ACN 4135: Taxation

Chapter 11:
Income from Capital Gain

Mofijul Hoq Masum

Agenda
1. Scope of “Income from Capital Gain”
2. Tax rate on capital gain
3. Set off and carry forward of Capital loss
4. Specimen form of computing income under
“Capital Gain”
1. Basis of “Income from Capital Gain” u/s 31
• Capital gain should be generated from capital asset
• The capital asset must be transferred by the
assessee
• Transfer should be happen within the income year
• There must be gain from such transfer
• Such gain is not exempted from tax
2. Tax rate on capital gain
• In case of a company:
1. Tax payable on taxable income other than capital gain at regular
rate
2. Tax rate @ 15% on capital gain
• In case of a person other than company:
1. Disposal of capital asset within 5 years of purchase – regular tax
rate
2. Disposal of capital asset after 5 years of purchase – average tax
or 15% whichever is lower
3. Set off and carry forward of Capital loss
• According to ITO 1984 section no. 37 capital loss can be set
off against income from capital gain relating to any other
capital asset
• Capital loss if not set off in current year can be carry
forwarded to next six successive assessment years u/s 40 of
the ITO 1984.
• In the succeeding year capital loss can be carry forwarded
only if such loss exceed BDT 5,000 u/s 40 of the ITO 1984.
4. Specimen form of computing income
under “Capital Gain”
A. Sales proceeds of capital assets or fair market value of assets at the
time of transfer – higher one should be considered
B. Allowable deductions:
1) Cost of transferring the capital assets
2) Cost of improving the capital asset
3) Cost of acquisition
C. Capital gain [A-B]
D. Less – tax exempted capital gain (if any)
E. Taxable capital gain
 Demonstration Problem
Mr. Mus-ub Muhammad has purchased a machine at a total cost of tk.
16,00,000 on 01/01/2016 for the purpose of his profession. In addition, he has
to pay Tk. 50,000 as legal fees to purchase the machine. He has spent
additional sum of Tk. 1, 00,000 for improvement of the machine.
On 30th December 2019, he had sold the machine at a total price of Tk.
2,000,000 when the balance of allowable accumulated depreciation was Tk.
800,000 in his books of accounts. But the fair market value of the machine on
that date amounts to Tk. 19,00,000 in the opinion of DCT. He incurred
advertisement cost of Tk. 140,000 and 1.5% as brokerage commission on the
sale value in relation to the sale.
Required: Determine the taxable capital gain and tax rate thereon.
Solution
Particulars Amount in Amount in
detail total
 Self checking Exercise
Income from Capital Gain: Mr. Muaj Muhammad has purchased a machine at
a total cost of tk. 8,00,000 on 01/01/2017 for the purpose of his profession. In
addition, he has to pay Tk. 25,000 as legal fees to purchase the machine. He
has spent additional sum of Tk. 50,000 for improvement of the machine.
On 30th December 2019, he had sold the machine at a total price of Tk.
1,000,000 when the balance of allowable accumulated depreciation was Tk.
400,000 in his books of accounts. But the fair market value of the machine on
that date amounts to Tk. 9,50,000 in the opinion of DCT. He incurred
advertisement cost of Tk. 70,000 and 1.5% as brokerage commission on the
sale value in relation to the sale.
Required: Determine the taxable capital gain and tax rate thereon.
Thank you