Tax Planning for Capital Gains · Tax Planning for new business, · Tax Planning and Financial Management, · Tax Planning and Managerial Decisions

1. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
MODULE-3
• Tax Planning for Capital Gains
• Tax Planning for new business,
• Tax Planning and Financial Management,
• Tax Planning and Managerial Decisions
Any profit or gain arising from the sale or transfer of a capital asset is chargeable to tax
under the head ‘Capital Gains’ Capital asset means any movable or immovable ,tangible or
intangible asset .
Capital Assets:-
1. Land, building., plot, flat, etc. immovable assets.
2. Furniture, Machinery, Plant etc. which are used for running the business.
3. Gold, silver, jewellery , Precious stones ,precious metals,
4. Shares, securities, Bond etc. held by the assesse as an investment.
5. Urban agriculture land which is situated in the local limits of Municipalty or
Cantonment Board or notified area populated not less than 10000.
6. Goodwill, patent,interest in firm etc.
Assets not treated as capital assets
1. Stock in trade
2. Personal effects
3. Agricultural Land in rural area
4. Gold Bonds
5. Special Bearer Bonds
6. Gold deposit Bonds
Types of capital Assets and Gains
• Short Term capital asset
• Long term capital asset
Determination of Short term or Long term
Assets Period of holding from the
date of acquisition
Nature of
capital asset
1. Land, building ,plot, (a) Upto 36 months Short term

2. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17:

3. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17:

4. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17:

5. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17:

6. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17:

7. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17:

8. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17:

9. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17:

10. INSTITUTE OF PROFESSIONAL EDUCATION AND RESEARCH, BHOPAL
ornaments ,gold,silver
,Precious ,metal etc.
2.Shares bonds
,units,debentures and other
securities
3. Depreciable assets
(b) More than 36 months
(a) Upto 36 months
(b) More than 12 months
Period of holding is immaterial
Long term
Short term
Long term
Short term
Computation of Capital Gains or loss on short term assets
Sales consideration
Less:- Aggregate amount of the following-
(i) Cost of acquisition(actual)
(j) Cost of improvement
(k) Transfer expenses
Computation of long-term capital gains Long-term capital gain arising on account of
transfer of long-term capital asset will be computed as follows :
Particulars Rs.
Full value of consideration --------
(i.e., Sales consideration of asset)
Less: Expenditure incurred wholly ---------
and exclusively in connection with
transfer of capital asset
(E.g., brokerage, commission, advertisement expenses, etc.) .
Net sale consideration
Less: Indexed cost of acquisition ---------
Less: Indexed cost of improvement if any ---------
Long-Term Capital Gains ---------
How to calculate Capital Gains on Shares?
Short-term capital gains can be computed by subtracting the following 3 items from the total
value of sale:
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Purchase price of the asset
Calculating the long-term capital gains
1. Brokerage or expenditure incurred in connection with the sale of the asset
2. Indexed purchase price of the asset
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s
value. The Government of India releases Cost Inflation Index, through which the indexed cost
can be estimated. The Cost Inflation Index (CII) from the fiscal year 1981-82 to 2016-17 are
available. Here’s the Cost Inflation Index (CII) from 2010-11 to 2016-17: