PRESENTED BY:-Kanchan Narayan

BBA-6TH Sem.

CAPITAL GAINCAPITAL GAIN

What Is Capital Gain??What Is Capital Gain??

A capital gain is a profit that results from investments into a capital assets, such as stocks,bonds or real estate, which exceeds the purchase price.

It is the difference between a higher selling price and a lower purchase price, resulting in a financial gain for the investor.

Elements Of Capital Gain:-Elements Of Capital Gain:-

Capital assets

Transfer of capital assets

Computation of capital gain

Capital AssetsCapital Assets

It means property of any kind held by an assesses whether connected with his business, profession or not.

It may be moveable or immovable, tangible or intangible, fixed or floating etc.

It includes such as goodwill, leasehold right, jewellery, manufacturing license etc.

Types Of Capital Assets:-Types Of Capital Assets:-

Short-term capital assets

Long-term capital assets

Transfer Of Capital AssetsTransfer Of Capital Assets[sec.2(47)][sec.2(47)]

Sale Relinquishment of the assets Exchange Extinguishment of any right in an asset Conversion of asset into sock-in-trade by the owner Maturity or redemption of a zero coupon bond

Computation Of Capital Gain Computation Of Capital Gain [[sec.48(1)]sec.48(1)]

Short-term capital gain [sec.2(42B)]

STCG = Purchase Value - Current Asset Value

Long-term capital gain [sec.2(29)B]]

LTCG = Purchase Value - Current Asset Value

Format of STCGFormat of STCG:-:-

Sales considerationLess:-selling expenses

Net sale considerationConsiderationLess:-cost of acquisition cost of improvement

Short-term Capital Gain

Less:- limited exemptions Taxable STCGTaxable STCG

Format Of LTCG:-Format Of LTCG:-

Sales considerationLess:-selling expenses

Net sale consideration

Less:-indexed cost of acquisition indexed cost of improvement

long term capital gain

Less:- All exemptions Taxable LTCG

Tax On Capital GainTax On Capital Gain

Tax on short term capital gain

Tax on long term capital gain

Tax On Short Term Capital gainTax On Short Term Capital gain

It means transfer of shares on which security transaction tax has been charged [sec111(A)]

Applicable to• All assesseeCondition to be satisfied• STCA being an equity share in a company or a unit of an equity

oriented fund.• Transaction is chargeable to Security transaction tax. Tax Rate• STCG shall be taxed @15%+surcharge+education cess including

SHEC.

Tax On Long term Capital GainTax On Long term Capital Gain[sec.112(1)][sec.112(1)]

It means share on which transaction tax has been charged [sec.10(38)].Applicable to• All assessseeCondition to be satisfied• Any income arising from the transfer of a LTCA, being an equity share in

a company or a unit of an equity oriented fund.• Transaction is chargeable to Security transaction tax.Tax Rate• LTCG arising on transfer of Zero coupon bonds shall be calculated @10%

+surcharge+education cess+SHEC without indexation.

EXEMPTION - 54EXEMPTION - 54Section

Applicable to

Conditions

Time limit for acquisition of new assets

Deduction

Revocation of benefit

54

Individual or Huf

Assessee has transferred a long-term residential house, income of which is taxable under the head of Income From house property”.

It must acquire a new residential house within prescribed time limit.

For purchase within a period of 1yr. before, or 2 year after, the date of transfer.

For construction with in a period of 3 years after the date of transfer.

Investment in the new assets or Capital gain

If the newly acquired residential house is transferred with in 3 years from the date of acquisition of new assets, then the benefit availed earlier shall be revoked. Revoked income shall be reduced from cost of acquisition of new assets.

Exemption - 54bExemption - 54bSection

Applicable to

Conditions

Time limit for acquisition of new assets

Deduction

Revocation of benefit

54 B

Individual or Huf

Assessee must have transferred a capital asset being an agriculture land. Agriculture land must have been used by the individual or his parents for agriculture purpose for at least 2 yr. prior to its transfer.

With in 2 years after the date of transfer.

Investment in the new assets or Capital gain.

If the newly acquired residential house is transferred with in 3 years from the date of acquisition of new assets, then the benefit availed earlier shall be revoked. Revoked income shall be reduced from cost of acquisition of new assets.

EXEMPTION - 54ecEXEMPTION - 54ecSection

Applicable to

Conditions

Time limit for acquisition of new assets

Deduction

Revocation of benefit

54 EC

All assessee

Assessee must have transferred any long-term capital asset.

It acquires ‘long-term specified assets’.

Within 6 months after the date of transfer.

Investment in the new assets or capital gain.

Earlier benefit shall be revoked in such bond each transferred or converted into money within 3 year of its acquisition or a loan is taken security of the new asset within the said period. Revoked income shall be reduced from cost of acquisition of new assets.

EXEMPTION - 54FEXEMPTION - 54FSection

Applicable

Conditio

ns

Time limit

Deduction

Revocation of benefit

54F

Individual or Huf

Assessee must have transferred a long-term capital asset other than a residential house property. It must acquire a one residential house within prescribed time limit. It doesn’t purchase, within 2yrs, or construct, within 3yrs of transfer of the original asset

For purchase within a period of 1yr. before, or 2 year after, the date of transfer.

For construction with in a period of 3 years after the date of transfer.

Investment in the new assets*Capital gain/net sale consideration

Capital gain [net sale consideration=sale consideration – exp.on transfer

If the newly acquired residential house is transferred with in 3 years after the date of acquisition ,benefit availed earlier shall be revoked. Another residential house is purchased by the assessee within 2 yr. or constructed within 3 yrs.after the date of transfer of original asset.

QUESTION:-QUESTION:-

Mrs. Ritika acquired land on 1/4/77 for Rs.10,000. the fair market value as on 1/4/81 was Rs. 12,500. As on 1/4/2008, she sold such land for Rs. 1,40,000. Brokerage @1% of sale value was paid by her.

Compute capital gain of Mrs. Ritika for the A.Y. 2009-10.

CII- 2008-09=582

1981-82=100

Solution:-Solution:-

Working notes:-Expenses on transfer:-1% of Rs.1,40,000Indexed cost of acquisition:-Rs.12,500*582/100

PARTICULARS DETAILS AMOUNT

Sale consideration 1,40,000

Less:-Expenses on transfer 1,400

Net sale consideration 1,38,600

Less:-indexed cost of acquisition 72,750

indexed cost of improvement NIL 72,750

LONG TERM CAPITAL GAIN(65,850)