Unit-1 Sem-6 A Capital Gain

UNIT-1- A- CAPITAL GAINS
Introduction:
Any profit or gains arising on sale or transfer of a capital asset effected during the previous
year is treated as capital gain and is assessed to income tax whether the consideration is actually
received during the year or not. Thus the date of receipts and the method of accounting are
irrelevant for transfer purpose. Profit arising from the conversion of a capital asset into stock-
in-trade of a business carried on by an assessee will be chargeable to tax in the year in which
such stock is sold by him. Profit arising on sale of assets including goodwill by an individual
to a firm or by a firm to an individual is also made taxable.
Meaning of Capital Asset:
According to Sec. 2 (14) Capital Asset
1. Property of any kind held by an assessee, whether or not connected with his business or
profession.
2. Any securities held by a foreign institutional investor as per SEBI Act, 1992. The definition
shows that the term Capital Asset includes all kinds of property, movable or immovable,
tangible or intangible, fixed or circulating.
A. Any stock-in-trade consumable stores or raw materials held for the purpose of his business
or profession.
B. Personal effects that is to say, movable property, including wearing apparel, all types of
vehicles and furniture held for personal use by the assessee or any member of his family
dependent on him
C. Agricultural land in India, which is not an urban agricultural land
KIND OF CAPITAL ASSETS
For the purpose of income-tax assessment, capital assets are divided into two categories,
1. Short-term capital asset
2. Long-term capital asset

1. Short-term capital asset
Short-term capital asset means a capital asset which is held by an assessee for not more than
36 months on the date of transfer
I. For Financial asset
In the following cases an asset held for not more than 12 months (instead of 36 months) is
treated as short-term capital asset.
A. share or security listed in a recognized stock exchange in India
B. Zero coupon bonds
C. Units of UTI
D. Units of an Equity Oriented Funds
II. Unlisted Shares
Held for not more than 24 months ( instead of 36 months ) shall be treated as short term capital
Asset.
III. For immovable property being land and building or both:
Held for not more than 24 months ( Instead of 36 months) are treated as Short- term Capital
Assets.
2. Long-term capital asset
Long –term capital asset means an asset which is held by an assessee for more than 36 months
( for equity shares, preference shares, Zero coupon Bonds securities units etc. the period must
be of more than 12 months or for land and building 24 months ) immediately the date of its
transfer.
DEFINITION OF CAPITAL GAIN
According to Section 45 (1) any profits or gains arising from the transfer of a capital asset
effected in the previous year is chargeable to income-tax under the head ‘capita gains’.
It is deemed to be the income of the previous year in which the transfer takes place. It is
immaterial whether the profit is actually received during that year or not.
Meaning of ‘Transfer’: As per section 2 (47), Transfer, in relation to capital asset, includes
1. The sale, exchange or relinquishment of the asset
2. The extinguishment of any rights therein
3. The compulsory acquisition there of under any law or
4. In case of conversion of an asset into ‘stock-in-trade’
5. Where the possession of an immovable property is given as a part of a contract mentioned

U/c 53 (a) of the transfer of property Act 1882
6. Where the benefits arise due to acquisition of shares or by becoming members of a Co-
operative Society, Company or an Association person
7. In case of ‘Zero Coupon Bonds’ transfer is recognized on the date of its maturity or early
encashment.
TYPES OF CAPITAL GAIN
1. Short-term Capital Gain
When a capital asset has been held by the assessee for not more than 36 months ( in case of
financial assets not more than 12 months but in cash of unlisted shares and immovable property
being land and building or both not more than 24 months) on the date of transfer the profit
arising on its transfer is said to be short-term capital gain. Such capital gain is treated as normal
revenue income and is included in other taxable income. It is not subject to any special
treatment.
2. Long-term capital gain:
When a capital asset has been held by the assessee for more than 36 months ( in case of financial
Assets more than 12 months but in case of unlisted shares and immovable property being land
building or both for more than 24 months) on the date of transfer the profit arising out of its
transfer is termed long-term capital gain.
Illustration-1
On 15-11-2017, Shri Athavale ( an ordinary resident and Indian citizen) has sold his personal
jewellery for Rs. 17,04,000 and incurred Rs. 40,000 as valuation charges in connection with its
sales. The original cost of jewellery, bought in 1988-89 was Rs. 2,50,000 but its fair market
value on 1-4-2001 was Rs. 4,00,000.
On 10-2-2018, he has invested Rs. 5,00,000 in 3 years bonds of Rural electrification

corporation Ltd. Relevant cost inflation index of year 2001-02 and 2017-18 are 100 and 272
respectively.
Determine taxable capital gain for the A.Y 2018-19.
Computation of Taxable Capital Gain from Jewellery
P.Y. 2017-18 A.Y. 2018-19
Rs. Rs.
Sales value of Jewellery 17,04,000
Less: Specific Deductions
1. Selling expenses (Valuation expenses ) 40,000
2. Indexed cost of Acquisition [ 4,00,000 x 272/100] 11,28,000
Long term Capital Gain 10,88,000 5,76,000
Less: Exemption U/s 54-EC ( to the extent of investment
made in specified assets 3 years bonds of RECL) 5,00,000
Taxable Lon term Capital Gain 76,000
Illustration -2
On 11-10-2017, Shri Chandraswami has sold his self-residential house for Rs. 16,76,800.
Brokerage paid amount to 64,000. He had bought this house in 2004-05 for Rs. 1,86,450 and
had incurred Rs. 64,500 in 2007-08 for additional construction made.
On 1-3-218, Rs. 10,00,000 was invested in 3 years bound of National Highway Authority of
India, Relevant cost inflation index are as under:
2004-05 :113 2007-08:129 2017-18:272
Determine the taxability of capital gain for the assessment year 2018-19.
Computation of Taxable Capital Gain from Personal Residential House
P.Y. 2017-18 A.Y. 2018-19
Rs. Rs.
Sales value of personal residential house 16,76,800
1. Transfer charges ( Brokerage) 64,000
2. Indexed cost Acquisition [1,86,450 x 272/113] 4,48,800
3. Indexed cost of additional construction [64,500 x 272/129] 1,36000
6,48,800
Long term Capital Gain 10,28,000
Less: Exemption U/s 54-EC ( investment in 3 years of NHAI 10,00,000
Bonds)
Illustration-3
From the following particulars of income of shri Chanakya, determine his income under the
head capital gain for the assessment year 2018-19.
1. Shri Chanakya had purchase a residential house for Rs. 4,68,000 on 1-1-2006. He sold this
house on 1-4-2017 for Rs. 16,45,000. This was the only house owned by him. A part of the
sale proceeds was utilized by him for the education of his son and Rs. 5,60,000 was used on
31-12-2017 to acquire another residential house.
2. On 31-12-2017, he sold some of the securities for Rs. 3,18,325 which were purchased by
him on 1-5-2004 for 65,400. Rs. 1,00,000 of the sales price was invested on 1-2-18 in 3-years
bonds of NHAI.
Relevant cost index for long term capital gain are as follows:
PY 2003-04 109 PY 2005-06 117 PY 2017-18 272

P.Y. 2017-18 A.Y. 2018-19
Rs. Rs.
1. Sales value of self-occupied Residential house (1-4-
2017) 16,45,000
Indexed cost Acquisition [4,68,000 x 272/117]
Long term Capital Gain from residential house 10,88,000 Nil
Less: Exemption U/s 54-EC ( Note No.1) 5,57,000
5,57,000
2. Sales of securities (31-12-2017)
1. Sales value of securities
Less: Specific Deductions 3,18,325
Indexed cost Acquisition [65,400 x 272/109]
Long term Capital Gain from Govt. Securities 1,63,200 55,125
Less: Exemption U/s 54-EC ( Note No.2) Actual Investment 1,55,125
100,000
Illustration-4
Hiral had purchased a residential house for Rs. 18,60,000 during the year 2004-05. She had
also paid Rs. 3,52,500 as additional construction expenses during the year 2007-08.
On 7-7-2017, she sold the above house for Rs. 64,71,275 and paid Rs. 80,000 as brokerage.
On 1-1-2018, she purchased another house for Rs. 12,00,000 relevant cost inflation numbers
are as under.
PY 2004-05 : 113 PY 2007-08 : 129 PY 2017-18: 272
Find out the tax free capital gain according to Sec.54 for the A.Y. 2018-19.
P.Y. 2017-18 A.Y. 2018-19
Rs. Rs.
Sales value of personal residential house 64,71,275
1. Transfer charges ( Brokerage) 80,000
2. Indexed cost Acquisition [18,60,000 x 272/113]
3. Indexed cost of additional construction [3,52,500 x 44,77,168
272/129] 7,43,256 53,00424
Less: Exemption U/s 54-EC ( investment in self residential 12,00,000
house)
Taxable Long term Capital Gain -
As the assessee has invested the entire capital profit in another residential house within the
prescribed time limit, it is fully exempted U/s 54.
Illustration-5
Computation the capital gains chargeable to tax of Shree Janakkumar from the following details
for the A.Y 2018-19.
Serial Date of Selling Transfer Cost Particulars Index of

No. Purchase price Charges Rs. Of assets year of
Rs. Rs. purchase
1. 1-1-1988 42,03,000 23,000 3,00,000 Only self occupied 100
house
2. 1-6-2015 4,60,000 …….. 1,62,560 Share of Reliance 254
Ltd.
3. 1-3-2014 2,52,800 4,000 2,64,000 Shares of Arvind 220
Ltd.
4. 1-9-2005 34,48,100 11,000 14,04,000 Jewellery 117
5. 1-1-2017 ……….. …….. 8,76,000 Residential House
for self-occupation
(new)
He had sold old self-occupied house on 15-3-2018. The cost inflation index of financial year
2017-18 is 272 ( CIF as on 1-4-2001 was 100).
On 1-4-2001 the fair market value of self-occupied house and Jewellery were Rs. 12,00,000
and Rs. 1,80,000 respectively. Shares of both the companies (sold on 1-11-2017) were subject
to securities transaction tax (STT).
Computation of Taxable Capital Gain
P.Y. 2017-18 A.Y. 2018-19
Rs. Rs.
1. Long-term Capital Gain (On Sales of Reliance Ltd.
Shares):
Sales value of shares of Reliance Ltd. 4,60,000
1. Transfer Expense ………..
2. Indexed cost of Acquisition [1,62,560 x 272/254] 1,74,080
Taxable Long term Capital Gain (Note- 2,85,920 2,85, 920
1)
2. Long-term Capital Gain ( Self occupied House): 42,03,000

Sales value of self-occupied old house
Less: Specific Deductions 23000
1. Transfer Expense 32,64,000
2. Indexed cost of Acquisition [12,00,000 x 272/100] 9,16,000
Less: Exemption U/s 54-EC ( Note-3) 40,000
Taxable Long term Capital Gain (Note-2)
3. Long-term Capital Gain ( Shares of Arvind Ltd.): 2,52,800
Sales value of shares of Arvind Ltd.
Less: Specific Deductions 4,000
2. Indexed cost Of Acquisition [2,64,000 x 272/220] -77,600
Long term Capital loss
4. Long-term Capital Gain (Jewellery): 34,48,100

Sales value of Jewellery
Less: Specific Deductions 11,000
2. Indexed cost Acquisition [14,04,000 x 272/117] 1,73,100
Taxable Long term Capital Gain
Total Taxable Long term Capital Gain 2,13,100
Illostration-6
From the following information of Mr. Kapildev calculate the taxable amount of capital gain
for P.Y. 2017-18:
Jewellery purchased on 10-3-95 for Rs. 2,09,000 was sold for Rs. 13,16,810 on 2-5-2017. He
paid Rs. 2,000 and Rs. 4,500 respectively as brokerage for purchase and sale.
On 3-12-2017, he purchased bonds of National Highway Authority of India (NHAI) Rs.

4,00,000, which are repayable after 3 years.
In the above transaction if he has purchased a residential building for Rs. 6,56,155 instead of
bonds of NHAI than what will be the change in your answer?
The fair market value of the jewellery on 1-4-2001 was Rs. 4,40,000. Index 2001-02 - 100,
2017-18- 272.
P.Y. 2017-18 A.Y. 2018-19
Rs. Rs.
1. Selling expenses (sales Brokerage ) 4500
2. Indexed cost of Acquisition [ 4,40,000 x 272/100] 11,96000 12,00,500
Less: Exemption U/s 54-EC ( Investment in NHAI- but this 4,00,000 ………...
dedication is not allowed )
Taxable Lon term Capital Gain 1,16,310
Notes:
Option-1: As the investment in 3 years bonds of NHAI has been made after expiry of 6 months
period, Exemption U/s 54 EC is not available and hence, entire capital profit is considered as
taxable.
Option-2
Exemption U/s 54F = Total long-term capital profit x Investment in residential house
Net consideration
1,16,310 x 6,56,155
= 13,12,310 ( 13,16,810- 4500)
= 58,155 Exemption U/s 54F
P.Y. 2017-18 A.Y. 2018-19
Rs. Rs.
2. Indexed cost of Acquisition [ 4,40,000 x 272/100] 11,96000 12,00500
Less: Exemption U/s 54-F ( Investment in Residential 58,155
House)
Illustration-7
From the following particulars of Niyati’s transaction of assets effected during the financial
year 2017-18, compute her taxable income under the head “Capital Profit”:
Serial Date of Date Cost of Fair Selling Particulars Index of

No. Purchase of acquisition inflation price Of assets year of
Sales index of Rs. purchase
purchase
2001-02
1. 15-1-98 15-4- 90,000 3,60,000 11,42,300 Listed 100
17 90,000 3,60,000 11,54,300 Shares 100
23-4-
17
2. 26-3-11 23-7- 1,00,200 …….. 2,88,750 Share not 167
17 listed on
stock
exchange
3. 31-1-12 30- 2,13,000 ………. 3,90,000 Debentures 184
12-17 not listed on
stock
exchange
4. 18-2-14 1-3- 1,76,000 ………. 3,20,000 Unlisted 220
18 1,76,000 3,26,000 approved 220
15-3- Mutual
18 funds
5. 29-6-89 28-3- 25000 60,000 5,77,500 Gold 100
18
Relevant cost inflation index number of financial year 2017-18 is 272. Listed shares sold on
23-4-2017 were not subject to security transaction tax as they were sold directly. Similarly the
equity Oriented units of approved mutual fund sold on 15-3-2018 were not subject to securities
transaction tax as they were also sold directly.
P.Y. 2017-18 A.Y. 2018-19
Rs. Rs.
1. Shares listed on stock Exchange:
1. Shares sold on 15-04-2017 through the stock exchange
(Subject to SST)
Net Consideration
11,42,300
1. Transfer Charges
2. Indexed cost of Acquisition [Rs. 3,60,0000 x 272/100]
Long term Capital Gain (Fully Exemption U/s 10 (38) 9,79,200 ………….
(Note-1) 1,63,100
2. Shares directly sold on 23-4-2017

(on which no STT was payable)
Net Consideration
1. Transfer Charges
Taxable Long term Capital Gain (Note-1) 9,79,200 1,75,100
2. Shares not listed on stock Exchange

Net consideration (on 23-7-2017)
1. Transfer Charges
2. Indexed cost of Acquisition [Rs. 1,00,200 x 272/167] ………… 1,25,550
Taxable Long term Capital Gain (Note-2) 1,63,200
3. Debenture not listed on stock Exchange

Net consideration (on 30-12-2017)
1. Transfer Charges
2. Indexed cost of Acquisition (Indexation of debenture is
not allowed except in case of capital index bonds issued by
the Central Govt.) 213000 1,77,000
Taxable Long term Capital Gain (Note-3)
4. Equity Oriented units approved mutual funds

1. Net consideration of units sold (on 23-7-2017 subject
to SST) 3,20,000
1. Transfer Charges
Taxable Long term Capital Gain Fully exemption u/s 10 2,17,600
(38) (Note-4) ……………
1,02,400
2. Net consideration of units sold (on 15-3-2018 without

to SST)
1. Transfer Charges 3,26,000
2. Indexed cost of Acquisition [Rs. 1,76,000 x 272/220] 1,08,400
Taxable Long term Capital Gain Fully taxable ………….
2,17,600
5. Gold
Net consideration of Gold
Indexed cost of Acquisition [Rs. 60,000 x 272/100] 5,77,500 4,14,300
Taxable Long term Capital Gain
1,63,200
Illustration-7
Find out the taxable capital gain and exemption U/s 54 F for the A.Y 2019-20 from the
detail given below by Anamika.
Serial Asstes Date of Purchase Sales Selling

No. Purchase price Price Expenses
1. Land situated in Surat City 1-1-02 100,000 5,90,000 750
2. Jewellery 1-1-06 4,83,915 12,61,088 ---------
3. Shares of Bardoli Sugar 1-1-11 2,07,215 9,48,326 900
Factory
4. Listed debenture on a 1-1-11 1,26,650 2,27,000 350
company
5. Unlisted debentures of 1-1-14 2,61,237 3,48,986 …….
Company
6. Residential Flat 2-11-18 26,98,720 ………. ……..
On 1-11-18, all the above assets (Excluding residential flat) were sold. Security transaction tax
has not been charged on sales of security. The cost-inflation Index numbers are as under:
2001-02:100 2010-11:167
2005-06:117 2017-18:280
Computation of Taxable Capital Gain of Shree Anamika
P.Y. 2018-19 A.Y. 2019-20
Particulars Rs. Rs.

1. : Land situated in Surat City
1. Sales price 5,90,000
Less: Sales Expenses 750
Net Consideration 5,89,250

Indexed cost of Acquisition [Rs. 100,000 x 280/100] 2,80,000
Long term Capital Gain 3,09,250 3,09,250
2. Jewellery
Less: Sales Expenses
Net Consideration ………..
Indexed cost of Acquisition [Rs. 4,83,915 x 280/117] 12,61,088
Taxable Long term Capital Gain 1,03,001
3. Shares of Bardoli Sugar Factory 11,58,087

Net Consideration
Indexed cost of Acquisition [Rs. 2,07,215 x 280/167] 900
Taxable Long term Capital Gain 9,47,426 600,000
4. Listed debenture of a company 3,47,426

1. Sales price 600,000
Net Consideration
Indexed Cost not required 350
5. Unlisted debenture of a company 1,26,650

Net Consideration
Indexed Cost not required …..
2,61,237
87,749
Exempted Capital Gain U/s 54F = Long term capital gain x Cost of new residential House
Net Consideration
Exempted Capital Gain U/s 54F = 12,00,000 x 26,98,720

33,73,400
= 9,60,000
Taxable Long Term Capital Gain = 12,00,000 – 9,60,000

= 2,40,000
Land – 5,89,250
Jewellery- 12,61,088
Shares – 9,47,426
LD- 2,26,650
UD- 3,48,986
NC - 33,73,400
Illustration-8
Shri Ashish Pandya provides the following details pertaining to previous year 2017-18.
Compute taxable capital gains for the A.Y 2018-19. Cost inflation index for the financial
year 2017-18 is 272.
Serial Assets Date of Purchase Date of Sales Transfer Cost

No. Purchase price Sales Price charges inflation
Index
1. Self 1-7-90 180,000 31-12- 49,70,000 15,000 100
residential 18
House (
Only One)
2. Kotak 1-8-05 1,20,000 1-1-19 5.15,206 400 117
Bank’s
equity Share
3. Tata Ltd’s 1-2-14 2,20,000 1-2-19 2,26,000 1500 220
Equity
shares
4. Jewellery 1-12-05 15,95,880 31-3-19 51,04,841 10,000 117
5. Self 1-1-19 4,48,000 ………. ………. …….. …….
Residential
House (
New)
The fair market value of the self-residential hose was Rs. 16,00,000 on 1-4-2001. The shares
of both the companies were subject to SST on respective dates of Sales.
P.Y. 2017-18 A.Y. 2018-19
Particulars Rs. Rs.

1. : Self residential House
Less: Transfer Charges 15000
Net Consideration 49,55000

Indexed cost of Acquisition [Rs. 1600,000 x 280/100] 44,80,000
Less: Exemption U/s 54 ( Investment in New Residential 4,48,000
House)
Taxable Long term capital gain 27,000
2. Kotak Bank’s equity shares

Less: Transfer charges 400
Indexed cost of Acquisition [Rs.1,20,000 x 280/117] 2,87,180
Taxable Long term Capital Gain 2,27,626 2,27,626
3. Shares of Tata Ltd.

Indexed cost of Acquisition [Rs. 2,20,000 x 280/220]
Taxable Long term Capital Loss ( Ignored) 2,80,000
- 55,500 - 55,500
4. Jewellery
1. Sales price
Less: Sales Expenses 51,04,841
Indexed Cost of Acquisition [Rs. 15,95,880 x 280/117]
12,75,641
Illustration-9
Find out taxable capital gain from the following information of Shri Ajitbhai for the
A.Y.2018-19.
Serial Assets Date of Purchase Date of Sales Sales

No. Purchase price Sales Price Expenses
1. Self residential 11-11-97 6,00,000 1-3-18 56,36,250 37,750
House in rural Area
2. Personal Gold 1-10-2004 11,30,000 21-9-17 23,41,000 3,000
3. Personal Computer 15-10-2011 62,000 21-12-17 65,000 …..
4. Share (unquoted) 1-03-2012 1,84,000 31-12-17 6,44,500 1500
5. Residential Flat in 30-8-2016 40,00,000 1-2-18 45,30,250 30,250
urban area
The fair value of Rural residential house was Rs. 14,00,000 on 1-4-2001. From the sales
proceeds of this house, Rs. 11,00,000 invested in new residential house on date 2-1-2018. For
the benefit of tax exemptions, he invested Rs. 4,50,000 in three years NHAI on 2-7-2018.
Related cost inflation index:
Financial Year Cost Inflation Index

2001 -02 100
2004-05 113
2011-12 184
2016-17 264
2017-18 272
P.Y. 2017-18 A.Y. 2018-19
Particulars Rs. Rs.

1. : Self residential House in rural Area
Less: Sales expenses 37,750
Net Consideration
55,98,500
Indexed cost of Acquisition [Rs. 1400,000 x 272/100]
Less: Exemption U/s 54 ( Investment in New Residential
House) 17,90,500
Less: Exemption U/s 54EC investment in NHAI
Taxable Long term capital gain 11,00,000 2,40,500
2. Personal Gold 4,50,000

1. Sales price
Net Consideration
Indexed cost of Acquisition [Rs.11,30,000 x 272/113] 3000
Taxable Long term Capital Loss (ignore) 23,38,000 - 3,82,000
3. Personal Computer is not considered a capital assets 27,20,000 ………….

and hence profit / loss on its transfer is to be ignored -3,82,000
4. Unquoted Shares
1. Sales price
Less: sales expenses ………
Net Consideration
Indexed cost of Acquisition [Rs. 1,84,000 x 272/184] 6,44,500
Taxable Long term Capital Gain 1500 3,71,000
6,43,000
5. Residential Flat
Indexed Cost of Acquisition [ No indexation as it is held for
less than 36 months] 45,30,250
Taxable Short term Capital Gain 30,250 5,00,000
45,00,000
40,00,000
5,00,000
Total Taxable Long term Capital Gain
Q - Shri Tarak Mehta has provided the following details for P.Y 2018-19. Compute
taxable capital gain for the A.Y 2019 – 20.
Sr. Assets Date of Selling Date of Purchase Transfer

No. Sale Price (Rs.) Purchase Price (Rs.) Expenses
(Rs.)
1. Residential House 25-3-19 90,00,000 1-10-95 3,00,000 25,000
2. RIL Equity Shares 1-3-19 10,00,000 1-9-05 2,80,800 1,000
3. Personal Motor 1-3-19 4,50,000 1-2-14 4,00,000 5,000
Car
4. Jewellery 28-2-19 39,00,000 1-11-15 31,00,000 30,000
5. Residential House - - 1-2-19 9,00,000 -
The fair market value of the self residential house was Rs. 35,00,000 as on 1-4-2001. The shares
of the company were subject to S.T.T.
F.Y 2001-02 2005-06 2013-14 2015-16 2018-19

Index 100 117 220 254 280
P.Y. 2018-19 A.Y. 2019-20
Particulars Rs. Rs.

1. : Old residential House

Indexed cost of Acquisition [Rs. 3500,000 x 280 /100] 98,00,000
Taxable Long term capital Loss 8,25,000 - 8,25,000
2. RIL Equity shares

Less: Transfer charges 1000
3. Personal Motor Car (It is not a Capital assets) ………… ………..
4. Jewellery
Less: Sales Expenses 30,000
Indexed Cost of Acquisition ( no Indexation) 31,00,000
Taxable Short term Capital Gain 7,70,000 7,70,000
Total Taxable Short term Capital Gain 7,70,000
As Long - term capital loss of Rs. 8,25,000 can be set-off against long term capital profit of
Rs, 3,27,000, the balance of such loss will be carried forward. It cannot be set – off against
short term capital gain.
Q–2 From the following informations of Mr. Kapil Dev Calculate the taxable amount of
capital gain for P.Y. 2018 -19:
Jewellery purchased on 10-3-95 for Rs. 2,09,000 was sold for Rs. 13,52,810 on 2-5-2018. He
paid Rs.2000 and Rs.4,500 respectively as brokerage for purchase and sale.
On 3-12-2018, he purchased bonds of National Highway Authority of India (NHAI) Rs.

4,00,000, which are repayable after 5 years.
In the above transactions if he has purchased a residential building for Rs. 6,74,155 instead of
bonds of NHAI, then what will be the charge in your answer?
The fair market value of the jewellery on 1-4-2001 was Rs. 4,40,000.
Index :
2001-02 - 100
2018-19 - 280.
P.Y. 2018-19 A.Y. 2019-20
Rs. Rs.
4,00,000 ………
Less: Exemption U/s 54-EC ( Investment in NHAI- but this
dedication is not allowed )
Taxable Lon term Capital Gain 1,16,310
Notes:
Option-1: As the investment in 3 years bonds of NHAI has been made after expiry of 6 months
period, Exemption U/s 54 EC is not available and hence, entire capital profit is considered as
taxable.
Option-2
Exemption U/s 54F = Total long-term capital profit x Investment in residential house
Net consideration
1,16,310 x 6,74,155
= 13,48,310 ( 13,52,810- 4500)
= 58,155 Exemption U/s 54F
P.Y. 2018-19 A.Y. 2019-20
Rs. Rs.
Less: Less: Exemption U/s 54-F ( Investment in Residential 58,155
House)
Q- Hiral had purchased a residential house for Rs. 18,59,980 during the year 2004-05. She had
also paid Rs. 3,52,493 as additional construction expenses during the year 2007-08.
On 7-7-2018, she sold the above house for Rs, 66,24,750 and paid Rs. 80,000 as brokerage.
On 1-1-2019, She purchased another house for Rs. 12,00,000. Relevant cost inflation number
as under:
P.Y 2004-05 - 113
P.Y 2007-08 - 129
P.Y 2018-19 - 280
Find out the tax free capital gain according to sec.54 for the A.Y.2019-20.
Illustration-9
Find out taxable capital gain from the following information of Shri Ajitbhai for the
A.Y.2021-22.
Serial Assets Date of Purchase Date of Sales Sales

No. Purchase price Sales Price Expenses
1. Self residential 11-11- 6,00,000 01-03- 59,30,250 37,750
House in rural 1997 2021
Area
2. Personal Gold 1-10-2004 11,30,000 21-9- 34,75,000 3,000
2020
3. Personal Computer 15-10- 62,000 21-12- 65,000 …..
2012 2020
4. Share (unquoted) 1-03-2012 1,84,000 31-12- 6,65,500 1500
2020
5. Residential Flat in 30-8-2019 40,00,000 01-02- 45,30,250 30,250
urban area 2021
The fair value of Rural residential house was Rs. 14,00,000 on 1-4-2001. From the sales
proceeds of this house, Rs. 11,00,000 invested in new residential house on date 2-3-2021. For
the benefit of tax exemptions, he invested Rs. 4,50,000 in three years NHAI on 2-7-2021.
Related cost inflation index:
Financial Year Cost Inflation Index
2001 -02 100
2004-05 113
2011-12 184
2016-17 264
2020-21 301
P.Y. 2017-18 A.Y. 2018-19
Particulars Rs. Rs.

1. : Self residential House in rural Area
Less: Sales expenses 37,750
Net Consideration
58,92,500
Indexed cost of Acquisition [Rs. 1400,000 x 301/100]
Less: Exemption U/s 54 ( Investment in New Residential
House) 16,78,500
Less: Exemption U/s 54EC investment in NHAI 1,28,500
Taxable Long term capital gain 11,00,000
2. Personal Gold
Net Consideration
Taxable Long term Capital Loss 3000 - 4,62,000
3. Personal Computer is not considered a capital assets 34,72,000
and hence profit / loss on its transfer is to be ignored ………….
4. Unquoted Shares
Less: sales expenses
Net Consideration
Less: Specific Deductions ………
Indexed cost of Acquisition [Rs. 1,84,000 x 301/184]
1500
4,64,000
5. Residential Flat
Less: Sales Expenses 1,63,000
Net Consideration
Indexed Cost of Acquisition [ No indexation as it is held for 45,30,250
less than 24 months] 30,250 5,00,000
Taxable Short term Capital Gain 45,00,000
40,00,000
5,00,000
Total Long term Capital Loss - 1,70,500
Taxable Short term Capital Gain 500,000

Unit-1 Sem-6 A Capital Gain

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Unit-1 Sem-6 A Capital Gain

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UNIT-1- A- CAPITAL GAINS

Meaning of Capital Asset:

According to Sec. 2 (14) Capital Asset

C. Agricultural land in India, which is not an urban agricultural land

KIND OF CAPITAL ASSETS

1. Short-term capital asset

2. Long-term capital asset

I. For Financial asset

A. share or security listed in a recognized stock exchange in India

B. Zero coupon bonds

D. Units of an Equity Oriented Funds

II. Unlisted Shares

III. For immovable property being land and building or both:

2. Long-term capital asset

DEFINITION OF CAPITAL GAIN

1. The sale, exchange or relinquishment of the asset

2. The extinguishment of any rights therein

3. The compulsory acquisition there of under any law or

4. In case of conversion of an asset into ‘stock-in-trade’

5. Where the possession of an immovable property is given as a part of a contract mentioned

TYPES OF CAPITAL GAIN

1. Short-term Capital Gain

2. Long-term capital gain:

On 10-2-2018, he has invested Rs. 5,00,000 in 3 years bonds of Rural electrification

Determine taxable capital gain for the A.Y 2018-19.

Computation of Taxable Capital Gain from Jewellery

P.Y. 2017-18 A.Y. 2018-19

Taxable Lon term Capital Gain 76,000

Computation of Taxable Capital Gain from Personal Residential House

P.Y. 2017-18 A.Y. 2018-19

PY 2003-04 109 PY 2005-06 117 PY 2017-18 272

P.Y. 2017-18 A.Y. 2018-19

PY 2004-05 : 113 PY 2007-08 : 129 PY 2017-18: 272

P.Y. 2017-18 A.Y. 2018-19

Serial Date of Selling Transfer Cost Particulars Index of

Computation of Taxable Capital Gain

P.Y. 2017-18 A.Y. 2018-19

2. Long-term Capital Gain ( Self occupied House): 42,03,000

4. Long-term Capital Gain (Jewellery): 34,48,100

On 3-12-2017, he purchased bonds of National Highway Authority of India (NHAI) Rs.

P.Y. 2017-18 A.Y. 2018-19

Computation of Taxable Capital Gain from Jewellery

P.Y. 2017-18 A.Y. 2018-19

Serial Date of Date Cost of Fair Selling Particulars Index of

Computation of Taxable Capital Gain

P.Y. 2017-18 A.Y. 2018-19

2. Shares directly sold on 23-4-2017

2. Shares not listed on stock Exchange

3. Debenture not listed on stock Exchange

4. Equity Oriented units approved mutual funds

2. Net consideration of units sold (on 15-3-2018 without

Serial Asstes Date of Purchase Sales Selling

Computation of Taxable Capital Gain of Shree Anamika

P.Y. 2018-19 A.Y. 2019-20

Particulars Rs. Rs.

Less: Specific Deductions

3. Shares of Bardoli Sugar Factory 11,58,087

4. Listed debenture of a company 3,47,426

5. Unlisted debenture of a company 1,26,650

Total Taxable Long term Capital Gain 12,00,000

Exempted Capital Gain U/s 54F = 12,00,000 x 26,98,720

Taxable Long Term Capital Gain = 12,00,000 – 9,60,000

Serial Assets Date of Purchase Date of Sales Transfer Cost