Capital Gain(Sec 31-32)

Any gain or profit arise from sale or

transfer of capital assets should be
treated as capital gain[Sec-31].In
another word, if any asset is sold or
transferred at a value of more than
the original costs is recognized as
capital gain.
 Definition of Capital Assets
• Capital assets are those property/assets which are
held by the assessee regardless the relation with his
business or profession. Capital assets should not
include the following:
a)Any inventory/stock in trade(not being stocks or
shares),consumables or raw materials held for the
purpose of business and profession.
b)Any movable property that is held for use exclusively
for personal or dependant of the assessee and is not
for business or professional use .
 Definition of Capital Assets(Con’t)
c)Agricultural land in Bangladesh not being land situated
i)In any area which is comprised within the jurisdiction of Dhaka ,
chittagong , Gazipur ,Narshingdi, Munshiganj and Manikganj
districts,KhulnaDevelopmentAusthority(KDA),Rajshahi
DevelopmentAuthority(RDA),
acitycorporation,municiapality,Paurashava,Cantonment board; or
ii)In any area within such distance not being more than five miles from
the local limits of RAJUK,CDA,KDA,RDA,a city corporation,
Municipality, Paurashava, Cantonment board referred in
paragraph(i),as the government may having regard to the extent of,
scope for, urbanization of that area and other relevant considerations,
specify in this behalf by notification in the official gazette.
 Definition of Transfer
Transfer includes sales , exchange or relinquishment of
the asset, or the extinguishments of any right their in,
but does not include:
-Any transfer of the capital asset under a gift, bequest,
will, or an irrecoverable trust.
-Any distribution of the assets of a company to its
shareholders on its liquidation; and
-Any distribution of capital assets on the dissolution of a
firm or other association of persons or on the partition
of a Hindu Undivided Family.
 Computation of Capital Gains[Sec-32]
Capital gains should be computed after making the following
deduction from the full value of the consideration received or
accruing from the transfer of the capital asset or the fair market
value thereof, which ever is higher, namely:
a)Any expenditure incurred solely in connection with the transfer of
the capital asset; e.g. advertisement, brokerage, stamp duty,
registration fee , legal expenses etc; or
b)The cost of acquisition of the capital asset and any capital
expenditure incurred for any improvements thereto but excluding
any expenditure in respect of which any allowance is admissible
under any provisions of section 23(deductions form
security),Secton-29(B&P) and 34(Deductions from other sources)
 Cost of acquisition
Cost of acquisition of the capital asset means:
-The actual cost of acquisition of the assets(purchase
price with associated costs)
-If the property acquired by a way gift , bequest , will
or transfer then the actual cost of the previous
owner ; and where actual cost of the previous
owner can not be ascertained ,the fair market value
at the date on which the capital asset become the
property of the previous owner[Sec32-2].
 Tax rate( Para,2 Second Schedule)
a)In case of company:
i)Tax payable on the total income excluding capital gains as per the
specific rate for being a company;
ii)Tax rate of 15% on the whole amount of such capital gains.
b) In case of individual or other than company:
i)On disposal of capital assets within 5years of acquisition, the
amount of capital gain will be included with the total income taxed
accordingly at regular rate;
ii)On disposal of capital assets after 5years of acquisition, tax payable
on the capital gains at the rate applicable to his total income
including the said capital gains, or tax at the rate of 15% on the
amount of the capital gains, which ever is lower.
 Illustration-1
Salvo Chemical’s total income is Tk 500,000(inclusive of
Tk.50,000 capital Gain) for the income year 2013-
2014.Compute the tax liablity assuming that the
company tax rate is 27.5% for the assessment year
2014-2015.
Particulars Total Income Tax Rate Tax Liability
Total income excluding capital 450,000 27.5% 123,750
Gain
Capital Gain 50,000 15.00% 7,00
Total 450,000 131,250
 Illustration-2

Mr. Amirul’s total income is Tk520,000(Inclusive of capital gain

Tk.50,000) for the income year 2013-2014.Compute the tax
liability or the assessment year 2014-2015,assuming that
disposal of capital assets has done within 5years of
acquisition.

Particulars Tax Rate Tax Liability

On the first 220,000 0% 00
On the next 300,000 10% 30,000
Total 30,000
If the details of total income and capital gain of two assessee’s
are as follows for the income year 2013-2014.
Particulars Mr.Javed Mr.Abrar
Total income excluding 235,000 15,00,000
capital gain
Capital Gain 100,000 1,00,000
Total Income 335,000 16,00,000
Compute the tax liability for the assessment year 2014-2015,assuming that disposal of
capital asset has done after 5years of acquisition.
 Mr.Javed
Computation of Tax liability:
Tax liability on total income(excluding capital gain):
On the first 220,000X0% =00
On the next(335000-220,000)X10%=11500
Average tax on total income(including capital
gain)=11500/335000=03.43%
Tax rate on capital gain=03.43% or 15% whichever is
lower ;i.e 03.43%
So, Tax liability on capital gain 100,000X03.43%=Tk.3430
 Mr.Abrar
Tax liability on total income(including capital
gain):
Particulars Tax Rate Tax Liability
On the first Tk 220,000 0% 0
On the next 300,000 10% 30000
On the next 400,000 15% 60000
On the Next 300,000 20% 60,000
Rest 380,000 25% 95,000
Total 245,000
 Mr.Abrar(Con’t)
Average tax rate on total income(Including
capital Gain)=245,000/1600000X100=15.31 or
15% whichever is lower;i.e 15%
So,Tax liability on capital gain
100,000X15%=15,000.
And the tax rate on (16,00,000-
1,00000)=15,00,000 will be on the regular
rate.