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Chat Showing the Computation of Capital Gain

CHART  SHOWING
THE COMPUTATION  OF “CAPITAL GAIN”

ITEM

TREATMENT

SCOPE OF CHARGE

1. Capital Assets              [Sec. 2(14)]

 

 

 

2.  Transfer           [Sec.2(47)]

 

 

 





3. Gain

 

 

 

Indexing of the Cost of Acquisition and cost of Improvement of Long Term Capital Asset only  [Section 48]

 


TYPES OF CAPITAL GAIN

1.Short-Term Capital Gain

 

2. Long - Term Capital Gain



EXEMPTED CAPITAL GAIN

1. Sale of Residential House Property.(asset is Long-Term) [Sec. 54]

 

 

 

2. Sale of Self-cultivated Agricultural Land (urban) [Sec. 54B]

3.Compulsory acquisition of    Capital Assets
[Sec.54D]

 

 

4. Sale of any Long-Term Capital Asset [Sec.54EC]

 

 

5. Investment of Long-Term Capital Gain in specified Asset[Sec.54ED]

 

 

 

6. Sale of Long-Term Capital Assets in case of Investment in Residential Houses[Sec.54F]


7. Treatment of Capital Loss
(Set Off )

 

8. Carry Forward of Unadjusted Capital Loss

Gain on Transfer of a Capital Asset called Capital Gain , (sec.45)

Property of any kind held by assessee, whether or not connected his business or profession. It includes Plant & Machinery, ‘Building’ - Whether Business Premises or Residential, all assets of a business, goodwill, patent rights, etc. :
Does not include ...
(i)  Stock In Trade
(ii) Persona effects -- Household goods except  Jewellery ;
(iii)  Agricultural Land situated in rural areas.


Includes Sale, Exchange, Relinquishment of the Asset or the Extinguishment of any rights therein or the Compulsory acquisition under any law. It must be effected during the previous year.

  1. Transfer of Assets on partition of H.U.F. ;
  2. Transfer of Assets on Liquidation of Company to its Shareholders ;
  3. Transfer of Assets under a Gift, Will or irrecoverable Trust ;
  4. Transfer of Assets by a Parent Company to Subsidiary Company ;
  5. Transfer of Assets on Amalgamation of Companies ;
  6. Transfer of Shares  on Amalgamation of Companies ;
  7. Conversion of Bonds and Debentures into Shares or Debentures.


Capital Gain = Sale Price -
(i)  Cost of acquisition [Indexed]
(ii) Cost of any Improvement [Indexed]
+
(iii) Expenses on Transfer
Balance is called Capital Gain

Actual Cost and Cost of Improvement has to be inflated by using Cost Inflation Index (C.I.I.) in following manner :
a Indexed Cost = Actual Cost X C.I.I. of the year of Sale / C.I.I. of the year of Acquisition.
a Indexed Cost of Improvement = Cost of Improvement X C.I.I of the year of Sale / C.I.I. of the year of Improvement.
(No Indexing in case of Short-Term Capital Assets, units acquired u/s 80 CCB, Bonds and Debentures for non resident Assesses.)

 

 

Gain on Asset held by Assessee for a period up to 36 months .
( In case of Shares Debentures Units Securities etc. This period is 12 Months)


Gain on Asset held by Assessee for a period exceeding 36 months .
( For Shares  12 Months)

 

 


The part of Capital Gain of Individual and H.U.F. from the sale of such house property which is Long-Term Capital Asset, is Exempted which is Invested in ---
(i)   Purchase of another house within 3 years  after the ale.
(ii)  Construction of another house within  3 years after the sale.
Condition : Such Exempted Gain will be added to new Capital Gain if the new house purchased or constructed is sold or transferred within 3 years from the date of purchase or construction.

 

That part of Capital Gain from the sale of such Land is Tax-FREE which is reinvested in purchase of another piece of Land within 2 years after sale.


That part of Capital Gain arising from Compulsory acquisition of Land , Building or any right is such Asset used by Assessee for 2 years for his own business, shall be Tax-FREE which is reinvested in purchase of another Land or Building or Right in Land or Building  within 3 years of the acquisition.
The new Asset so acquired cannot be sold or transferred for a period of 3 years, otherwise old exempted Gain will be put to TAX.


Investment of Long-Term Capital Gain within 6 months from date of sale in Bonds issued by National Bank for Agriculture and Rural Development ( NABARD), or National Highway Authority of India or by SIDBI. Amount of gain so invested shall be exempted. The new Bonds so acquired cannot be sold or transferred or pledged for 3 years.

With effect from Assessment Year 2002-2003 in case Long-Term Capital Gain from sale of listed Securities or Units is reinvested within 6 months from date of sale in acquiring shares forming part of the eligible issue of Capital, the Long-Term Capital so invested shall be exempted. The new Shares so acquired cannot be sold or otherwise transferred for a period of ONE Year from the date of Investment.
The gain which was exempted due to Investment in such Equity Shares and such equity shares are sold before the expiry of one Year, shall be deemed Long-Term Capital Gain of the year in which sold.

Where a Long-Term Asset is transferred and sale price is reinvested in construction or purchase of a Residential House within 3 years or 1 year before or 2 years after Sale, respectively, so much of Capital Gain shall be exempted as is in proportion of amount invested to net consideration.
No exemption if assesses owns another house or acquires another house in 1 year before or 2 years after or constructs another house in 3 years.

Short-Term Capital Loss can be Set Off from either Short Term Capital Gain or Long Term Capital Gain.
Long-Term Capital Loss can be Set Off only from Long Term Capital Gain.


Unadjusted Capital Losses are carried forward separately for 8 succeeding previous years to be

Related Topics....Under the head 'Capital Gain'

Capital Assets, Capital Gain & Transfer of Capital Assets for Taxation of 'Capital Gain'
Types of Capital Assets for Computing ‘Capital Gain’
Computation Of ‘Period Of Holding of an Asset' for Computing Gapital Gain [Explanation 1(i) to Section 2(42A)]
Transfer Of A Capital Asset [Section 2(47)] for Computing Capital Gain
Transactions Not regarded as ‘Transfer’ for Computing Capital Gain [Section 46 and 47]
Method of Computing Capital Gain [Section 48]
Deemed Cost of Acquisition of Asset for Computing Capital Gain
[Section 55(2)] : Cost of Acquisiton of Assets for Computation of Capital Gain
Capital Gains Accounts Scheme, 1988.
Types of Capital Gain
Tax on Long-Term Capital Gain in certain Cases (Section 112A)
Exemption of Capital Gains under Section 10 and 115JG

Exemption of Capital Gains under Sections 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GB anf 54H

(Section 54) : Exemption of Capital Gains from the Transfer of Residential House Property
(Section 54B) : Exemption of Capital Gain on Transfer of Land used for Agricultural Purposes
(Section 54D) : Exemption of Capital Gains on Compulsory Acquisition Of Land And Buildings forming part of Industrial Undertaking
(Section-54EC) : Exemption of Capital Gain on Transfer of any Long Term Capital Asset on the basis of Investment in certain Bonds
(Section 54EE) : Capital Gain not to be charged on Investment in Units of a Specified Fund
[Section 54F] : Exemption of Capital Gain on Transfer Of Long-Term Capital Assets other than a House Property
[Section 54G] : Capital Gain on Shifting of Industrial Undertaking from Urban Areas to Non-Urban Areas :
[Section 54GA] : Exemption of Capital Gain on transfer of assets in case of shifting of Industrial Undertaking from an urban area to any Special Economic Zone (SEZ)
(Section 54GB) : Exemption of Long term Capital Gain Tax on Transfer of Residential Property if Net Consideration is Invested in the Equity Shares of a new Start-up SME Company :
(Section 54H) : Extension of time limit for acquiring new Asset or Depositing or Investing amount of Capital Gain, in case of Compulsory Acquisition :

Capital Gain in various Special Cases - How to Find Out or Calculate

  1. Capital Gain from Zero Coupon Bonds

  2. Capital Gain in case of amount Received from an Insurer on account of Damage or Destruction of any Capital Asset [Section 45(1A)]:

  3. Capital Gain in the case of Transfer of Depreciable Assets [Section 50] -

  4. Capital Gain on Conversion of Capital Asset into Stock-in-Trade [Section 45(2)]-

  5. Capital Gain on Transfer of Capital Asset by a Partner/Memeber to a Firm/AOP/BOI as Capital contribution [Section 45(3)]-

  6. Capital Gain on Distribution of Capital Assets by a Firm, AOP/BOI to Partners at the time of Dissolution [Section 45(4)]-

  7. Capital Gain on Compulsory Acquisition of a Capital Asset [Section 45(5)]-

  8. Computation of Capital Gains in case of Joint Development Agreement [Section 45(5A)] [W.e.f. A.Y. 2018-19]

  9. Capital Gain on Conversion of Debentures / Bonds into Shares [Section 47(x), 49(2A) and rule 8AA] :

  10. Capital Gain on Transfer of Shares / Debentures in the hands of Non-Residents (Proviso 1 to Section 48 and Rule 115A) :

  11. Capital Gain on Transfer of Self-Generated Capital Assets :

  12. Capital Gain on Transfer of Bonus Shares -

  13. Capital Gain on Transfer of Right Entitlement -

  14. Capital Gain on Transfer of Securities in Demat Form -

  15. Capital Gains on Distribution of Assets by Companies in Liquidation [Section 46]:

  16. Computation of Capital Gains in the case of Transfer of Land and Building or in Real Estate Transactions [Section 50C] -

  17. Capital Gains on Purchase by Company of its Own Shares or Other Specified Securities [Section 46A]:

  18. Capital Gain on Sale of Land and Building to be computed separately in case of Building Constructed by the Assessee:

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