What are Capital Gains and how they are taxable under Income Tax 1961

1. NITTY-GRITTY
OF CAPITAL GAINS
- By Hardik Lashkari
How Capital Gains are
taxable under Income Tax
Act, 1961
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Basic of Capital Gains

3. Property of any kind held by person irrespective of whether such
property is used for personal purpose or business purpose;
Securities held by Foreign Institutional Investor (Investment in
accordance with regulations made under SEBI 1992);
Jewellery, archaeological collections, drawings, paintings, sculptures &
any work of art; or
Urban Agricultural Area.
Capital Asset
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4. Stock in trade, consumable stores or raw materials held for business
purpose;
Movable property, including wearing apparel and furniture held for
personal purposes by family or the person himself;
Rural agricultural Land;
6.5% Gold Bonds 1977 or 7% Gold Bonds 1980 or National Defence
Gold Bonds 1980 issued by CG;
Special Bearer Bonds 1991 issued by CG;
Gold Deposit Bonds
Then which Assets are not Capital Assets?
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5. Short Term Capital Asset: A Capital asset that MEETS THE BELOW MENTIONED
CRITERIA of period of holding.
Long Term Capital Asset: A Capital asset OTHER THAN SHORT TERM CAPITAL
ASSET is treated as Long Term Capital Asset.
Type of Capital Assets
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Asset
Period of holding immediately preceding date of transfer
Security listed in RSE in India 12 months
Unit of UTI or unit of an equity oriented fund 12 months
Zero Coupon Bond 12 months
Unlisted Shares or Unit of Mutual Fund (if transferred
during 1st April 2014 – 10th July 2014)
12 months
Unlisted Shares or Unit of Mutual Fund (if transferred
after 10th July 2014)
36 months
All other assets 36 months

6. On transfer of Equity shares of a company or unit of equity oriented
fund on which STT has been charged:
Other Assessees => 15% x STCG
Individual/ HUF => 15% x [STCG Amount – (Basic Exemption Limit –
Other Income)] {Only if income other than capital gains is less than basic
exemption limit}
Other STCG
at Tax Rates applicable to the Assessees
Taxability of Short Term Capital Gains
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7. In case of Individual/ HUF;
20% x LTCG
20% x [LTCG Amount – (Basic Exemption Limit – Other Income)] {Only if income other than capital gains is
less than basic exemption limit}
In case of Domestic Company;
20% x LTCG
In case of a Non Resident or a Foreign Company;
In case of Unlisted Securities, LTCG shall be taxable at 10% WITHOUT GIVING EFFECT OF INDEXATION
BENEFIT AND WITHOUT CONVERTING CAPITAL GAINS INTO FOREIGN CURRENCY AND RE-
CONVERTING IT INTO INDIAN CURRENCY;
Other Capital Assets – 20%
Any other Assessees
20%
Taxability of Long Term Capital Gains
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8. Computation of Short Term Capital Gains
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9. Computation of Long Term Capital Gains
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10. Lower of
10% of Gross Capital Gains (Net Consideration – COST OF
ACQUISITION WITHOUT INDEXATION)
OR
20% of LTCG (Net Consideration – INDEXED COST OF
ACQUISITION)
Tax on listed securities (other than a unit) or Zero Coupon Bonds being
Long Term Capital Assets
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11. Profit on sale of property used for Residence (Section 54):
Eligible Assessee – Individual/ HUF;
Long Term Capital Asset being building or land used for residential purpose should be
transferred;
Assessee has either purchased within period of 1 year before or 2 years after, or has
constructed within 3 years after date on which transfer took place, a new residential house in
India;
If Amount of LTCG is greater than the amount of investment, then exemption up to amount of
investment shall be granted; & if amount of LTCG is equal or to less than amount of
investment, then entire capital gain amount shall be exempt from tax
Exemptions related to Capital Gains
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12. Capital Gain on transfer of Urban Agricultural Land (Section 54B):
Eligible Assessee – Individual/ HUF;
Agricultural land so transferred is used by assessee or his family members or by HUF in 2
years immediately preceding date of transfer of land;
New agricultural land is to be acquired within 2 years from date of transfer;
If Amount of capital gains is greater than the amount of investment, then exemption up to
amount of investment shall be granted; & if amount of capital gains is equal or to less than
amount of investment, then entire capital gain amount shall be exempt from tax;
Exemptions related to Capital Gains
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13. Capital Gains on compulsory acquisition of land and building (Section 54D):
Eligible Assessee: All Assessees;
Land or building or rights in land or building forming part of industrial undertaking which were
used by assessee for business of said undertaking within period of 2 years immediately
preceding date of transfer;
Transfer is by way of compulsory acquisition under any law;
New land/ building is to be purchased for the purpose of industrial undertaking within a
period of 3 years from date of transfer;
Exemptions related to Capital Gains
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14. Capital Gains on Investment in Certain Bonds (Section 54EC):
Eligible Assessee: All Assessees;
Any long term capital asset is transferred;
If the assessee invests Long Term Capital Gains so arisen in long term specified asset (3
years redeemable bonds issued by NHAI or RECL) within 6 months after the date of transfer;
Aggregate Investment in long term specified asset [ in the year of transfer of Long Term
capital asset and subsequent F.Y.] must not exceed 50 Lakhs;
If Amount of LTCG is greater than the amount of investment, then exemption up to amount of
investment shall be granted; & if amount of LTCG is equal or to less than amount of
investment, then entire capital gain amount shall be exempt from tax.
Exemptions related to Capital Gains
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15. Capital gains on transfer of capital assets and investment in residential house
(Section 54F):
Eligible Assessee – Individual/ HUF;
Any long term capital asset other than building/ land used for residential purposes is
transferred;
Assessee has either purchased within period of 1 year before or 2 years after, or has
constructed within 3 years after date on which transfer took place, a new residential house in
India (Only 1 residential house and it must be situated in India);
Amount of Exemption:
Exemptions related to Capital Gains
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Amount of Capital Gains
X
Amount invested for acquisition of
new house property
Amount of Net Consideration

16. Capital Gains on transfer of assets in case of shifting of industrial undertaking from
urban area to Rural area (Section 54G):
Eligible Assessees: All Assessees;
Machinery, Plant, Building or Land or rights in building or land used for purpose of industrial
undertaking situated in urban area is transferred on account of transfer of said undertaking by
assessee to a rural area from urban area;
Amount of capital gains is used by the assessee within a period of 1 year before or 3 years
after date of transfer in –
Purchase of new machinery or plant for purpose of business of said industrial
undertaking;
Acquisition of building or land or construction of building;
Incurrent of expenses in accordance with scheme notified by board.
Exemptions related to Capital Gains
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17. Capital Gains on transfer of Residential House Property (Section 54GB):
Eligible Assessee – Individual/ HUF;
Any Long Term Capital Asset being Residential House Property;
Assessee has invested amount of net consideration for subscription of equity shares in an
eligible company before due date of filing return u/s 139(1) and the company has utilized such
amount for purchase of new asset within 1 year from date of subscription in equity shares by
the assessee;
Amount of Exemption:
Exemptions related to Capital Gains
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Amount of Capital Gains
X Amount invested in new asset
Amount of Net Consideration

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HARDIK LASHKARI
(CRO 0423022)
(+91- 8385979340)