Work Sheet

Computation of Income under the head “Capital Gains”

Question 1:
X purchases a house property for Rs.76,000 on June 30, 1977.The following
expenses were incurred by him for making addition/ alteration to the house
property:
a. Cost of construction of first floor in 1985-86 Rs.1,10,000
b. Cost of construction of second floor in 2003-04 Rs.3,40,000
c. Alteration/ reconstruction of the property in 2012-13 Rs.2,90,00
Fair market value of the property on April 1, 2001 is Rs.4,50,000.
The house property is sold by X on June 15, 2020 for Rs.99,50,000
(expenses incurred on transfer: Rs.10,000)
(CII for 2001-02: 100; for 2003-04: 109; for 2012-13: 200; for 2020-21: 301)
Compute taxable capital gain.

Solution:
Computation of long-term capital gain
Particulars Rs Rs
Full value of consideration 99,50,000
Less:
Expenses on transfer 10,000
Indexed cost of acquisition (Note 1) 13,54,500
Indexed cost of improvement (Note 2) 13,75,349 27,39,849
Long-term Capital Gain 72,10,151

Notes:
1. Indexed cost of acquisition = 4,50,000 x 301/100 = Rs.13,54,500
Fair market value on 1-4-2001 is taken as the cost of acquisition.
Actual cost being lower than the fair market value on April 1, 2001 is
ignored.
2. Indexed cost of improvement:
Rs.
Construction of first floor in 1985-86 (expenses incurred
prior to April 1, 2001 are not considered) Nil
Construction of second floor in 2003-04
(3,40,000 x 301/109) 9,38,899
 Alteration/ reconstruction in 2012-13
(2,90,000 x 301/200) 4,36,450
Cost of Improvement 13,75,349

Question 2:
X sells the following capital assets during the previous year 2020-21:
Non-listed House
shares property
Sales consideration 24,00,000 6,80,000
Year of acquisition 2002-03 2005-06
Cost of acquisition 2,90,000 18,000
Cost of improvement in 2016-17 ---- 70,000

CII: (2002-03) - 105; (2005-06) – 117; (2016-17) – 264; (2020-21) – 301

Compute taxable capital gains.
Solution:
Computation of capital gain
Non-listed House
Particulars shares property
Full value of consideration 24,00,000 6,80,000
Less: Indexed cost of acquisition* 8,31,333 46,308
Indexed cost of Improvement** Nil 79,811
Long-term capital gain 15,68,667 5,53,881
Income under the head “Capital Gains” 21,22,548

Working notes:
*Indexed Cost of acquisition of shares – (2,90,000 x 301)/105 = 8,31,333
Indexed cost of acquisition of house property – (18,000 x 301)/117 = 46,308
**Indexed cost of improvement of House property – (70,000 x 301)/264 =
79,811
Question 3:
X purchases a house property for Rs.26,000 on May 10, 1982. He gets the first
floor of the building constructed in 1987-88 by spending Rs.40,000. He dies on
September 12, 1998. The property is transferred to Mrs. X by his will. Mrs. X
spends Rs.30,000 and Rs.26,700 during 1999-00 and 2005-06 respectively for
renewals/reconstruction of the property. Mrs. X sells the house property for
Rs.21,50,000 on March 15, 2021 (brokerage paid by Mrs. X is Rs.11,500). The
fair market value of the house on April 1, 2001 is Rs.1,60,000.
CII: 2001-02: 100; 2005-06: 117; 2021:301.
Compute Income taxable under the head “Capital Gains”
Solution:
Computation of capital gains
Particulars Rs
Full value of consideration 21,50,000
Less: Expenditure on transfer (brokerage) 11,500
Indexed cost of acquisition (Note 1) 4,81,600
Indexed cost of improvement (Note 2) 68,690 5,61,790
Long-term capital gain 15,88,210

Note 1: Cost to the previous owner – Rs.26,000

Fair Market value on April 1, 2001 – Rs. 1,60,000
(Higher of the two Rs.1,60,000 is taken as cost of acquisition)
Indexed cost of acquisition = (1,60,000 x 301)/100 = Rs.4,81,600
(2). Cost of improvement prior to April 1, 2001 (not considered)
Cost of improvement incurred in 2005-06 - Rs.26,700
Indexed cost of improvement = (26,700 x 301)/117 = 68,690
Question 4:
Mr. Kishore purchases 500 equity shares of Rs.10 each for Rs.40 per share in
2007-08 and incurs an expenditure of Rs.400 as brokerage. In May 2011 he
receives 100 bonus shares. In September 2020 he gets 100 right shares for Rs.20
each. He sold 100 bonus shares in Nov. 2020 at Rs.90 per share and 100 rights
shares @ 30per share in Dec. 2020. Find out the capital gains for the AY: 2021-
22. The CII for 2011-12 is 184 and for 2020-21 it is 301.
Solution:
Computation of Capital Gains

Sale Proceeds of 100 Bonus Shares 9,000

Less: Cost of acquisition of 100 Bonus shares Nil
Long-term capital gain 9,000
Sale proceeds of 100 rights shares @Rs.30 3,000
Less: Cost of acquisition of 100 rights shares @Rs.20 each 2,000
Short-term capital gain 1,000

Question 5:
X Ltd. owns the following assets.
Units of Mutual fund House Property
(Debt-oriented)
Cost of acquisition Rs.1,40,000 Rs.70,000
Date of acquisition April 10,2014 March 10, 2019
These capital assets (no depreciation is claimed) are transferred by X Ltd. to its
wholly-owned Indian subsidiary company – S Ltd. on April 01, 2019. On July
18, 2020, these assets are transferred by S Ltd. fore a consideration of
Rs.4,50,500 (units: Rs.2,15,700 and house property Rs. 2,34,800). Compute the
Capital Gain chargeable to tax in the case of S Ltd. for the assessment year:
2021-22.
Solution:
Units House Property
Sale consideration 2,15,700 2,34,800
Less: Cost of acquisition to the previous owner ……… 70,000
Indexed cost of acquisition (1,40,000 x 301/240) 1,75,583 ………
Short-term capital gain …… 1,64,800
Long-term capital gain 40,117 ………