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RETAI
LMODULE-
E
CHAPTER21:
MORTGAGEADVI
CE
CAPI
TALGAI
NBASEDCASESTUDY
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Whati
scal
ledCapi
talgai
n?
WhenweTransf
erapr
oper
tyorsel
laproper
ty
t
henthepr
ofi
twegeti
scal
ledCapi
talgai
n.
*Onpur
chasewecal
litacqui
sit
ion&onsal
ewe
cal
li
ttr
ansfer
.
Example1: Aj
ayPurchaseahouseforRs.20Lakh
andafter10YearssellI
tforRs.50Lakht
henHis
capi
talgainwil
lbe30Lakh.
Example2:Vi
jaypurchase1000SharesforRs.10
Eachin2001andselltheseshar
esatRs.50Each
i
n2012t henhiscapi
talgai
nwillbe50000-
10000=40000
Whati
scal
ledCapi
talAsset
?
Capit
al AssetmeansanassetorPropert
ywhi
ch
canbemov abl
eorImmovable,t
angibl
eor
i
ntangible.
Exampl
e:
1-
Landsal
eandpur
chase
2-
Pref
erenceshar
e
3-
Gov
.secur
it
ies
4-
Mut
ual
funds
5-Zer
ocouponbond
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Whati
snotcount
edi
nCapi
talAsset
?
1.
Stocki
ntr
ade(
notpur
chasey
et)
2.
Consumabl
eSt
ores
3.
Rawmat
eri
al
4.
Agri
cult
urel
and(si
tuat
edout
sidemuni
cipal
ornoti
fi
edarea)
5.
Ifl
andi
str
ansferredfr
om fat
hertoson,
then
wedonotconsideritf
orcapi
talgai
n
6.
Personal ef
fectsl
ikeJewelr
y,costlystones,
andornament smadeofsi l
ver,gold,plat
inum
oranyot herpreci
ousmetal,archaeological
col
lecti
ons, drawi
ngs,pai
nti
ngs, scul
pturesor
anywor kofar t
Ty
pesofCapi
tal
Asset
:(TwoTy
pes)
1-
Shor
tTer
m Capi
talAsset
:
Capi
talassethel
dfornotmorethan36mont hs
i
mmedi atel
ypri
ortothedateoft
ransfer
(sal
e)
shal
lbedeemedasshor t-
ter
m capi
talasset
.
Howev er
,fol
lowi
ngassetshel
dfornotmoret
han
12mont hsshallbet
reat
edasshort–ter
m
capi
talasset
s:
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a)Equit
yorpref
erencesshar
esinacompany
whicharel
ist
edinanyrecogni
zedst
ock
exchangei
nIndi
a
b)Ot
herl
ist
edsecur
it
ies
c)Uni
tsofUTI(
Mut
ual
Fund)
d)Uni
tsofequi
ty-
ori
ent
edf
unds
e)Zer
ocouponbonds.

Note:Unl
ist
edsharesandi mmov ableproper
ty
(
beinglandorbuil
dingsorboth)heldfornotmor e
t
han24mont hsi
mmedi atel
ypri
ort othedateof
t
ransfer
(sal
e)shal
lbet r
eatedasshor t-
ter
m asset.

2-LongTer
m Capi
talAsset
:
Capit
al Assetthatheldformorethan36months
or24mont hsor12mont hs,
asthecasemaybe,
i
mmedi atelyprecedingthedateoftr
ansf
er(
sal
e)
i
streatedasl ong-t
erm capit
alasset
.
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Not
e:Shar
esar
esol
dinFI
FOmanner
.
Exampl
e:
Ram buy1000shar
eofJi
oin2012
Agai
nbuy2000shar
esofJi
oin2014
Agai
nbuy5000shar
esofJoi
in2015
Agai
nbuy1500shar
esofJoi
nin2016
Nowifhesel
ls4000shar
esi
n2020t
henwhi
ch
shar
eswil
lbesold?
1000shar
eofJi
oin2012[
fi
rstt
hiswi
llbesol
d
1000]
2000shar
esofJi
oin2014[
secondt
his2000]
Agai
nbuy5000sharesofJoii
n2015[
thenr
est
1000shar
efr
om these5000shar
eswil
lbesol
d]

Costi
nfl
ati
oni
ndex(
CII
):
Thi
sdecl
aredbyGov
t.eachy
ear
I
tInf
orm aboutt
hei
nfl
ati
oni
nthatpar
ti
cul
ary
ear
.
Exampl
e:
CI
Ifor2017-
18i
sequalt
o100
CI
Ifor2018-
19i
sequalt
o110
CI
Ifor2019-
20i
sequalt
o115
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I
ndexcostofacqui
sit
ioni
nthey
earofsal
e=
Costofacqui
sit
ion*[
CIIt
ransf
er/
CIIacqui
sit
ion]

Ques.1IfRam buy1000shareon24Apr il2017

forRs.5eachthenwhi chCI
Iwillbeappl
icable
andifhesell
siton6May2019atRs.20each
thenwhichCIIwil
lbeappli
cable.Al
socalculat
e
Indexcostofacqui
sit
ionintheyearofsale.
CI
Ifor2017-
18i
sequalt
o100
CI
Ifor2018-
19i
sequalt
o110
CI
Ifor2019-
20i
sequalt
o115

Sol
uti
on1:
Gi
ven:
Ram buy1000shar
eon24Apr
il2017f
orRs.5
each
CI
Iofacqui
sit
ionwi
llbeof2017-
18(
110)
[
01-
04-
2017t
o31-
03-
2018]
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Costofacqui
sit
ion=5*
1000=5000Rs.
Gi
ven:
Hesel
lsi
ton6May2019atRs.20each
CI
Ioft
ransf
erwi
llbeof2019-
20(
115)
[
01-
04-
2019t
o31-
03-
2020]
Costofsal
e=20*
1000=20,
000Rs.

I
ndexcostofacqui
sit
ioni
nthey
earofsal
e=
Costofacqui
sit
ion*[
CIIt
ransf
er/
CIIacqui
sit
ion]
I
ndexcostofacqui
sit
ioni
nt hey
earofsal
e=
5000*
[115/
110]=Rs.5227.27

Casest
udy
:
Mr.Mohanhadinher
it
edapr oper
tyofmarket
val
ueofRs.50Lakhfrom hi
sgrandf
atheron28
December2009.
Hisgrandf
atherpur
chasedt
hispr
oper
tyon01
September2001forRs12Lakh.
Mr.Mohansol
dthi
spr
oper
tyf
orRs70Lakhon
10Januar
y2017.
Comput
ethecapi
talgai
ns/
loss.
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CostI
nfl
ati
onI
ndexf
or
2001-
2002:426,
2009-
2010:632&
2016-
2017:1125

Sol
uti
on:
Acqui
sit
ionpr
iceofpr
oper
ty=12,
00,
000(
01Sep
2001)
Marketv
alueofi
nher
it
edpr
oper
ty=50,
00,
000(
28
Dec2009)
Sal
esconsi
der
ati
on=70,
00,
000(
Jan2017)
CI
I–426(
2001-
02)
CI
I–632(
2009-
10)
CI
I–1125(
2016-
17)
I
ndexCostofacquisi
ti
on=Costofacqui
sit
ion*
[
CIIt
ransf
er/
CIIacqui
sit
ion]

I
ndexCostofacqui
sit
ion=12,
00,
000X1125/
426
=31,
69,
014
Capi
tal
gai
n=70,
00,
000–31,
69,
014
=38,
30,
986