Capital Gains

The gains arising from transfer of Capital Asset will be chargeable to tax under the head capital gains
u/s 45

Capital Assets + Transfer = Capital Gains (C.G)

Capital Asset u/s 2(14) means:

Property of any kind held by assesse weather or not used for the purpose of his business/
profession

But does not include:

 Stock in trade used in business;

 Movable property used for personal purpose (except JADPASS);
 Agricultural land in India not in urban area
 National Gold Bonds.

Transfer u/s 2(47) includes:

 Sale;
 Exchange;
 relinquishment of the asset;
 compulsory acquisition thereof under any law;
 Conversion of a Capital Assets held in business into a stock in trade;
 Transition of taking possession of immovable property under section 53A of TOPA act, 1882;

In capital gains there are two kinds of gains based on period of holdings:

Short term capital gains u/s 2(42A) Long term capital gains u/s 2(29A)

Capital assets held less than 36 months Capital assets held more than 36
months
24 months holding period applicable for:
Any capital asset not a short term asset.
 Unlisted shares;
 Immovable property.

12 months holding period applicable for:

 Listed shares and securities;

 Units of UTI;
 Equity oriented funds;
 Zero coupon bonds.
Charging section under section 45 –

 Any profits or gains arising from the transfer of a capital asset effected in the previous year shall
be chargeable to income-tax under the head "Capital gains"
 Any person receives any money or other assets under an insurance from an insurer on account
of damage to, or destruction of, any capital asset, as a result of –

 flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or

 riot or civil disturbance; or
 accidental fire or explosion; or
 action by an enemy
 Transfer by way of conversion by the owner of a capital asset into stock-in-trade of a business;
 Transfer of a capital asset by a person to a firm or other association of persons or body of
individuals in which he is or becomes a partner or member, by way of capital contribution or
otherwise, shall be chargeable to tax;
 Transfer of a capital asset by way of distribution of capital assets on the dissolution of a firm or
other association of persons or body of individuals or otherwise, shall be chargeable to tax;
 Capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory
acquisition under any law, the compensation or the consideration for such transfer is enhanced
or further enhanced by any court, shall be chargeable to tax;
 Where the capital gain arises to an assessee, being an individual or a Hindu undivided family,
from the transfer of a capital asset, being land or building or both, under a specified agreement,
the capital gains shall be chargeable to income-tax as income of the previous year in which the
certificate of completion for the whole.

Mode of computation of capital gains u/s 48

In case of Short term capital gains: In case of Long Term capital Gain:
Sale value - XXX Sale value - XXX
Less: expenses related to sale - XXX Less: expenses related to sale - XXX
Net Sale Consideration - XXX Net Sale Consideration - XXX
Less: Cost of acquisition - XXX Less: Indexed Cost of acquisition - XXX
Less: Cost of Inprovement - XXX Less: Indexed Cost of Improvement XXX
Capital gains before exemptions - XXX Capital gains before exemptions - XXX
Less: Exemption u/s 54 - XXX Less: Exemption u/s 54 - XXX
Capital Gains - XXX Capital Gains - XXX