PowerPoint Presentation : INCOME FROM CAPITAL GAIN 1. Capital gains/loss is the gain/loss which is computed on the transfer of a capital asset which is chargeable to tax. 2. Capital Asset u/s 2(14) :- Capital gain is charged on the sale of a capital asset as specified under the act. Capital asset refers to any property excluding the following specified asset, a) any stock in trade use for the purpose of business of the assesee. b) any personal effect i.e, movable property for personal use, however jwellery is considered to be a capital asset c) agricultural land situated is rural india. d) 6.5% gold bond (1977) e) special bearer bond (1991) f) gold development bond (1999) g) 7% gold bond (1980) h) national defence gold bonds (1980)
PowerPoint Presentation : 3. Transfer u/s 2(47) :- Capital gain is chargeable on transfer of a capital asset. Transfer includes, a) sale (in Rs.), exchange (in kinds), relinquishment (surrender). b) compulsory acquisition. c) conversion of capital asset in to stock in trade. d) possession of immovable property on transfer. e) enjoyment of immovable property and its rights. 4. Types of Capital Assets :- a) Short term capital asset : If any share, deb, units of uti or any mutual funds is transferred within 12 months then it is treated as STCA otherwise LTCA. b) Long term capital asset : If any capital asset beside share, deb, units are transferred within 36 month then they are charged as STCA otherwise LTCA.
PowerPoint Presentation : 5. Computation Of Capital Gain U/S 48 :- A) Computation Of Short Term Capital Gain : Full Value Of Consideration XX Less : Expenses Of Transfer (XX) Less : Cost Of Acquisition (XX) Less : Cost Of Improvement ( XX ) Short Term Capital Gain XX B) Computation Of Long Term Capital Gain : Full Value Of Consideration XX Less : Expenses Of Transfer (XX) Less : Indexed Cost Of Acquisition (XX) Less : Indexed Cost Of Improvement ( XX ) Short Term Capital Gain XX
PowerPoint Presentation : 6. Cases When FMV = Sales Consideration :- A) Capital Asset Into Stock In Trade B) Distribution Of Capital Asset By FIRM, AOP, BOI C) Barter/ Exchange D) Asset Distributed In Kind On Liquidation E) Asset Transferred By Way Of Gift/ Will 7. Expenses of Transfer :- a) Brokerage and Commission b) Cost of Stamp c) Registration fees borne by vendor d) Travelling expenses e) Litigation expenses (i.e, expenses on registration of share)
PowerPoint Presentation : 8. Cost of acquisition :- A) Cost inflation index (CII) :- Previous Year CII Previous Year CII Previous Year CII 1981-82 100 1982-83 109 1983-84 116 1984-85 125 1985-86 133 1986-87 140 1987-88 150 1988-89 161 1989-90 172 1990-91 182 1991-92 199 1992-93 223 1993-94 244 1994-95 259 1995-96 281 1996-97 305 1997-98 331 1998-99 351 1999-00 389 2000-01 406 2001-02 426 2002-03 447 2003-04 463 2004-05 480 2005-06 497 2006-07 519 2007-08 551 2008-09 582 2009-10 632 2010-11 711 2011-12 785
PowerPoint Presentation : B) Cost Of Previous Owner U/S 49(1) :- In Certain Cases Cost To The Owner Will Be Deemed To Cost Of The Previous Owner, A) Asset Received By Gift, Will. B) Partition Of HUF. C) Transfer Of Asset To The Partner On Dissolution. D) Transfer Of Asset On Liquidation Of The Company E) Transfer Of Asset On Amalgamation Of A Company F) Transfer By A Holding Co. To Indian Subsidiary Co. G) Transfer By A Subsidiary Co. To Indian Holding Co. H) Transfer By Trust. C) Cost Of Converted Share/ Debenture U/S 49(2a) :- Value Of Deb. Before Conversion XX Less : Value Of Deb. After Conversion ( XX ) Cost Of Acquisition Of Shares XX
PowerPoint Presentation : D) Cost Of Acquisition In Case Of Depreciable Assets Under Block Method :- Case I – All assets in a block are sold u/s 50(2) STCG = sale revenue > combined wdv STCL = sale revenue < combined wdv Case II – All assets in a block are not sold u/s 50(1) STCG = sale revenue of part of the block > combined wdv of full block STCL = does not arise in this case E) Fair Market Value As On 1-4-81 U/S 55(2)(b) :- When A asset has been acquired before 1-4-81(except A depreciable Or an intangible asset) then the cost to the owner will be the higher of A) actual cost of acquisition B) FMV as on 1-4-81 Even in the asset is acquired by any method as specified U/S 49(1) then also 55(2)(b) is applicable
PowerPoint Presentation : F) Indexed Cost Of Acquisition :- 1. Original Cost Adjusted As Per Index. 2. Only For Long Term Capital Gain 3. By These Indexation Cost Will Increase And Assessee Will Pay Less Tax On Capital Gain Icoa = Acoa X Index Of Year Of Transfer Index Of Year Of Acquisition G) Indexation Is Not Available For The Following Assets :- 1. Any Short Term Asset 2. Any Depreciable Asset (Always Short Term) 3. Any Debentures H) Cost Of Improvement :- Cost Of Improvement Basically Relates To 2 Types Of Assets A) For Goodwill And Rights = NIL B) For Any Other Asset = Cost Of Addition Or Alteration Incurred Note : Ignore Any Cost Of Improvement Incurred Before 1-4-81. Icoi = Acoi X Index Of Year Of Transfer Index Of Year Of Improvement
PowerPoint Presentation : I) Different Cases Of Indexation :- 1. Asset Acquired By Assesee After 1-4-81 Icoa = Acoa X Index Of Year Of Transfer Index Of Year Of Acquisition Icoi = Acoi X Index Of Year Of Transfer Index Of Year Of Improvement 2. Asset Acquired By Assessee Before 1-4-81 Icoa = Acoa Or X Index Of Year Of Transfer Fmv On 1-4-81 Index Of Year Of Acquisition Icoi = Acoi X Index Of Year Of Transfer (After 1-4-81) Index Of Year Of Improvement
PowerPoint Presentation : 3. Asset Acquired By Assessee U/S 49(1), Before 1-4-81 Icoa = Acoa Of P.Owner Or X Index Of Year Of Transfer Fmv On 1-4-81 Index Of Year Of 81-82 Icoi = Acoi X Index Of Year Of Transfer (After 1-4-81) Index Of Year Of Improvement 4. Asset Acquired By Assessee U/S 49(1) After 1-4-81 Icoa = Acoa Of P.Owner Or X Index Of Year Of Transfer Fmv On 1-4-81 Index Of Year In Which- Assesee Got The Asset Icoi = Acoi X Index Of Year Of Transfer (After 1-4-81) Index Of Year Of Improvement
PowerPoint Presentation : 5. asset acquired by assesee u/s 49(1) after 1-4-81, previous owner after 1-4-81 Icoa = Acoa Of P.Owner X Index Of Year Of Transfer Index Of Year In Which- Assesee Got The Asset Icoi = Acoi X Index Of Year Of Transfer Index Of Year Of Improvement
PowerPoint Presentation : 9. Computation of capital gains in the case of conversion of capital asset into stock in – trade U/S 45(2) :- Investment (2000-01) Converted in to Stock in trade (2005-06) Sale (2009-10) A) conversion of capital asset in to stock in trade is treated as transfer for the Purpose of capital gain. B) for this purpose the fmv on the date of conversion is taken as sales conside- Ration. C) thus capital gain = fmv on date of conversion – purchase cost. D) however such capital gain will be charged to tax in the year of actual sale & not in the year of conversion. E) in the year of sale, Business profit = actual sales price – fmv on date of conversion. Cg = sc –coa (Taxed in the year on sale)) Bp = sales price – fmv on date on conversion