capital gains basic conditionsbasic conditions –there must be a capital asset. –there must be...
TRANSCRIPT
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CAPITAL GAINS
• Basic Conditions– There must be a Capital Asset.
– There must be Transfer of the asset.
– Transfer During the previous year.
– Due to transfer Gain/ Profit arises.
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CAPITAL ASSET
• Meaning Section 2 (14)– Property of any kind
• Tangible or Intangible– Whether connected to business or not– Held by Assessee
• Subject to certain exceptions
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Exceptions• Stock in trade, consumables or raw
material held for business.
• Agricultural Land in rural area
• Special bearer bonds 1991
• 6.5 % Gold Bonds 1977, 7% Gold Bonds 1980, National Defence gold bonds
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Contd.
• Personal effects of the assessee i.e.– Movable property including furniture,
wearing apparel , held for personal use of assessee or his dependents
– Excluding Gold, Silver, Semi Precious Stone, Real Stone, Metal Jewellery, Ornaments
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TRANSFER 2(47)• Sale or Exchange or Relinquishment• Extinguishment (like due to fire,
theft etc.)• Compulsory Acquisition• Conversion into stock• Transfer of capital asset by a person
to a firm in which he is a partner• Distribution of capital assets on
dissolution of firm
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PREVIOUS YEAR
• To decide the previous year Date of Transfer is Important except– In case of receipt of insurance claim –
Date of Receipt– In case of conversion of Capital asset
into stock – Date of sale of Stock– In case of Compulsory Acquisition –
Date of receipt of compensation.
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TYPES OF ASSETS
• Short term asset– Asset held for less
than 36 months– Subject to
exception
• Long term asset– Asset held for more
than 36 months– Subject to
exception
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EXCEPTION
– With respect to • Equity shares/ Pref. shares any Co.• Securities such as Deb. & others of Govt.
listed on Stock Exchange• Units of Unit Trust of India (Quoted or not)• Units of Mutual Funds specified U/s.10
(23D) (Quoted or not)– Held for a period less than 12 months-
Short Term otherwise Long Term
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Problems
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Computation of Gain
• Short Term Gain– Full value of
consideration– Less: Transfer Exp.– Less: Cost of
Acquisition– Less: Cost of
Improvement
• Long term Gain– Full value of
consideration– Less: Transfer Exp.– Less: Indexed Cost
of Acquisition– Less: Indexed Cost
of Improvement
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Full Consideration• Full = Gross• Means Sale consideration / Sale
price / Value received or receivable on transfer.
• Special cases– Transfer of asset between firm and
partners (amount in firm’s book)– Conversion of capital asset into stock
(F.M.V. on date of conversion)– Compulsory acquisition (Amount of
compensation)
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Cost of Acquisition
• Actual Cost • Deemed Cost
– Transfer of asset under will/gift/inheritance holding & subsidiary etc. [49(1)]
– Amalgamation of companies- cost for amalgamated company
– Conversion of Debentures (Cost of Debentures)
– Assets received by a member on liquidation (F.M.V.)
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Cost of Improvement 55(1)(b)
• Intangible Assets– Nil
• Tangible Asset– Exp. Which are
Capital in nature– Incurred to do
additions or alterations to the asset
– Allowed only if incurred after1st April 1981.
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Indexing
• Formula– Cost of acq.*
index no. of year of transfer/ index no of year of acquisition
• No indexing possible– Short term gain– Transfer of
Debentures or bonds
– Transfer by NRI
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Problems
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Shares & Capital Gain
• Initial Shares
• Right Shares
• Bonus Share
• Sale of Right to Right Shares
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Depreciable Assets (Sec.50)
• Depreciation under Income tax
• Previous year last day , W.D.V. of block zero [50(1)]
• Block of the assets is empty on last day of previous year [50(2)]
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Problems
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Conversion of assets into stock
• Date of sale of Stock = year of taxability of gain
• Full consideration on conversation = Fair market value as on conversation
• For indexing year of conversation to be considered
• Actual sale of Stock = Business income