Income from Capital Gains

Capital Asset
Capital Asset is defined to include property of any kind, whether fixed
or circulating, movable or immoveable, tangible or intangible.
The following assets are however excluded from the definition of
Capital Assets:
Any stock in trade, consumable stores or raw materials held for the

purpose of business or profession.

Personal effects of the assessee, i.e. movable property including
wearing apparel and furniture held for his personal use (jewellery,
archeological collections, sculptures, drawings, paintings, etc. are
not considered as personal effects).

Rural Agricultural land.

Classification of Capital Gains

Short Term Capital Gains (STCG):

o Shares: Gain arising on the transfer of capital assets which are held
for a period of less than 12 months.
o Other than Shares: Gain arising on the transfer of capital assets
which are held for a period of less than 36 months.
Long Term Capital Gain (LTCG):

o Shares: Gain arising on the transfer of capital assets which are held
for a period of more than 12 months.
o Other than Shares: Gain arising on the transfer of capital assets
which are held for a period of more than 36 months.

Computation of STCG:
Particulars

Rs.

Rs.

Full value of Sale Consideration

XXXX

Less: Selling Expenses

XXXX

Net Consideration
Less:

XXXX

Cost of Acquisition

XXXX

Cost of Improvement

XXXX

Short Term Capital Gains -

XXXX
XXXX

Computation of LTCG:
Particulars

Rs.

Rs.

Full value of Sale Consideration

XXXX

Less: Selling Expenses

XXXX

Net Consideration
Less:

XXXX

Indexed Cost of Acquisition

XXXX

Indexed Cost of Improvement

XXXX

Long Term Capital Gains -

Indexed Cost of Acquisition =

CII of the year in which the asset

was transferred
CII of 1981-82 or CII of the year in
which the asset was acquired
(whichever is later)

XXXX
XXXX

X Cost of Acquisition

 Cost of Acquisition of property purchased before 01/04/1981 Actual

Cost or Fair Market Value as on 01/04/1981, whichever is more.

Any costs incurred on improvement of the property prior to 01/04/1981
is to be ignored while computing the capital gains.

Exemptions

Sec 54 CG Arising from the transfer

of Residential House Property
The following conditions have to be satisfied to claim the exemption
Only an individual or a HUF can claim exemption.

Exemption is available only if the capital asset which is transferred is a

residential house property irrespective of whether it is SOP or LOP.
The house property should be a long term capital asset.
To claim the exemption the assessee has to purchase a residential house
property (old or new) or construct a residential house property.

Time limit for purchase is 1 year before or 2 years after the date of
transfer.
Time limit for construction is 3 years from the date of transfer.

Sec 54D CG on Compulsory Acquisition of

Land and Building forming part of Industrial
Undertaking
The following conditions have to be satisfied to claim exemption

The assessee may be any person.

The capital asset maybe short term or long term.
Such land and/or building was used by the assessee for the purpose of
industrial undertaking for at least 2 years preceding the date of
acquisition.
Assessee should purchase another land or building within 3 years and

use it for setting up or re-establishing an industrial undertaking.

Sec 54EC CG not to be charged on

investment in certain bonds
Any long term capital asset is transferred during the P.Y.
Within 6 months from the date of transfer, the assessee should invest
the amount of capital gains in long term specified / notified bonds

eligible for investment u/s. 54EC.

These bonds have a compulsory lock-in period of 3 years.
Bonds are issued by
National Highway Authority of India (NHAI)
Rural Electrification Corporation of India (REC) and
National Bank for Agricultural and Rural Development (NABARD)

Sec 54F CG arising from transfer of

Long Term Capital Asset other than
House Property
Only an individual or a HUF can claim exemption.

To claim the exemption, the assessee will have to purchase residential

house property (old or new) or construct a residential house property.
Time limit for purchase is 1 year before or 2 years after the date of
transfer.
Time limit for construction is 3 years from the date of transfer.
This exemption is available only if on the date of transfer of the original

asset, the assessee does not own more than 1 residential house
property.

 The amount of exemption is Cost of New House X

Capital Gains
Net Sale Consideration