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Income From Capital Gain

Income From Capital Gain

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Published by Dipock Mondal

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Published by: Dipock Mondal on Oct 11, 2012
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Income from Capital Gain
Definition of Capital Asset
Mainly Capital asset means “
all tangible property which cannot easily be converted into cash and which is usually held for a long period, including real estate ,equipment, etc
”.Another word we can say, Capital asset means an item that we own for investment or personal purposes, such as stocks, bonds, or stamp collections. The saleof a capital asset produces a capital gain or a capital loss. Assets we use in our businessand inventory are not capital assets.
Conditions Need To Fulfill To Be Taxable System
 Under the section 31 of company act, 1994 a capital gain needs to fulfill the followingconditions to be taxable system:
It will arise from sale or transfer of capital asset.
Title of the property must be transferred to the purchaser.
It will be taxable in the year of transfer unless it has been re-invested inapproved fields.
Capital loan, if any, be eligible for treatment under section 40 of company act,1994 as set off and carry forward or losses.
System of tax-exempted transfer for capital assets
Under section 2(66) of I.T. Ordinance, 1984 provides that transfer in relation to capitalassets includes the sale, exchange or relinquishment of assets or the extinguishments of any right therein, but does not include:
Any transfer of the capital asset under a gift, bequest, will or an irrevocabletrust;
Any distribution of the assets of a company to its share holders on itsliquidation; and
Any distribution of capital assets on the dissolution of a firm or other association of persons or on the partition of a Hindu Undivided Family.
Further, it has also be provided through amendment that transfer of holdingcompany’s assets to subsidiary company will also be exempted from chargingcapital gains subject to the following:
Total share capital of subsidiary company shall remain under the controlof holding company.
The subsidiary company will be situated in taxable territory (i.e.Bangladesh); and
The subsidiary will be registered under Companies Act, 1994 of Bangladesh.
Computation of Capital Gains
The income under the head “Capital gains” shall be computed after making thefollowing deductions from the full value of the consideration received or accruing fromthe transfer of the capital asset or the fair market value there of, which ever is higher namely;a)Any expenditure incurred solely in connection with the transfer of the capitalasset. b)The cost of acquisition of the capital asset and any capital expenditure incurredfor any improvements thereto but excluding any expenditure in respect of whichany allowance is admissible under any provisions of section 23 (deductionsfrom interest on securities, sec 29 (deduction from income arising from businessor profession) and sec 34 (deduction from income of other sources).In this connection cost of acquisition means;
Where it was acquired by the assesses by the purchase, the actual cost of acquisition and
Where it became property by succession, inheritance, bequest, gift,irrevocable trust, dissolution of company or firm, the actual cost of acquisition to the previous owner of the capital asset as reduced by theamount of depreciation.In this connection it is to be noted that, if in the opinion of D. C. T, transfer pricehas been shown less than market value than we can take following sections.
If price shown seems to be at least 15% less than market value, we withthe permission of inspecting join commissioner of taxes computed fair market value.
If price seems to be less at least 25%, we can arrange purchase of thecapital by the government.
“Tax Rate” & “Capital Loss”.
Tax Rate:
Tax is a compulsory levy imposed by the government and tax rate means afixed amount of money or tax that is charged by government and paid by people for some factors such as earning, purchase, sales, salary etc.Mainly, which rate is imposed on specific purpose by tax by government is called taxrate.When government selected the tax rate then government able to measure or calculatethe revenue and it is a large source of income of government. When income is high, thetax rate is high, government are levied according to the ability of the individual to paywhich is one of the feature of good tax rate system.
Capital loss:
If capital loss arises such loss will be set-off and carry forward as per sec 40 of the I.T. Ordinance 1984. In such a case if losses arise in this head in anincome year it can be set off against income of other capital profit head. If there is noother head it can be carry forward for next year/years to set off. But if losses are notmore than tk.5000 it can not be carry forwarded and if it exceeds tk.5000, the excessamount is eligible for carry forward.

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