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    Capital Gains 2019

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    Surbhi sinha
    1. Capital gains refers to profits arising from the sale of capital assets like property, stocks, or other assets. 2. Sections 45-55A of the Income Tax Act 1961 deal with the taxation of capital gains in India. Any profits from the transfer or sale of a capital asset are subject to capital gains tax if they exceed a certain threshold. 3. Capital gains are classified as short-term or long-term depending on how long the asset was held. Short-term capital gains refer to profits from assets held for less than 36 months, and are taxed at normal income tax rates. Long-term capital gains are from assets held for longer and taxed at concessional rates.

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    Capital Gains 2019

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    Surbhi sinha
    54 views25 pages
    1. Capital gains refers to profits arising from the sale of capital assets like property, stocks, or other assets. 2. Sections 45-55A of the Income Tax Act 1961 deal with the taxation of capital gains in India. Any profits from the transfer or sale of a capital asset are subject to capital gains tax if they exceed a certain threshold. 3. Capital gains are classified as short-term or long-term depending on how long the asset was held. Short-term capital gains refer to profits from assets held for less than 36 months, and are taxed at normal income tax rates. Long-term capital gains are from assets held for longer and taxed at concessional rates.

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    Captain gains

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    1. Capital gains refers to profits arising from the sale of capital assets like property, stocks, or other assets. 2. Sections 45-55A of the Income Tax Act 1961 deal with the taxation of capital gains in India. Any profits from the transfer or sale of a capital asset are subject to capital gains tax if they exceed a certain threshold. 3. Capital gains are classified as short-term or long-term depending on how long the asset was held. Short-term capital gains refer to profits from assets held for less than 36 months, and are taxed at normal income tax rates. Long-term capital gains are from assets held for longer and taxed at concessional rates.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    54 views25 pages

    Capital Gains 2019

    Uploaded by

    Surbhi sinha
    1. Capital gains refers to profits arising from the sale of capital assets like property, stocks, or other assets. 2. Sections 45-55A of the Income Tax Act 1961 deal with the taxation of capital gains in India. Any profits from the transfer or sale of a capital asset are subject to capital gains tax if they exceed a certain threshold. 3. Capital gains are classified as short-term or long-term depending on how long the asset was held. Short-term capital gains refer to profits from assets held for less than 36 months, and are taxed at normal income tax rates. Long-term capital gains are from assets held for longer and taxed at concessional rates.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 25

    CAPITAL GAINS

    (SECTIONS 45 TO 55)
    What is Capital Gains?
    “Capital Gain” means “any profit arising from the transfer of a capital
    asset”.

    Certain exemptions from tax have been provided for income from Capital
    Gain.

    Sec 45 – 55A of Income Tax Act, 1961 deals with Capital Gain.

    Section 2(24)(vi) of the Income tax Act specifically provides that ‘Income’
    includes ‘any capital gains chargeable under Section 45(1)’.
    The term ‘income’ should be given the widest connotation so as to
    include capital gains within its scope. (Navin Chandra Mafatlal v. CIT) &
    (Travancore Rubber v. State of Kerala)

    However, all capital profits do not necessarily constitute capital gains. For
    instance, profits on reissue of forfeited shares, profits on redemption of
    debentures, premium on issue of shares etc., are capital profits and not
    capital gains, hence, not liable to tax.
    The essentials of taxing capital gains under Section 45(1) are:

    a) That there must be a capital asset,

    b) The capital asset must have been transferred,

    c) The transfer must have been effected in the previous year, and

    d) There must be a capital gain arising on such transfer. There are certain
    types of capital gain which are otherwise exempted.
    What is Capital Asset?
    Section 2(14) of the Income tax Act defines the term ‘ Capital asset’
    which means property of any kind held by an assessee whether or not
    connected with his business or profession but does not include:

    a. Any stock-in-trade, consumable stores or raw materials held for the


    purpose of his business or profession;

    b. Personal effects that is to say, movable property (including wearing


    apparel and furniture but excluding jewellery) held for personal use
    by the assessee or any member of his family dependant on him;

    c. Agricultural land in India (Situated outside the specified area)


    d. 6 1/2 per cent Gold Bonds, 1977 or 7 per cent Gold Bonds, 1980 or
    National Defence Gold Bonds ,1980 issued by the Central
    Government;
    e. Special Bearer Bonds 1991 issued by the Central Government;

    f. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999
    notified by the Central Government.
    TRANSFER:

    The essential requirement for the incidence of tax on capital gains is the
    ‘transfer’ of a ‘capital asset’.

    Section 2(47) of the Act defines the expression ‘transfer’, in relation to a


    capital asset, which includes the following:

     Sale, exchange or relinquishment of a capital asset; or

     Extinguishment of any rights therein; or

     Compulsory acquisition of a capital asset under any law; or


    TRANSFER:

     Conversion or treatment of a capital asset into/as stock-in-trade; or

     The maturity or redemption of a Zero coupon bond; or

     Any transaction involving the allowing of the possession of any


    immovable property to be taken or retained in part performance of a
    contract of the nature referred to in Sec. 53A of the Transfer of
    Property Act, 1882; or

     Any transaction whether by way of acquiring shares in or by way of


    becoming a member of a co-operative society, company or other
    association of persons or by way of any agreement or arrangement or
    in any other manner which has the effect of transferring, or enabling
    the enjoyment of, any immovable property.
    The Supreme court in the case of Vodafone International Holdings B.V v.
    Union of India, held that;

     the transfer of shares in the foreign holding company does not result
    in a extinguishment of the foreign company’s control of the Indian
    company,

     It does not constitute an extinguishment and transfer of an asset


    situated in India,
    The Supreme court in the case of Vodafone International Holdings B.V v.
    Union of India, held that;

     Transfer of foreign holding company shares offshore, cannot result in


    an extinguishment of the holding companies right of control of the
    Indian company and the same does not constitute extinguishment
    and transfer of an asset/ management and control of property
    situated in India.
    To supersede this ruling with retrospective effect from April 1, 1962,
    Explanation 2 to section 2(47) has been inserted which defines transfer as
    follows:
    ‘Transfer’ includes and shall be deemed to have always included disposing of
    or parting with an asset or any interest therein, or creating any interest in any
    asset in any manner whatsoever, directly or indirectly, absolutely or
    conditionally, voluntarily or involuntarily by way of an agreement (whether
    entered into in India or outside India) or otherwise, notwithstanding that such
    transfer of rights has been characterised as being effected or dependent upon
    or flowing from the transfer of a share or shares of a company registered or
    incorporated outside India.

    The above transaction would be deemed as a transfer notwithstanding that


    such transfer of rights has been characterised as being affected or dependent
    upon or flowing from the transfer of a share or shares of a company registered
    or incorporated outside India.
    Short Term Capital Gain and Long Term Capital Gain:

    Any capital gain arising as a result of transfer of a short term capital asset
    is known as ‘short term capital gain’.

    According to section 2(42A) of the Income Tax Act, 1961 ‘Short term’
    capital asset means a capital asset held by an assessee for not more than
    thirty six months immediately preceding the date of its transfer.

    However, in the case of capital assets (being equity or preference share in


    a company) held by an assessee for not more than 12 months
    immediately prior to its transfer.
    Short Term Capital Gain and Long Term Capital Gain:

    Gains arising due to transfer of long term capital asset, are called as long
    term capital gain. In respect of long term capital gain, certain concessions
    like exemption, lower tax rate, deduction of indexed cost of acquisition
    are available.
    Capital Gains Computation (Sec. 48)

    Computation of Short Term Capital Gain:


    Particulars ₹ ₹
    Consideration Received xx
    Less: Expenses of Transfer (xx)
    Net Consideration xxx
    Less: Cost of Acquisition xxx
    Less: Cost of Improvement xxx (xx)
    Short term capital gain xxx
    Less: Exemption u/s 54B, 54D,54G, 54GA (xx)
    Taxable STCG xxx
    Capital Gains Computation (Sec. 48)

    Computation of Long Term Capital Gain:


    Particulars ₹ ₹
    Consideration Received xx
    Less: Expenses of Transfer (xx)
    Net Consideration xxx
    Less: Indexed Cost of Acquisition xxx
    Less: Indexed Cost of Improvement xxx (xx)
    Long term capital gain xxx
    Less: Exemption u/s 54 to 54GB (xx)
    Taxable LTCG xxx
    Taxability of Gifts
    Gifts
    Section 56(2)

    Applicability:

    All Assesses – for Gifts received on or after 01.04.2017


    Gifts
    Section 56(2)

    Taxability : The following amounts received by any person


    from any person(s) (subject to exception) is taxable as
    Income from Other Sources.
    Item Received Nature Amount Taxable
    under “IFOS”
    a. Any sum of Without consideration, the Whole of
    money aggregate value of which aggregate value of
    exceeds ₹ 50,000. such sum.
    Gifts
    Section 56(2)
    Taxability : The following amounts received by any person
    from any person(s) (subject to exception) is taxable as
    Item Received
    Income Nature
    from Other Sources. Amount Taxable
    under “IFOS”
    i. Without consideration & Stamp Stamp Duty Value
    Duty of such property.
    Value of property > ₹ 50,000
    b. Immovable
    Property ii. Inadequate consideration, i.e. Stamp Duty Value
    difference between (–) Consideration.
    Consideration & Stamp Duty
    Value exceeds ₹ 50,000.
    Note: Difference shall be taxable
    only if such difference is greater
    than ₹ 50,000 (+) 5 % of the
    Consideration.
    Gifts
    Section 56(2)
    Taxability : The following amounts received by any person
    from any person(s) (subject to exception) is taxable as
    Item Received
    Income Nature
    from Other Sources. Amount Taxable under
    “IFOS”
    i. Without consideration & Fair Market Value of
    aggregate Fair Market Value such property.
    c. Other than > ₹ 50,000
    Immovable
    Property ii. Inadequate consideration, Fair Market Value (–)
    i.e. difference between Consideration.
    Consideration & Fair Market
    Value exceeds ₹ 50,000.
    Awards

    1. Applicability All Individuals.

    2. Conditions a. The Reward or Award may be either in cash or


    in kind.
    b. The Reward or Award is instituted in the public
    interest, by the Central or State Government or
    any other Body approved by the Central or
    State Government.

    3. Exemptions Such Rewards / Awards are exempt u/s 10(17A).


    Remuneration received by MP / MLA

    1. Taxability Remuneration received by MP’s or MLA‘s is


    taxable under the head “Income from Other
    Sources”, subject to exemptions u/s 10(17).

    2. Exemptions a. Daily Allowance received by MP’s / MLA’s.


    b. Constituency Allowance received by MP’s &
    MLA’s.
    KSLU Past Examination Questions:

    1. Write a note on : STCG , LTCG [J 12] [D 17]


    2. What is CG? Explain capital assets and its transfers. [ J 17]

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