TAX ASPECTS OF BUSINESS

INCOME FROM CAPITAL GAINS

Presented To
Prof. A. Balasubramaniam

Presented By Name
Trushank Chavan

Roll No.
07

Shankar Gajare
Deepak Patil Rohan Rane Anushri Raut

17
42 49 50

Capital Gain

Any Income derived from a Capital asset movable or immovable is taxable under the head Capital Gains under Income Tax Act 1961.

Basis of Charge

Profit or gain arising from the transfer of capital assets during previous year is chargeable under the head capital gains if following conditions are full filed; Their should be capital Assets. Their should be transfer of capital assets. Transfer should take place in previous year. Their should be profit or gains.

There must be a Capital Asset [S.2(14)]

Capital assets is defined to mean propety of any kind, held by the assesse, whether or not connected with his business or profession. Property may be tangible or intangible. Land, buildings, vehicles, goodwill, tenancy rights, leasehold rights, licences, patents, trademarks, etc. are some examples of capital assets

Capital Assets must be transferred [S.2(47)]

The sale, exchange or relinquishment of the asset; The extinguishment of any rights therein; The compulsory acquisition of any capital assets by the government;

Conversion of capital assets into stock in trade.

Types of Capital Assets

There are two types of capital assets;

Short Term Capital Gains: It means a capital assets held by an assesse for not more than 36 months immediately prior to its date of transfer. Tax is calculated as per Income Tax Act. Long Term Capital Gains : A Asset is not a short term capital gain is long term capital gain. 20 % is taxable.

Computation of STCG
Full value of Consideration Less: Cost of acquisition Less: Cost of improvement Short Term Capital Gain Less: Exemption U/S 52(B), 54(D) & 54(G) XXX XXX XXX XXX XXX

Net Short Term Capital Gain

XXX

Computation of LTCG
Full value of Consideration XXX

Less: Cost of acquisition

Less: Cost of improvement Short Term Capital Gain Less: Exemption U/S 54 54(H) Net Short Term Capital Gain

XXX
XXX XXX XXX XXX

Meaning

Full Value Consideration : It means what the transferor or is entitled to receive as consideration for the sale of property/Asset. This Value may be in cash or in kind i.e. in exchange for an asset. Cost of Acquisition : It is the price which the assesse has paid or the amount which the assesse has incurred for acquiring the property/Asset. Cost of Improvement : It is capital expenditure incurred by am assesse in making any addition/Improvements to the capital asset.

Indexed Cost of Acquisition

Cost inflation index of the first year in which asset was first hold by the assesse or Cost inflation index of the year beginning on 1st april,1981.(which Every is later)

ICOA : Cost of Acquisition*Cost of the year in which asset is transferred.

Indexed cost of Investment

10

ICOI : Cost of Acquisition* Cost Inflation Index of the year in which asset is transferred.

Cost inflation index of the year in which improvement took place.

Sum

11

X Transfers Gold on 10th May, 2011 Rs 3655000. Expenses on Trasfer Rs 55000. Gold purchased on 23rd June, 1982 Rs 3 Lakhs to get benefit u/s 54(F). X Purchases house property on 12th May, 2011 Rs 27 Lakhs at pune. Mr X Transfers pune property on 29th June, 2013 For Rs 30 Lakhs.

Find out Capital gain chargeable to tax. Cost of investment for period 1982 is 109 & 2011-12 is 785.

Solution
Sales Consideration Less: Expenses Less: Index Cost Of Acquisition 1982 & 2011-12 is 109 & 785 respectively

12
3655000.0 55000.0

3600000.0

(300000*785/109)
Less: Exemption U/S 54(F) (2700000/3600000*1439450) Income Under head Capital Gain

2160550.0
1439450.0 1079587.5 359862.5