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8/3/2019 5.Capital Gains
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Income Under the Head Capital
GainsAny Gain arising on a sale ortransferof a
capital assetis chargeable to tax under
section 45, if it is not eligible for exemption
under section 54,54B,54D,54EC,54ED,54F,
& 54G. Incidence of tax on capital
gains,however, depend upon whethercapital gain is ashort or long term capital
gain.
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What is a Capital Asset?
Any kind of property whether fixed, circulating,
movable or immovable, tangible or intangible is
included in capital asset
Exceptions are: Stock in trade
Personal effects.
(excluding jewellery)..
Rural Agri land
6.5% Gold bonds
1977.
special bearer bonds
gold deposit bonds,
1999.
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Capital gains exempt u/s 10
Any Capital gain on the transfer of US64 if
transfer takes place on or after 1-4-2002Any CG on compulsory acquisition of urban
agricultural land arising to any individual or HUF
LTCG on transfer of securities not chargeable
to tax in cases covered by Transaction Tax.
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TRANSFER
Transfer includes:
i) Sale, exchange or relinquishment of a
capital asset
ii) Extinguishments of any rights in a capital asset
iii) Compulsory acquisition of the capital asset
under any law
iv) Conversion of a capital asset into stock-in-trade
v) Part performance of a contract of sale
vi) Transfer of rights in immovable properties
through the medium of co-operative societies,
companies etc.
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vii)Transfer by a person to a firm or other
or Body ofa person to a AOP/BOI
viii) Distribution of capital assets on Dissolutionix) Distribution of money or other assets
by a Company on liquidation
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Transactions not regarded as
Transfer Distribution of capital assets on the total or partial ,
partition of a Hindu Undivided Family;
of a capital asset under a gift or will or an irrevocable trustexcept transfer under a gift or an irrevocable trust,
of shares, debentures or warrants allotted by a company to
its employees under Employees' Stock Option Plan or
Scheme; transfer of a capital asset by a company to its 100% Indian
subsidiary company, & vice versa
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in a scheme of amalgamation, transfer of a capital asset bythe amalgamating company to the amalgamated companyif the amalgamated company is an Indian company
transfer of shares of an Indian Company by anamalgamating foreign company to the amalgamatedforeign company,
in a demerger : transfer of a capital asset by the demerged
company to the resulting company, if the resultingcompany is an Indian company;
transfer of bonds or Global Depository Receipts, purchasedin foreign currency, by a non-resident to another non-resident outside India
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transfer of agricultural land in India effected before first of
March,'70.
transfer of any work of art, archeological, scientific or artcollection, book, manuscript,drawing, painting,
photograph or print, to the Government or a University or
the National Museum, National Art Gallery, National
Archives or any such other public museum or institution
notified by the Central Government in the Official Gazetteto be of national importance or to be of renown throughout
any State or States.
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Computation of Capital GainsShort term capital gains
Full value of consideration
Deduct
1. Cost ofacquisition
2. Cost ofimprovement
3. Expenditure incurred whollyand exclusively for suchtransfer
From resulting amt deduct exemptionsu/s 54B, 54D, &54G
Balance is STCG
Long term capital gains
Full value of consideration
Deduct
1. IndexedCost ofacquisition
2. IndexedCost ofimprovement
3. Expenditure incurred whollyand exclusively for such transfer
From resulting amt deduct exemptionsu/s 54, 54B, 54D, 54EC,54ED,54F &54G
Balance is LTCG
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LTCG.
Tax liability on LTCG to be taken at 20%.
If total income other than LTCG is less than zeroslab, LTCG over the zero slab only attracts tax at
20%.
No deduction u/s 80C-80U is not to be given for
tax on LTCG.
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Computation ofindexedCOAandCOI
*
Case 1Where capital asset is acquired by the assesse before 1- April
1981
CII of the yr in which
asset is trfd
FMV as on 1-4-1981 or
COA,whichever is more
CII of 1981-82
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Computation ofindexedCOAandCOI
Case 2
Where capital asset is acquired by the assesse on or after
April 1981in one of the modes referred u\s49(1) but it
was originally acquired by the previous owner before 1-4-1981FMV as on 1-4-1981 or COA,
to the previous owner
whichever is more
CII of 1981-82
CII of the yr in which
asset is trfd*
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Computation ofindexedCOAandCOI
Case 3Where capital asset is acquired by the assesse before
April 1981in one of the modes referred u\s49(1) and the same
was originally acquired by the previous owner before 1-4-1981
FMV as on 1-4-1981 or COA
to the previous owner
whichever is more
CII of 1981-82
CII of the yr in which
asset is trfd*
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Computation ofindexedCOAandCOI
Case 4Where capital asset is acquired by the assesse
in one of the modes referred u\s49(1) on or after1-4-1981
COA
CII for the yr in which
asset is acquired
CII of the yr in which
asset is trfd*
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Computation ofindexedCOAandCOI
Case 5Where capital asset is acquired by the assesse
in one of the modes referred u\s49(1) on or after1-4-1981
COA
CII for the yr in which
asset is acquired
CII of the yr in which
asset is trfd*
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Section 54
-Any LTCG arising to individual and HUF from the transferofResd.HP shall be exempted to the extent it is used for
purchase ofanother Resd HP within the period ofone yr
before or within two yrs after the date oftransfer or has
constructeda resd HP within aperiod of3 yrs after the date
oftransfer
-If the money is not spent before the lastdate of filing the
return of income, it must be deposited underCGaccount
Scheme with public sector bank.
-If this amt remains unutilised after the expiry of stipulatedperiod ,it shall be treatedas LTCG
-ifnew HP is transferred within a period of 3 yrs,New CG
along with old CG shall be chargeable to tax as STCG.
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Section 54B
-Any CG arising to individual from the transfer ofAgricultural land if it was used by the individual or his parents
for agricultural purposes during at least 2 yrs immediately prior
to transfer shall be exempted to the extent it is used for purchase
ofanother Agri landwithin the period oftwo yrs after the
date oftransfer
-If the money is not spent before the lastdate of filing the
return of income, it must be deposited underCGaccount
Scheme with public sector bank.
-If this amt remains unutilised after the expiry of stipulatedperiod ,it shall be treatedas LTCG
-ifnew Afri landis transferred within a period of 3 yrs,New
CG along with old CG shall be chargeable to tax as STCG.
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Section 54D
-Any CG arising to any person from the transfer ofLandandbuilding forming part ofindustrial undertaking which is
compulsory acquired by govtand which is usedduring two
yrs for industrial purposes prior to its acquisition shall be
exempted to the extent it is used for purchase ofLandand
building for industrial purposes within the period of3 yrs
after the date oftransfer
-If the money is not spent before the lastdate of filing the
return of income, it must be deposited underCGaccount
Scheme with public sector bank.-If this amt remains unutilised after the expiry of stipulated
period ,it shall be treatedas LTCG
-ifnew assetis transferred within a period of 3 yrs,New CG
along with old CG shall be chargeable to tax as STCG.
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Section 54EC
-Any LTCG arising to any person from the transfer ofany LTcapital asset trfd after 31.3.2000 shall be exempted to the extent
it is investedin LT specifiedAssets within the period of6
months fromthe date oftransfer
-If the money is not spent before the lastdate of filing the
return of income, it must be deposited underCGaccount
Scheme with public sector bank.
-If this amt remains unutilised after the expiry of stipulated
period ,it shall be treatedas LTCG
-ifnew assetis transferred or convertedinto money or anyloan , advance is taken on security ofthese assets within a
period of3 yrs,New CG along with old CG shall be chargeable
to tax as LTCG.
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Section 54EC
LONG TERM SPECIFIED ASSET MEAN
Any bond redeemable after 3 yrs issued
1. On 1-4-2000 by NABARD or National
Highway Authority of India2. On or before 1-4-2001, by REC ltd
3. On or before 1-4-2002, by National Housing
Bank Or by SIDBI
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Section 54ED
-Any LTCG arising to any person from the transfer ofany LTcapital asset being units, listed shares or securities shall be
exempted to the extent it is investedin specifiedEquity Shares
within the period of6 months fromthe date oftransfer
-If the money is not spent before the lastdate of filing the
return of income, it must be deposited underCGaccount
Scheme with public sector bank.
-If this amt remains unutilised after the expiry of stipulated
period ,it shall be treatedas LTCG
-ifnew assetis transferred or convertedinto money or anyloan , advance is taken on security ofthese assets within a
period of1 yr,New CG along with old CG shall be chargeable
to tax as LTCG.
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Section 54F
-Any LTCG arising to individual and HUF from the transferofany LT capital asset (other than Resd HP)provided on the
date of transfer the taxpayer does not own more than one Resd
HP shall be exempted in proportion to the net consideration to
the extent it is used for purchase ofanother Resd HP within the
period ofone yr before or within two yrs after the date of
transfer or has constructeda resd HP within aperiod of3 yrs
after the date oftransfer
-If the money is not spent before the lastdate of filing the
return of income, it must be deposited underCGaccountScheme with public sector bank.
-If this amt remains unutilised after the expiry of stipulated
period ,it shall be treatedas LTCG
-ifnew HP is transferred within a period of 3 yrs,New CG
along with old CG shall be chargeable to tax as STCG.
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Section 54G
-Any CG arising to any person from the transfer ofLand,Building, plant or machinery in order to shiftan
industrial undertaking from urban areato rural area shall be
exempted to the extent it is used for purchase ofanother
Land,Building, plant or machinery in order to shiftan
industrial undertaking areato rural areawithin the period of
one yr before or within 3 yrs after the date oftransfer
-If the money is not spent before the lastdate of filing the
return of income, it must be deposited underCGaccount
Scheme with public sector bank.-If this amt remains unutilised after the expiry of stipulated
period ,it shall be treatedas LTCG
-ifnew assetis transferred within a period of 3 yrs,New CG
along with old CG shall be chargeable to tax as STCG.
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Section 54GA
-Any CG arising to any person from the transfer of
Land,Building, plant or machinery in order to shiftanindustrial undertaking from urban areato SEZ shall be
exempted to the extent it is used for purchase ofanother
Land,Building, plant or machinery in order to shiftan
industrial undertaking areato SEZwithin the period ofone yr
before or within 3 yrs after the date oftransfer