assets
-Stock in trade, consumable stores/ raw materials
-Personal effects like wearing apparel, furniture,
car, home appliances etc.
-Agricultural land in Indian rural areas.
-6.5% Gold bonds,
-Special bearer bonds
-Gold deposit bonds
-Deposit certificate issued under Gold
monetisation scheme

4. • Kinds of Capital assets
-Short term capital assets
-Long term capital assets
Short term capital gains: Capital gain resulting
from the transfer of short term capital asset
Long term capital gains: Capital gain resulting
from the transfer of Long term capital asset

5. • Transfer
• Year of chargeability
• Transactions not regarded as Transfer
• Full value of consideration
• Computation of Capital gains:
Short term capital gain
1) Find out the full value of consideration and deduct
a) Expenditure incurred wholly and exclusively in connection with
the transfer
b) Cost of acquisition
c) Cost of improvement
2) Make deductions in sections 54B, 54D, 54G and 54GA..
3) The balance amount is short term capital gain.

6. Long term capital gain:
1) Find out the full value of consideration and
deduct
a) Expenditure incurred wholly and exclusively in
connection with the transfer
b) Indexed Cost of acquisition
c) Indexed Cost of improvement
2) Make deductions in sections 54B, 54D, 54G and
54GA..
3) The balance amount is Long term capital gain.

7. COST INFLATION INDEX WITH BASE YEAR 2001-02
YEAR COST INFLATION INDEX
2001-02 100
2002-03 105
2003-04 109
2004-05 113
2005-06 117
2006-07 122

8. • Cost of acquisition
• Cost to the previous owner
• Cost of bonus share
• Cost of acquisition of shares in amalgamated
company
• Cost of acquisition of converted shares or
debentures.
• Cost of acquisition on rights issue of share or
security.
• Cost of acquisition on consolidation or conversion

9. INCOME FROM OTHER SOURCES
• Income of an assessee during the previous year which
is not attributable to a particular income is assessed
under the head “ Income from other sources”
• Incomes chargeable under “Other sources”
– Dividends
– Winnings from lottery, crossword puzzles, gambling,
betting, card games, horse races etc
– Fund of employees
– Interest on securities, if not chargeable under the head
Profits and gains of Business or Profession.
– Income from Machinery, Plant, furniture etc
– Amount received under ‘Keyman insurance policy’

10. • Situations where gift is not taxable
• Relatives for the purpose of tax on gift.
• Incomes commonly included under “Other sources”
• Deductions allowable from ‘Income from other
sources’
• Certain expenses or payments not deductible.
• Ex-interest transactions of securities
• Income from Deep discount bonds
• Bond washing transactions
• Deduction of tax at source

11. • Rates for TDS
– On interest other than interest on securities- 10%
– On winnings from lotteries, crossword puzzles, card
games - 30%
– On income by way of winnings from horse races -30%
– On income by way of insurance commission – 10%
Education cess
Surcharge
Grossing up of interest on securities
Grossing up of Income from lottery, cross word puzzles

12. CLUBBING OF INCOME
• Meaning
• Income belonging to certain other persons will be
compulsorily added to the income of an assessee in some
cases. This process is called CLUBBING OF INCOME.
Income of spouse
Income from asset transferred
Income of daughter in law
Income from asset transferred to a person or association of
persons for the benefit of spouse
Income from assets transferred to a person or AOP for the
benefit of son’s wife.
Income from business

13. • Income of a minor child
• Cross transfers.
• Income from converted property
• Benami transaction

14. SET OFF OF LOSSES AND CARRY
FORWARD AND SET OFF OF LOSSES
• Set off of losses
• Set off of loss from one head against income from
another head.
• Losses of AOP or BOI
• Set off of losses is not allowed against exempted
incomes
• Situations where set off is not allowed.
• Unabsorbed depreciation.
• Practical problems

15. THANK YOU