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 CHARGEABILITY

 DEFINATION
 TRANSACTIONS NOT REGARDED AS
TRANSFER
 CAPITAL ASSETS – EXCLUSION
 TYPES OF CAPITAL GAINS
 DEFINITIONS – IMPORTANT TERMS
 EXEMPTIONS
 TAX RATES

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 1
THERE
SHOULD BE A
CAPITAL GAIN
CAPITAL
ASSET

PROFIT OR CAPITAL
GAINS ARISES ASSET IS
AS A RESULT TRANSFERRED
OF TRANSFER BY ASSESSEE

TRANSFER
TAKES PLACE
DURING THE
PREVIOUS
YEAR

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 2
 (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


INVESTOR WHICH HAS INVESTED IN SUCH
SECURITIES IN ACCORDANCE WITH THE
REGULATIONS MADE UNDER THE SEBI
ACT,1992.

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 3
TRANSACTIONS NOT REGARDED AS TRANSFER

 ANY TRANSFER BY WAY OF CONVERSION OF BONDS, DEBENTURES,DEBENTURE STOCK,DEPOSIT


CERTIFICATES OF COMPANY,INTO SHARES OR DEBENTURES OF THAT COMPANY.

 ANY TRANSFER OF CAPITAL ASSET BY HOLDING COMPANY TO ITS SUBSIDIARY OR VICE VERSA
IF:
 THE PARENT COMPANY OR ITS NOMINEES HOLD WHOLE OF THE SHARE CAPITAL OF
SUBSIDIARY COMPANY &
 THE TRANSFEREE COMPANY IS AN INDIAN COMPANY

 ANY TRANSFER IN SCHEME OF AMALGAMATION OR DEMERGER OF CAPITAL ASSET IF THE


AMALGAMATED OR RESULTING COMPANY IS AN INDIAN COMPANY
 ANY DISTRIBUTION OF CAPITAL ASSET ON THE TOTAL OR PARTIAL PARTITION OF A HUF

 ANY TRANSFER OF CAPITAL ASSET UNDR A GIFT OR WILL OR AN IRREVOCABLE TRUST

 ANY TRANSFER OF CAPITAL ASSET IN SCHEME OF REVERSE MORTGAGE UNDER A SCHEME


MADE AND NOTIFIED BY THE CENTRAL GOVERNMENT

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 4
 ANY TRANSFER OF CAPITAL ASSET OR INTANGIBLE ASSET BY PRIVATE COMPANY OR UNLISTED PUBLIC
COMPANY TO LLP OR ANY TRANSFER OF SHARE OR SHARES HELD IN COMPANY BY SHAREHOLDER ON
CONVERSION OF COMPANY INTO A LLP IN ACCORDANCE WITH LLP ACT,2008 PROVIDED ALL CONDITIONS
SATISFIED:

 TOTAL SALES OR GROSS RECEIPT IN THE BUSINESS OF THE COMPANY DOES NOT EXCEED RS 60 LAKH IN
ANY OF THE THREE PRECEDING PREVIOUS YEARS,
 NO CONSIDERATION OR BENEFIT, DIRECTLY OR INDIRECTLY, OTHER THAN SHARE IN PROFIT & CAPITAL
CONTRIBUTION IN THE LLP ARISES TO THE SHAREHOLDRES,
 ALL ASSET & LIABILITIES OF THE COMPANY IMMEDIATELY BEFORE CONVERSION BECOME THE ASSET &
LIABILITIES OF THE LLP
 THE SHAREHOLDERS OF THE COMPANY BECOME PARTNERS OF THE LLP & THEIR CAPITAL
CONTRIBUTION & PROFIT SHARING RATIO IN THE LLP ARE IN THE SAME PROPORTION AS THEIR
SHAREHOLDING IN THE COMPANY ON THE DATE OF CONVERSION,

 THE ERSTWHILE SHAREHOLDRES OF THE COMPANY CONTINUE TO BE ENTITLED TO RECEIVE ATLEAST


50% OF THE PROFIT OF THE LLP FOR PERIOD OF 5 YEARS FROM THE DATE OF CONVERSION,

 THE TOTAL VALUE OF THE ASSET AS APPEARING IN THE BOOKS OF ACCOUNT OF THE COMPANY IN ANY
OF THE THREE PREVIOUS YEAR PRECEDING THE PREVIOUS YEAR IN WHICH THE CONVERSION TAKES
PLACE, SHOULD NOT EXCEED 5 CRORE,

 NO AMOUNT IS PAID EITHER DIRECTLY OR INDIRECTLY, TO ANY PARTNER OUT OF THE ACCUMULATED
PROFIT STANDING IN THE ACCOUNTS OF THE COMPANY ON THE DATE OF CONVERSION FOR A PERIOD
OF 3 YEARS FROM THE DATE OF CONVERSION.

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 5
 ANY TRANSFER OF CAPITAL ASSET OR INTANGIBLE ASSET BY SOLE
PROPRIETARY CONCERN TO COMPANY IN SCHEME OF
SUCCESSION PROVIDED :

 ATLEAST 50% OF THE VOTING POWER IN COMPANY IS HELD BY SOLE


PROPRIETOR & SHARE HOLDING CONTINUES FOR A PERIOD OF 5
YEARS FROM THE DATE OF SUCCESSION,

 ALL ASSET & LIABILITIES OF THE SOLE PROPRIETARY CONCERN


RELATING TO THE BUSINESS IMMEDIATELY BEFORE THE SUCCESSION
BECOME THE ASSET & LIABILITIES OF THE COMPANY,

 THE SOLE PROPRIETOR DOES NOT RECEIVE ANY CONSIDERATION OR


BENEFIT , DIRECTLY OR INDIRECTLY, IN ANY FORM OR MANNER ,
OTHER THAN BY WAY OF ALLOTMENT OF SHARES IN THE COMPANY

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 6
•ANY STOCK IN TRADE, CONSUMABLES, STORES OR RAW MATERIALS HELD FOR THE PURPOSE OF BUSINESS
STOCK IN TRADE HELD FOR
OR PROFESSION WILL BE TAXED UNDER THE HEAD PROFITS AND GAINS FROM BUSINESS OR PROFESSION
BUSINESS OR PROFESSION

•PERSONAL EFFECTS TO SAY MOVABLE PROPERTY HELD FOR PERSONAL USE BY THE ASSESSEE OR ANY
MEMBER OF HIS FAMILY DEPENDENT ON HIM/HER. HOWEVER FROM AY 2008-2009 ARCHELOGICAL
COLLECTIONS, DRAWINGS, PAINTINGS, SCULPTURES AND ANY WORK OF ART THOUGH ARE PERSONAL
PERSONAL EFFECT
ASSETS WOULD ATTRACT CAPITAL GAINS TAX)

•NOT AN URBAN AGRICULTURAL LAND. IT MUST BE RURAL AGRICULTURAL LAND.


AGRICULTURAL LAND IN
INDIA

•6.5% GOLD BONDS 1977, 7 % PER CENT GOLD BONDS 1980 OR NATIONAL DEFENCE GOLDS BONDS 1980
GOLD DEPOSIT BONDS
ISSUED BY THE CENTRAL GOVERNMENT
ISSUED UNDER GOLD
DEPOSIT SCHEME 1999.

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 7
CAPITAL GAIN TYPES

SHORT TERM CAPITAL GAIN LONG TERM CAPITAL GAIN

A SHORT TERM CAPITAL GAIN A LONG TERM CAPITAL GAIN


IS ARISING FROM THE SHORT IS A GAIN ARISING FROM A
TERM CAPITAL ASSET LONG TERM CAPITAL ASSET

Land and /or Building and


Unlisted shares ===24
CAPITAL ASSET HELD FOR A CAPITAL ASSET HELD FOR - A CAPITAL ASSETS HELD months or more.
NOT MORE THAN 12 MONTHS NOT MORE THAN 36 MONTHS FOR MORE THAN 12 MONTHS
ARE SHORT TERM CAPITAL IMMEDIATELY PRIOR TO ITS Any other type of Capital
IMMEDIATELY PRIOR TO ITS
ASSETS DATE OF TRANSFER asset including Units of Debt
DATE OF TRANSFER OTHER oriented/Mutual Fund=== 36
THAN MENTIONED IN SHORT
months or more
TERM CAPITAL GAIN

OTHER SECURITIES LISTED IN


EQUITY OR PREFERENCE
A RECOGNISED STOCK UNITS OF UTI OR UNITS OF
SHARES IN A COMPANY
EXCHANGE IN INDIA – MUTUAL FUND SPECIFIED ZERO COUPON BONDS
LISTED IN A RECOGNISED
DEBENTURES, GOVERNMENT 10(23D)
STOCK EXCHANGE–
SECURITIES

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 8
 FULL VALUE OF CONSIDERATION
 Transferor receives, or is entitled to receive as consideration for the
capital asset transferred. Full Value means the whole price without
any deduction whatsoever.
 EXPENDITURE ON TRANSFER
 Expenses incurred wholly and exclusively in connection with transfer
of capital asset is deductible viz. brokerage, commission, cost of
stamp, registration fees by vendor, litigation expenses.
 COST OF ACQUISITION :
 Cost of acquisition is the price which the assessee has paid, or the
amount which the assessee has incurred, for acquisition of the
asset. Expenses of capital nature for completing or acquiring the
title to the property are includible in the cost of acquisition. In case
of capita asset acquired before 1.4.2001 option to take either the
actual cost of acquisition or the fair market market value as on
1.4.2001 whichever is higher.

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 9
S NATURE OF ASSET SHORT TERM LONG TERM CAPITAL
R CAPITAL ASSET
. ASSET
1 FOR ASSETS BEING HELD FOR NOT HELD FOR MORE THAN 12
SHARES IN A COMPANY MORE THAN 12 MONTHS
OR ANY OTHER SECURITY MONTHS
LISTED IN A RECOGNISED
STOCK EXCHANG IN INDIA
OR A UNIT OF THE
UTI/ADMINISTRATOR OF
THE SEPCIFIED
UNDERTAKING/SPECIFIED
COMPANY OR A UNIT OF
A MUTUAL FUND OR A
ZERO COUPON BOND
2 LAND AND BUILDING AND HOLD FOR NOT HELD MORE THAN 24 MONTHS
SHARES OF UNLISTED MORE THAN 12 OR MORE
COMPANY MONTHS
3 ANY OTHER TYPE OF HELD FOR NOT HELD FOR MORE THAN 36
CAPITAL ASSETS MORE THAN 36 MONTHS
INCLUDING UNITS OF MONTHS PGDB-BE BUSINESS TAXATION
DEBT ORIENTED MUTUAL MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 10
FUND
 RULES CHANGED FOR TAX EXEMPTION REINVESTMENT OF ON LONG
TERM CAPITAL GAINS ON SALE OF A HOUSE (SECTION 54 & 54F) –
INVESTMENT MADE ONLY IN ONE HOUSE QUALIFY FOR TAX
EXEMPTION
 RULES CHANGED FOR TAX EXEMPTION REINVESTMENT OF ON LONG
TERM CAPITAL GAINS ON SALE OF ANY ASSET IN CAPITAL GAINS TAX
SAVINGS BONDS (SECTION 54EC) – DEDUCTION LIMITED TO RS. 50
LACS ONLY.
 TAXATION OF INCOME ARISING FROM NON EQUITY ORIENTED
MUTUAL FUNDS – SHORT TERM IF HELD FOR LESS THAN 36 MONTHS
WHICH EARLIER WAS 12 MONTHS AND WOULD BE TAXED AT 20%
AFTER TAKING INTO CONSIDERATION INDEXATION BENEFIT WHICH
EARLIER WAS 10% WITHOUT AVAILING INDEXATION BENEFIT.

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 11
 1.FAIR MARKET VALUE TO BE DEEMED CONSIDERATION IN CASE OF UNQUOTED SHARES: U/S 50C the Fair
market value (FMV)would be deemed to be the full value of consideration if actual sale consideration is less than
the FMV on the date of sale of shares.Thus,the both seller and buyer would have to pay tax on the difference if
the FMV is higher than the actual consideration.
 2.CPAITAL GAINS FOR THE JOINT DEVELOPMENT AGREEMENT (JDA) ON THE LAND /BUILDING OWNED BY
INDIVIDUAL/HUF:
 (A) There should be a registered agreement between the owner of the Land or building or both and developer, to
develop the real estate in consideration of land or building or both or part in cash.
 (B) Capital gain shall be chargeable to tax as income of the previous year in which the certificate of completion
for the whole or part of the project is issued by the Competent for this purpose, the stamp duty shall be the
value on the date of issuing the completion certificate.
 It is also proposed to define the following expressions "competent authority", "specified agrement" and
"stamp duty value" for this purpose.
 It is also proposed to insert a new section 194-IC in the Act so as to provide that in case any monetary
consideration is payable under the specified agreement, tax at the rate of ten per cent shall be deductible from
such payment
 3.Expanding the scope of long term bonds under 54EC : section for sectors which may raise fund by issue of
bonds eligible for exemption under section 54EC, it is proposed to amend section 54EC so as to provide that
investment in any bond redeemable after three years which has been notified by the Central Government in this
behalf shall also be eligible for exemption.

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 12
 Long Term Capital gains on sale of equity shares, units of equity
oriented mutual funds and units of a business trust on which STT as
required has been paid which was hitherto exempt from tax, now
subject to tax w.e.f April 1 2018 @ 10% in case gain exceeds Rs.
1,00,000/-
 Foreign Institutional Investors to be also taxed in respect of the
aforesaid long term capital gain in excess of Rs 1,00,000/- @10%.
Benefits of double taxation avoidance agreements if any continue to
be available
 Exemption
 Any transfer of a capital asset being bond or global depository receipt or rupee
denominated bond of an Indian Company or derivate made by a non resident on a
recognised stock exchange located in any International Financial Services Centre and
where the consideration for such transaction is paid or payable in foreign currency not
chargeable to tax.
 Exemption under section 54EC by way of investment made in certain specified bonds in
respect of transfer of capital asset made after April 2018 :
 - Available only in respect of capital gain arising on transfer of long-term capital asset
being land or building or both
 Available only in case of bonds redeemable after five years.

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 13
PARTICULARS AMOUNT RS.
FAIR MARKET VALUE OF CAPITAL ASSET (A) 100
If the capital asset is listed on a recognised stock exchange the highest price of the
capital asset quoted on such exchange on January 31 2018. If there is no trading in
such asset on such exchange on January 31 2018 the highest price of such assets on
a date immediately preceding January 31 2018 when such asset was traded.
If the capital asset is a unit and is not listed on a recognised stock exchange the NAV
of the asset on January 31 2018

Full Value of Consideration received or accruing as a 120


result of such transfer (B)
Lower of (A) or (B) (C) 100
Actual Cost of Acquisition (D) 90
Cost of Acquisition for the purpose of computing Capital 100
Gain Higher of (C) or (D) (E)
Benefit of exchange loss (in case of non residents) and
indexation (in case of residents) not available
Long Term Capital Gain (B) – (E) (F) 20

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 14
 SALE, EXCHANGE, RELINQUISHMENT
 EXTINGUISHMENT OF ANY RIGHTS THEREIN.

 COMPULSORY AQUISITION THEREOF UNDER ANY


LAW.
 CONVERSION OF CAPITAL ASSET INTO STOCK IN
TRADE.
 TRANSACTIONS WHICH HAVE THE EFFECT OF
TRANSFERRING ENABLING THE ENJOYMENT OF
IMMOVABLE PROPERTY VIZ. BECOMING A MEMBER
OF OR ACQUIRING SHARES IN A CO-OPERATIVE
SOCIETY WHICH HAS EFFECT OF GETTING SHARES
IN COMMON PLOT.
 (RELINQUISHMENT - WITHDRAWING, ABANDOING,
EXTINGUISHMENT – DESTRUCTION, TERMINATION
PGDB-BE BUSINESS TAXATION
MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 15
 IMMOVABLE PROPERTY
 (I) DOCUMENTS REGISTERED – EXECUTION AND
REGISTRATION OF CONVEYANCE DEED
 (II) DOCUMENTS NOT REGISTERED - (A) CONTRACT IN
WRITING (B) CONSIDERATION RECEIVED BY TRANSFEREE (C)
TRANSFEREE WILLING TO PERFORM PART OF THE CONTRACT
(D) TRANSFEREE SHOULD HAVE TAKEN POSSESSION OF THE
PROPERTY
 MOVABLE PROPERTY
 CONTRACT TO SELL
 TITLE PASSED AND DELIVERY MADE

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 16
 COST OF IMPROVEMENT
 Capital Expenditure incurred to increase the value of the capital asset is
treated as cost of improvement.
 INDEXED COST
 An amount which bears to the cost the same proportion as cost inflation
index for the year in which the asset is transferred bears to the cost inflation
index for the year in which the asset was acquired.

 COST INFLATION INDEX


 Cost Inflation Index as notified by the Central Government for different
previous year.

 INDEXED COST = Capital Assets x Cost Inflation Index of the year of transfer
---------------------------------------------
------------------------------
Cost Inflation Index of the year of acquisition

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 17
CAPITAL ASSETS TRANSFEFOR WHO

Bonds or debentures (other then (a) capital indexed Any Person


bonds issued by the Government or (b) Sovereign
Gold Bond issued by RBI under the Sovereign Gold
Bond Scheme 2015)

Shares in or debentures of an Indian company Non Resident


acquired by utilising convertible foreign exchange
(Section 48)
Depreciable assets Any Person

Undertaking/division transferred by way of a slump Any Person


sale (Section 50B)
As per section 2(42C) of Income -tax Act 1961, 'slump sale' means the transfer of one or more
undertakings as a result of the sale for a lump sum consideration without values being
assigned to the individual assets and liabilities in such sales.

Units Purchased in foreign currency (Section 115AB) Off Shore Fund

Global Depository Receipts (GDR) purchased in Non Resident


foreign currency (Section 115AC)
Global Depository Receipts purchasedPGDB-BE
inMODULE Resident
BUSINESS TAXATION
3 CAPITAL GAINS Individual
foreign currency (Section 115ACA) JIGNESH VIRENDRA SHAH 18
PARTICULARS AMOUNT
FULL VALUE OF CONSIDERATION XXXXXX
(A)
DEDUCT (B)
1. EXPENDITURE INCURRED XXXXX
WHOLLY AND EXCLUSIVELY IN
CONNECTION WITH SUCH
TRANSFER
2. COST OF ACQUISITION XXXXX
3. COST OF IMPROVEMENT XXXXX
SHORT TERM CAPITAL GAIN (A) – XXXXX
(B)

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 19
PARTICULARS AMOUNT
FULL VALUE OF CONSIDERATION XXXXXX
(A)
DEDUCT (B)
1. EXPENDITURE INCURRED XXXXX
WHOLLY AND EXCLUSIVELY IN
CONNECTION WITH SUCH
TRANSFER
2. INDEXED COST OF ACQUISITION XXXXX
3. INDEXED COST OF XXXXX
IMPROVEMENT
LONG TERM CAPITAL GAIN (A) – (B) XXXXX
(C)
LESS : EXEMPTION (D) XXXXX
LONG TERM CAPITAL GAIN (C) – (D) XXXXXXX

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 20
 Amit purchased house property on 10.12.2005 for
Rs. 45,00,000/- (Expenses on transfer and
registration Rs. 2,00,000/- borne by buyer .
Transfer fee paid to the Housing Society of Rs.
1,00,000/- on 3.3.2006. Amit sold the said house
property on 01.5.2017 for Rs. 1,50,00,000/-
(Brokerage 1% to be borne by seller and legal
expenses of transfer and registration Rs.
5,00,000/- to be borne by buyer). Compute Capital
Gain of Amit for the Assessment Year 2018-2019
(Cost Inflation Index 2005-2006 117 2006-2007 –
122 and 2017-2018 –272)
PGDB-BE BUSINESS TAXATION
MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 21
 Cost of House Property Rs. 45,00,000
 Expenses on transfer and Registration Rs. 2,00,000.
 Expenses to housing society for transfer Rs. 1,00,000
 Total cost of House Property Rs. 48,00,000/-

 Index cost of House Property = Rs. 48,00,000 x 272/117


 Index cost of House Property = Rs. 1,11,58,974/-
 Capital Gain Computation
 Sales Price = Rs. 1,50,00,000/-
 Less : Brokerage 1% Rs. 1,00,000/-
 NET CONSIDERATION Rs. 1,49,00,000/-
 Less : Indexed Cost Rs 1,11,58,974/-
 Capital Gain Rs. 37,41,025/-
PGDB-BE BUSINESS TAXATION
MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 22
 IF AMIT PURCHASED A NEW HOUSE ON 15.6.2017 OF RS.
41,00,000 CAPITAL GAIN COMPUTATION WOULD BE
 CAPITAL GAIN = 37,41,025
 LESS : EXEMPTION OF INVESTMENT
IN NEW HOUSE 37,41,025
 CAPITAL GAIN LIABILE TO BE TAXED NIL
 EXEMPTION ALLOWABLE TO THE EXTENT OF CAPITAL GAIN

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 23
 IF AMIT INSTEAD OF PURCHASING NEW HOUSE BEFORE 15.6.2017 DEPOSITED AMOUNT
OF RS. 41,00,000 IN CAPITAL GAIN DEPOSIT ACCOUNT SCHEME THEN CAPITAL GAIN
WOULD BE COMPUTED AS FOLLOWS :
 CAPITAL GAIN RS. 37,41,025
 LESS : LOWER OF AMOUNT DEPOSITED UNDER
CAPITAL GAIN DEPOSIT ACCOUNT SCHEME OR
CAPITAL GAIN RS. 37,41,025
(CAPITAL GAIN RS. 37,41,025 AMOUNT DEPOSITED RS. 41,00,000)
 CAPITAL GAIN NIL FOR THE ASSESSMENT YEAR 2018-2019 NIL.
 AMOUNT UTILISED FROM CAPITAL GAIN DEPOSIT ACCOUNT SCHEME BY PURCHASING
PROPERTY ON 10TH OCTOBER 2017 RS. 35,00,000 THEN CAPITAL GAIN COMPUTED
WOULD AS FOLLOWS
 AMOUNT DEPOSITED IN CAPITAL GAIN DEPOSIT ACCOUNT SCHEME RS. 41,00,000
 LESS : AMOUNT UTILISED BY PURCHASING NEW PROPERTY RS. 35,00,000
 LONG TERM CAPITAL GAIN RS. 6,00,000
 FOR THE ASSESSMENT YEAR 2019-2020

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 24
 Mr. Shah had purchased a piece of land in
May 1980 for Rs. 5,00,000. On 1.5.2009 he
started business in real estate and treated the
land as stock-in-trade of that business
adopting its value as on that date at Rs.
50,00,000. The fair market value of the land
as on 1.5.2009 was Rs. 40,00,000. On
4.3.2018 he sells the land for Rs.
1,70,00,000 to a builder. Compute his Capital
Gain and Business Income for assessment
year 2010-2011 and 2018-2019.
PGDB-BE BUSINESS TAXATION
MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 25
 Assessment Year 2010-2011
 Capital Gain Nil
 Assessment Year 2018-2019
 Capital Gain
 Fair Market Value on 1.5.2009 Rs. 40,00,000
 Less : Cost of Acquisition Rs. 5,00,000
 Indexed Cost of Acquisition
 5,00,000 x 272/100 Rs. 13,60,000
 Capital Gain Rs. 26,40,000
 Business Income – on Sale of Land
 Sale Proceeds Rs. 1,70,00,000
 Less : Cost of Acquisition being fair
 Market value as on 1.5.2009 Rs. 40,00,000
 Rs. 1,30,00,000
 Total Income Rs. 1,56,40,000

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 26
 RELINQUISHMENT – WITHDRAWN FROM,
ABANDONING OR GIVING UP AND ABANDONS
RIGHTS THERETO (CIT V RASIKLAL MANEKLAL
(1989) SC)
 EXTINGUISHMENT – TOTAL DESTRUCTION,
TERMINATION, OR EXTINCTION OF A CAPITAL
ASSET (CIT V VANIA SILK MILLS PVT LTD
(1991) SC & (CIT V MRS GRACE COLLIS AND
OTHERS (2001) SC)

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 27
 CBDT CIRCULAR DT. 24.6.1998 CLARIFIED AS
 FIFO METHOD WILL BE APPLIED ONLY IN
RESPECT OF THE DEMATERIALISATION
HOLDINGS.
 FIFO METHOD WILL BE APPLIED ACCOUNT
WISE IN CASE OF INVESTOR HOLDING
MULTIPLE DEMAT ACCOUNTS.

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 28
PGDB-BE BUSINESS TAXATION
MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 29
Section Asset Who is User or Amount to New Asset Exemption Prescribed Treatment Sale of
Transferred entitled Holding be Invested to be Criteria Period for of New Asset
period Purchased investment Untilized
amount

54 Residential Individual Exceeding Capital Residential Capital Within 1 Deposit in If sold


House & HUF 24 Months( Gains House Gains or year before Capital within 3
from amount or 2 years gains years from
1.4.2017 invested after the account the date of
prior to whichever date of scheme purchase/c
that it were is less transfer in before due onstruction
36 months) case of date of , for the
purchase furnishing purpose of
or within 3 the return computatio
years after of income n of Short
the date of Term
transfer, in Capital
case of Gain Asset
new on the new
constructio asset, the
n cost of new
asset shall
be reduced
by the
amount of
Capital
Gain
claimed as
exempt

54B Agricultural Individual Used by Capital Agricultura As above Within two As Above As above
Land him or his gain l Land years after
parent for transfer
2 years
immediatel
y prior to
the date of PGDB-BE BUSINESS TAXATION
transfer for
MODULE 3 CAPITAL GAINS
agriculture
JIGNESH VIRENDRA SHAH 30
Section Asset Who is User or Amount New Asset Exemption Prescribed Treatment Sale of New
Transferre entitled Holding to be to be Criteria Period for of Asset
d period Invested Purchased investmen Untilized
t amount

54 D Land & Any Used for 2 Capital Land & Capital Within 3 Deposit in If sold within 3
Building Assessee year Gains Building gains or years after Capital years from the
for for amount transfer Gain date of
Industrial Industrial invested Account purchase/cons
Undertaki Undertakin whichever Scheme truction, for
ng g is less before due the purpose of
date of computation
furnishing of Short Term
the return Capital Gain
of income Asset on the
new asset, the
cost of new
asset shall be
reduced by the
amount of
Capital Gain
claimed as
exempt

54EC Long Term Any Long Term Capital Which may Capital Within 6 ----- If sold within 3
Capital Assessee Capital gain raise fund Gains or months of years
Assets Assets by issue of amount transfer of exempted
bonds invested original capital gain
eligible for or Rs. 50 asset will be
exemption lacs deemed to be
U/s 54EC whichever the income
is less from Long
Term Capital
Gain of the
assessee in
PGDB-BE BUSINESS TAXATION the year of
MODULE 3 CAPITAL GAINS sale of new
asset.
JIGNESH VIRENDRA SHAH 31
Section Asset Who is User or Amount to New Asset Exemption Prescribed Treatment Sale of
Transferre entitled Holding be Invested to be Criteria Period for of New Asset
d period Purchased investment Untilized
amount

54 F Any Asset Individual/ Should be Net Residential (capital Within 1 Deposit in Same as
other than HUF Long Term Considerati House gain/net year before capital for Section
residential Capital on considerati 2 years gains 54, 54B,
house Gain. on) x after account 54D except
Should not amount transfer in scheme that under
own more invested case of before due section 54f
than one and does purchase date of it will be
house on not hold or 3 years furnishing taxed as
date of more than after return of Long Term
transfer one transfer in income Capital
residential case of Gain
house constructio
other then n
new asset

54G Plant and Any May be Capital Plant and Capital Within one Deposit in Same as
Machinery Assessee Long Term Gains Machinery Gains or year before Capital for Section
or Land & Capital or Land & amount or within 3 gains 54, 54B
Building Asset or Building invested years after account and 54D
for Short Term used for whichever the date of scheme
Industrial Capital Industrial is less transfer before due
Undertakin Asset Undertakin date of
g in urban g in non furnishing
Area urban area return of
or meeting income
expenses
of shifting

Under all the above sections, amount deposited in Capital Gains Account Scheme, if not utilised within the prescribed time, it will be taxed in
the previous year in which is prescribed period expires

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 32
 NAMED AS CAPITAL GAIN ACCOUNTS SCHEME 1988.
 BANKS NOTIFIED BY CENTRAL GOVERNMENT AND ARE NAMED AS DEPOSIT OFFICE
 TWO TYPES OF ACCOUNTS CAN BE OPEND DEPOSIT ACCOUNT – A SAVINGS BANK
ACCOUNT DEPOSIT ACCOUNT – B FIXED DEPOSIT ACCOUNT
 INTERST ON ACCOUNT – A SIMILAR TO SAVINGS BANK ACCOUNT ACCOUNT – B FIXED
DEPOSIT ACCOUNT SCHEME NOTIFED BY RESERVE BANK OF INDIA.
 ACCOUNT B CAN BE CONVERTED INTO ACCOUNT A
 NOMINATIONS IN RESPECT OF AN ACCOUNT CAN BE MADE.
 APPLICATIONS IN PRESCRIBED FORM FOR FIRST TIME WITHDRAWL MANNER AND EXTENT
OF UTILISATION.
 AMOUNT WITHDRAWN SHOULD BE UTILISED WITHIN 60 DAYS FROM THE DATE OF
WITHDRAWL.
 IF AMOUNT UNTILISED WITHIN 60 DAYS SHOULD BE DEPOSITED IN ACCOUNT A.
 CLOSURE OF ACCOUNT TO BE MADE WITH APPROVAL OF ASSESSING OFFICER

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 33
 INDIVIDUAL OR A HINDU UNDIVIDED FAMILY ELIGIBLE
 RESIDENTIAL HOUSE PROPERTY TRANSFERRED WHOSE INCOME IS TAXABLE
UNDER THE HEAD INCOME FROM HOUSE PROPERTY
 HOUSE PROPERTY TRANSFERRED SHOULD BE LONG TERM CAPITAL ASSET
 EXEMPTION – PURCHASE OF RESIDENTIAL HOUSE PROPERTY ( OLD OR NEW)
WITHIN ONE YEAR BEFORE OR WITHIN 2 YEARS AFTER THE DATE OF TANSFER
OR CONSTRUCT A RESIDENTIAL HOUSE PROPERTY WITHIN 3 YEARS FROM THE
DATE OF TRANSFER.
 AMOUNT OF EXEMPTION – AMOUNT OF CAPITAL GAIN OR AMOUNT INVESTED
IN PURCHASING OR CONSTRUCTING NEW RESIDENTIAL PROPERTY. PURCHASE
OF HOUSE PROPERTY NOT LIMITED TO ONE (D.ANAND BASAPPA V IT (2004)
(BANG), ITO V PCRAMAKRISHNA (2007) (CHENNAI) PREM PRAKASH BHUTANI V
CIT (2007) (DELHI)
 CONSEQUENCE IF NEW PROPERTY TRANSFERRED WITHIN 3 YEARS – SHORT
TERM CAPITAL GAIN ON (SALE – EXEMPTION AVAILED = SHORT TERM
CAPITAL GAIN)

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 34
COMPUTATION OF SHORT TERM COMPUTATION OF LONG TERM
CAPITAL GAIN CAPITAL GAIN
Consideration Received xxxx Consideration Received xxx
Less : Expenses of xxxx Less : Expenses of xxx
Transfer Transfer
Net Consideration xxxx Net Consideration xxx
Less : Cost of Acquisition xxx Less : indexed Cost of xxx
Acquisition
Less : Cost of xxx Less : Index Cost of xxx
Improvement Improvement
Short Term Capital Gain xxx Long Term Capital Gain xxx
Less : Exemption u/s 54 xxx
to 54G
Taxable Short Term xxx Taxable Long Term xxx
Capital Gain Capital Gain
PGDB-BE BUSINESS TAXATION
MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 35
Capital Assets If transaction is covered by Securities If transaction is not covered by Securities Transactions Tax
Transactions Tax
Long Term Short Term Long Term Short Term

Without Indexation With Indexation

Listed Equity 0 15% 10% 20% Normal Slab


Shares Rates
Unlisted Equity N.A N.A N.A 20% Normal Slab
Shares Rates
Listed N.A N.A 10% N.A Normal Slab
Debentures Rates
Unlisted N.A N.A 20% N.A Normal Slab
Debentures Rates
Equity Oriented 0 15% 10% 20% Normal Slab
Mutual Funds Rates
Non Equity N.A N.A 10% 20% Normal Slab
Oriented Mutual Rates
Funds
Immovable NA NA NA 20% Normal Slab
Property Rates

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 36
Year Cost of inflation Year Cost of
index inflation
index
2001-2002 100 2009-2010 148

2002-2003 105 2010-2011 167


2003-2004 109 2011-2012 184
2004-2005 113 2012-2013 200
2005-2006 117 2013-2014 220
2006-2007 122 2014-2015 240
2007-2008 129 2015-2016 254

2008-2009 137 2016-2017 264

2017-2018 272

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 37
 BUY BACK OF SHARES.
 REDUCTION IN FACE VALUE OF SHARES.
 CONVERSION OF LISTED DEBENTURES INTO SHARES
LISTED AT NYSE.
 CONVERSION OF INVESTMENT INTO STOCK IN
TRADE.
 BONUS SHARES
 FIFO METHOD FOR CAPITAL GAIN ON SHARES,
DEBENTURES AND PREFERENCE SHARES
 REFERENCE TO VALUATION OFFICER –
ASCERTAINING FAIR MARKET VALUE

PGDB-BE BUSINESS TAXATION


MODULE 3 CAPITAL GAINS
JIGNESH VIRENDRA SHAH 38

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