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    Lecture - 17: Computation of Income Under The Head Capital Gains

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    Harjot Singh
    The document discusses computation of capital gains income under the income tax head "capital gains". It defines capital assets and differentiates between short-term and long-term capital assets based on the period of holding. It explains that capital gains are computed by deducting the cost of acquisition, expenditure on transfer and indexation from the sale consideration. Long-term capital gains may be fully or partially exempt under certain sections if the sale proceeds are reinvested.

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    Lecture - 17: Computation of Income Under The Head Capital Gains

    Uploaded by

    Harjot Singh
    26 views26 pages
    The document discusses computation of capital gains income under the income tax head "capital gains". It defines capital assets and differentiates between short-term and long-term capital assets based on the period of holding. It explains that capital gains are computed by deducting the cost of acquisition, expenditure on transfer and indexation from the sale consideration. Long-term capital gains may be fully or partially exempt under certain sections if the sale proceeds are reinvested.

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    Leture 17

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    The document discusses computation of capital gains income under the income tax head "capital gains". It defines capital assets and differentiates between short-term and long-term capital assets based on the period of holding. It explains that capital gains are computed by deducting the cost of acquisition, expenditure on transfer and indexation from the sale consideration. Long-term capital gains may be fully or partially exempt under certain sections if the sale proceeds are reinvested.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    26 views26 pages

    Lecture - 17: Computation of Income Under The Head Capital Gains

    Uploaded by

    Harjot Singh
    The document discusses computation of capital gains income under the income tax head "capital gains". It defines capital assets and differentiates between short-term and long-term capital assets based on the period of holding. It explains that capital gains are computed by deducting the cost of acquisition, expenditure on transfer and indexation from the sale consideration. Long-term capital gains may be fully or partially exempt under certain sections if the sale proceeds are reinvested.

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    © All Rights Reserved
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    Download as pptx, pdf, or txt
    of 26

    LECTURE - 17

    Computation of income under the head


    capital gains
    Learning Outcomes

    comprehend and identify the assets classified as “capital assets” for the
    purposes of chargeability under this head;

    comprehend the meaning of short-term capital asset and long-term


    capital asset;

    compute the period of holding for determining whether an asset is a


    short-term capital asset or long-term capital asset; 
    You must file income tax return if you hold
    any foreign assets
    Who should report foreign income? 
    ◦ “The first condition to meet is that you should be a tax resident and ordinarily resident
    (ROR) in India," said Archit Gupta, founder and chief executive officer, ClearTax.
    You are an ROR if you have lived in India for at least two out of 10 previous years or
    for at least 730 days in the preceding seven years.
    What qualifies as foreign assets?
    ◦ Assets under this category include foreign deposit account, custodian account,
    immovable property, cash value insurance contract or annuity contract and capital
    assets equity and debt interest and any other income derived from a foreign source.
    Let’s start with today’s topic
    Poll Time:
    How many
    heads of
    income are
    there in Income
    Tax?

    A) 3
    B) 5
    C) 7
    D) 6
    Salary House Property Capital Gain

    Business/Profession Other Sources


    Salary House Property Capital Gain

    Business/Profession Other Sources


    CAPITAL ASSET 

    (a) property of any kind held by an assessee, whether or


    not connected with his business or profession; 

    (b) any securities held by a Foreign Institutional


    Investor which has invested in such securities in
    accordance with the SEBI regulations. 
    it does not include:

    Stock-in trade

    Personal effects 
    • EXCLUSIONS:
    (a) jewellery;
    (b) archaeological collections;
    (c) drawings;
    (d) paintings;
    (e) sculptures; or
    (f) any work of art. 
    it does not include:

    Rural agricultural land 

    Specified Gold Bonds


    • 6 % Gold Bonds, 1977 or
    • 7% Gold Bonds, 1980, or
    • National Defence Gold Bonds, 1980, issued by the Central
    Government; 
    it does not include:

    Special Bearer Bonds, 1991 

    Gold Deposit Bonds 


    TYPES OF CAPITAL ASSETS

    Capital Assets

    Short-term Long term


    Capital Assets Capital Assets
    ◦ Short-term capital asset means a capital asset held by an assessee for not more
    than 36 months immediately preceding the date of its transfer.
    ◦ Thus, a capital asset held by an assessee for more than 36 months
    immediately preceding the date of its transfer is a long-term capital asset. 
    Exceptions:
    MODE OF COMPUTATION OF CAPITAL
    GAINS
    MODE OF COMPUTATION OF CAPITAL
    GAINS
    MODE OF COMPUTATION OF CAPITAL
    GAINS
    (i) Computation of capital gains: The income chargeable
    under the head ‘capital gains’ shall be computed by deducting
    the following items from the full value of the consideration
    received or accruing as a result of the transfer of the capital
    asset:
    • (1) Expenditure incurred wholly and exclusively in connection with such
    transfer.
    • (2) The cost of acquisition and cost of any improvement thereto. 
    MODE OF COMPUTATION OF CAPITAL
    GAINS

    (ii) No deduction in respect of STT: However, no


    deduction shall be allowed in computing the income
    chargeable under the head “Capital Gains” in respect of
    any amount paid on account of securities transaction tax
    (STT) under Chapter VII of the Finance (No.2) Act,
    2004 
    MODE OF COMPUTATION OF CAPITAL
    GAINS
    (iii) Cost inflation index 
    • The benefit of indexation will not apply to the long-term capital gains arising from the transfer of bonds or
    debentures other than – 
    • (1) Capital indexed bonds issued by the Government; or
    • (2) Sovereign Gold Bond issued by the RBI under the Sovereign Gold Bond Scheme, 2015. 
    • In case of depreciable assets, there will be no indexation and the capital gains will always be short-term capital
    gains. 
    • The benefit of indexation would not be applicable to the long-term capital gains arising from the transfer of the
    following assets referred to in section 112A –
    • (i) equity share in a company on which STT is paid both at the time of acquisition and transfer
    • (ii) unit of equity oriented fund or unit of business trust on which STT is paid at the time of transfer. 
    cost
    inflation
    indices
    Where the capital asset become the property
    of the assessee before 1-4- 2001?

    Cost of acquisition of the asset to the assessee or

    Fair market value of the asset on 1-4-2001,

    Whichever is higher
    EXEMPTION OF CAPITAL GAINS

    Exemptions under section


    • 54
    • 54B
    • 54D
    • 54EC
    • 54F 

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