Income from Capital Gain

Capital Gain Section 45 of the Act, provides that –

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” and shall be deemed to be the
income of the previous year in which the transfer took place.
Transfer: Sec. 2(47):
Transfer in relation to a capital asset includes sale, Exchange, or relinquishment of the asset or
the compulsory acquisition there of under any law or conversion of the asset by the owner in
stock-in-trade of a business carried on by him or the maturity or redemption of a zero coupon
bond.
Capital Asset: Sec. 2(14):
Capital Asset means property of any kind (Fixed, Circulating, movable, immovable, tangible or
intangible) whether or not connected with business or profession.
Capital Assets in Negative list
(Capital Gain on the following assets not taxable under this head)
1. Any stock-in-trade, consumable stores or raw materials held for the purpose of his business
or profession;
2. Personal effects, i.e., movable property (including wearing apparel and furniture, excluding
jewellery, Archaeological collection, drawing, paintings etc.), held for personal use by the
assessee or any member of , is family dependent on him.
3. Agricultural land in India, not being land situated in the following: -
a) In any area which is comprised within the jurisdiction of a municipality or a cantonment
board and, which has a population of 10000 or more.
b) i) < 2 km & Population between 10k and 1 lakh
ii) < 6 km & Population between 1 lakh and 10 lakh
iii) < 8 km & Population more than 10 lakh
4. 6.5 per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, or National, Defense Gold
Bonds, 1980, issued by the Central Government;
5. Special Bearer Bonds, 1991, issued by the Central Government;
6. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 notified by the Central
Government.
Long Term Capital Asset (LTCA)
Short term Capital Asset (STCA)
 Benefit of indexation is not available in case of
following Long term capital assets
i)Bonds & Debentures (Except Capital index bonds & Sovereign gold bond)
ii) Shares of Indian co. purchased by using foreign exchange
Iii) Depreciable assets (Always short term)
Iv) Equity shares/Mutual fund units referred u/s 112A
Cost to the previous owner [Sec 49(1)]
Under following circumstances, while calculating capital gain, COST OF ACQUISITION &
COST OF IMPROVEMENT will be taken as such cost to the previous owner-
 Acquisition of property under gift or will;
 Acquisition of property under succession or inheritance
 Acquisition of property on partition of HUF
 In order to find out L.T. or S.T. capital gain, period of holding of previous owner shall
be taken into account.
 The benefit of indexation will be available from the year in which the asset was first
held by the previous owner.
Conversion of Assets into stock in trade
Advance money forfeited (Section 51)
 Practice Problems
Problem-1

Bought Purchase Improve Sale Brokerage on

Asset on Value ment Sold on Value sale

Plot 1.1.2022 50000 0 18.3.2023 60000

steel
Utensils 2.8.2013 25000 0 22.8.2022 12000
Silver
Utensils 1.3.2004 750000 0 1.2.2023 2800000 1%
Gold
coins 1.8.2017 250000 0 11.9.2022 320000
Problem-2

House property Silver Diamond

Date of acquisition 20.5.1990 10.3.2000 1.3.2008
Date of transfer 29.4.2022 20.12.2022 15.6.2022
Sale consideration (Rs) 1,400,000 800,000 1,200,000
Stamp duty value(Rs) 1,650,000
cost of acquisition 95,000 58,000 70,000
Fair Market value 1.4.2001 90,000 60,000 84,000
Cost of construction of floor 1 (1999-2000) 18,000
Cost of construction of floor 2 (2014-15) 40,000
Determine amount of capital gain chargeable to tax for the AY 2023-24

Problem-3

House property Gold Debentures

Date of acquisition 20.4.2005 20.7.2019 1.4.2009
Date of transfer 1.1.2023 20.12.2022 15.6.2022
Sale consideration (Rs) 1,850,000 800,000 1,200,000
Stamp duty value(Rs) 2,100,000
cost of acquisition 87,000 640,000 950,000
cost of improvement in 2015-16 110,000
Expenditure on transfer 15,000 2,000
Determine amount of capital gain chargeable to tax for the AY 2023-24
Problem-4
Mr. X purchased gold on 15.4.2011 for Rs. 1,00,000. He transfers this gold to his friend Mr. Y by gift
on 20.12.2018 (market value on this date was Rs. 170000) On 18.5.2022, Mr. Y transfers gold for a
consideration of Rs. 4,90,000. Determine capital gain chargeable to tax in the hands of Mr X and Mr.
Y.
Problem-5
Mr. A Convert his Capital assets acquired for an amount of Rs 50,000 in June, 2005 into stock
in trade in the month of November 2018. The fair market value of the asset on the date of
conversion is Rs 4,50,000. The stock in trade was sold for an amount of Rs. 6,50,000 in the
month of September 2022. What will be the tax treatment?
Problem-6
X Purchased a house property on 18.9.2003 for Rs. 100000. On April 4, 2004, he entered into an
agreement to sell the house to A for Rs. 650000 (After receiving an advance of Rs. 10000). On
A's failure to pay the balance within the stipulated period of 45 days, X forfeited the advance
money. X dies on Oct 12,2004 and Mrs. X (as per the will) got the property.
Mrs. X enters into an agreement on January 13, 2005 to sell the property to B after receiving
advance of Rs. 80000 and on B's Failure to pay the balance within 2 months, as per the agreement,
the advance money is forfeited by Mrs. X. Further Mrs. X enter into an agreement on 6.4.2022
to transfer the property to Mr C after taking advance of Rs 100000. Mr C could not pay the
balance consideration within the stipulated time and Mrs. X forfeits the advance money.
Mrs. X ultimately sells the property to Y on June 26, 2022 for Rs. 42,90,000.
Determine income from capital gain to i) Mr. X and ii) Mrs. Y for the AY 2023-24.

Problem-7

Problem-8
If cost of new house purchased is Rs. 12,00,000. What will be your answer?

Problem-9
Capital Bought Purchase Improve Sale Brokerage
Asset on Value ment Sold on Value on sale
Gold 2.8.2012 500000 0 1.3.2023 2500000 2%
What is the amount of capital gain if he purchased
new residential house on 1.7.22
a) For Rs.15,00,000
b) For Rs. 25,00,000

Problem-10
Mr. Aniket purchased an agriculture land on 1.1.2008 for Rs. 1,60,000 and stamp duty charges
paid for Rs. 10,000 for registration. The agricultural land is situated within local limit of Jabalpur
municipality.
On 1st August 2022 the said land was sold for Rs. 12,50,000 and brokerage was paid @ 1%. On
1st January 2023 he purchased a new agriculture land for Rs. 6 lakhs and paid Rs. 20000 for its
registration.
Compute taxable capital gains for the Assessment year 2023-24.
Problem-11
Mr. Rajendra Joshi sold a house for Rs. 20 lakhs on 1.12.22.
The house was constructed by him in 1991 at a cost of Rs. 1.50 lakh and
being used for own residence. After construction he spent Rs. 14,000 in 2007-08 on the
improvement of the house. He also spent Rs. 5,000 per year on normal repairing and painting
of the house.
He has invested Rs. 2,00,000 in specified bonds of National Highway authority of India on dt
1.3.2023.
Compute his taxable capital gains. He paid 3% brokerage and other expenses Rs. 10000 on
selling the house. On April 2001, the fair value of the house was Rs. 5 lakh.
Problem-12
X Enterprises (Sole proprietorship) has a building acquired on 17.8.2020 for Rs. 5,00,000.
The assessee was tenant earlier used the building for industrial purpose since last 7 years and
even after purchase it is continuously used for industrial purpose. Such building is compulsorily
acquired by Govt. at an agreed value of Rs. 12,00,000 as on 15.7.2022. The compensation was
received on 1.3.2023. The WDV of the block (consist of 3 building) as on 1.4.2022 is Rs.
7,50,000.
Determine the amount of capital gain chargeable to tax for the A.Y. 2023-24 assuming that the
organisation has acquired a new building for industrial purpose for Rs. 2,00,000 as on 31.3.2023.
Problem-13
X (43 years) purchased a house property on July 17, 1999 for Rs. 45,000 (in addition he paid
stamp duty at the rate of 12 per cent on stamp duty value of Rs. 50,000). Fair market value of
the property on April 1, 2001 is Rs. 48,000. X incurred the following expenses —
a. Construction of a room on the ground floor during 1999-2000 Rs. 30,000
b. Renewals/reconstruction in 2019-20 for Rs. 40,000
The property is transferred on April 6, 2022 for Rs. 87,00,000 (stamp duty value is Rs.
99,00,000 on which the purchaser has paid stamp duty at the rate of 9 per cent).
X made the following investments —
1. On April 1, 2022, X purchased Rs. 10,00,000 NHAI bonds for availing of exemption under
section 54EC.
2. On March 31, 2022, X purchased a residential house property in Pune for Rs. 13,00,000. In
addition, he paid stamp duty at the rate of 6 per cent on stamp duty value of Rs. 15,00,000.
3. On June 30, 2022, X constructed first floor in Pune property by spending Rs. 2,70,000.
4. On December 8, 2022. X purchased Rs. 8,00,000 REC bonds for availing of exemption
under section 54EC.

Problem-14
During the previous year 2022-23, X transfers the following assets –
1. On April 30, 2022, he transfers a personal computer for Rs. 60,000 (it was purchased
for Rs. 58,000 on January 1, 2022).
2. On June 15, 2022, he transfers personal jewellery for Rs. 18,00,000 (purchased during
2007-08 for Rs. 80,000). To avail of exemption, he has invested Rs. 18,00,000 in
purchasing new jewellery on the same day.
3. On June 18, 2022, he transfers a Tagore painting for Rs. 58,00,000 (purchased during
2005-06 for Rs. 24,00,000). Out of the sale consideration, X purchases on the same day
a Raja Ravi Verma painting for Rs. 40,00,000 and NHAI bonds of Rs. 6,00,000.
4. On July 6, 2022, he transfers his personal car for Rs. 2,50,000 (this car was purchased
in 2007 from second hand market for Rs. 80,000 and he spent Rs.1,00,000 on renewal
of the car) . On the same day out of the sale consideration, X purchases Rs. 1,00,000
REC bonds.
Find out the amount of capital gain chargeable to tax for the assessment year 2023-24.
Problem-15
Mr X had transferred jewellery on 10.7.2021 (Sale consideration Rs 40,00,000, index cost of
acquisition Rs 10,00,000 and long term capital gain 29,90,000). He purchased a residential house
property on 1.6.2021 for Rs 45,00,000 in Ranchi and availed of full exemption in the AY 2021-
22 u/s 54F.
On 17.9.2022, X transferred Ranchi property for Rs. 42,00,000 (Stamp duty valuation Rs
46,30,000).
Determine Capital gain for the AY 2023-24.

Problem-16
Mr. Rajesh purchased 1000 shares of Akash (P) Ltd. @ Rs 12 per share as on 1.8.1998.
Company declared one bonus share for every two shares held on 31.3.2000. As on 7.7.2006,
Rajesh got 500 shares of the same company as gift from his friend Mr. Rajendra (Rajendra
acquired such shares on 1.4.2001 @ Rs 14 per share).
As on 1.3.2022, company further declared one bonus share for every five shares held.
On 1.1.2023 Rajesh sold all the shares @ 50 each.
Compute capital gain of Mr. Rajesh for the A.Y. 2023-24.

Problem-17
Mr. Raunak purchased 1000 shares of Dey (P) Ltd. @ Rs 12 per share as on 1.8.2020. As on
1.5.2022, company declared one right share for each share held @ Rs 15 each. Mr Raunak
renounce 40% of such right in favour of Miss Rani @ Rs 2 per share and for balance he
subscribed to the company.
On 1.7.2022 Mr Raunak and Miss Rani sold all the shares to one of their friend @ Rs 50 each.
Find capital gain for both.

Problem-18
Mr. Hemant Gaur, an Indian resident, transfer following assets during the financial year 2022-
23. Compute taxable income from capital gain for the A.Y. 2023-24.
1. Transferred 100 debentures of L.K. Industries on dt 5.8.2022 @ Rs. 242 each. These
debentures were purchased on dt 8.3.2018 @ Rs. 100 each.
2. Block of assets (3 Computers & printer) balance as on 1.4.2022 was Rs 1,20,000 one new
laptop was purchased for Rs. 50,000 on 12.5.2022. Old computers sold for Rs. 2,00,000
on 1.9.2022.
3. Mr. Hemant and his brother were joint owner of a big house which was constructed by
them with equal contribution on 1.11.2010 for Rs. 50 lakhs. This complete house was
sold them on dt. 1.1.2023 for Rs. 3 crores. Mr. Hemant has purchased a new flat on dt.
27.2.2023 for Rs. 60 lakh and registration charges paid on this flat was Rs. 4,00,000.
4. Father in law of Mr Hemant had gifted 100 silver coins on dt 7.7.2017 (which was
purchased by father in law on 10.10.2012 @ Rs. 500 each.). 50 silver coins sold by Mr
Hemant for Rs. 1,00,000 on dt 7.11.2022. The fair market value of these coins on
7.7.2017 was Rs. 600 each.
5. Mr Hemant had rich collection of reading book (500 books), total cost of these books on
1.1.1999 was Rs. 1,80,000 (Fair market value on 1.4.2001 Rs. 1,50,000) convert into
stock in trade on dt. 8.4.2022 at a flat price of Rs. 400 each.