Capital Gains Flashcards
When is capital gain taxable
in the year of transfer of capital asset
Meaning of capital asset
Capital asset is defined to include:
a) Any kind of property
- held by an assessee,
- whether or not connected with business or profession of the assesse.
b) Any securities held by a FII
- which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.
Exclusions from capital asset
1.stock-in-trade
2.Movable personal property
except jewellery, archeological collections, drawings, paintings, sculptures, or any work of art
- Rural Agricultural Land in India
- Gold Deposit Bonds issued under Gold Deposit Scheme, 1999.
- Deposit certificates issued under the Gold Monetisation Scheme, 2015.
Are gold and silver utensils capital assets ?
Gold utensils are capital assets but silver utensils are not capital assets ( Personal movable property)
Define rural area
Not urban area
Urban area is :
municipality, notified area committee, town area committee, cantonment board and which has a population => 10,000
Within range of following distance measured aerially from the local limits of any municipality or cantonment board:
- not being more than 2 KMs, if population of such area is more than 10,000 but not exceeding 1 lakh;
- not being more than 6 KMs , if population of such area is more than 1 lakh but not exceeding 10 lakhs; or
- not being more than 8 KMs , if population of such area is more than 10 lakhs.
Population is to be considered according to the figures of last preceding census
When is a capital asset classified as long-term
1.all securities listed in a recognised stock exchange in India (other than units)
-units of equity oriented mutual funds,
-Units of UTI
-Zero Coupon Bonds,
the period of holding > 1 yr
Immovable property and shares of co. (other than covered in part A) > 2 yrs
Any other asset > 3 yrs
What is transfer
- Sale
- Exchange
- Relinquishment
- Extinguishment
- Compulsory acquisition by govt
- Conversion of CA to SIT
- Trf of possession as part performance
- Membership in co-op or acquiring shares which gives right to enjoyment of immovable property
- Redemption of zero coupon bond
What are the bonds in which i can invest CG to claim tax relief
section 54EC -
An assessee can claim tax relief by investing the amount of long-term capital gain arising from:
- long term capital asset being land or building or both
in the specified bonds
e.g. rural electrification bond
exceptions to yr. of trf = yr. of tax
- Conversion of CA into SIT - Yr. in which stock is sold
- Compulsory acquisition of asset - Yr. in which compensation is first received
- destruction of CA - Yr. in which claim is recd
- Immovable property transfer in JDA - Yr in which CC of project is recd
When is it taxable?
- Compensation on compulsory acquisition
- enhanced compensation
- compensation via interim order
- interest on compensation and deduction
- compensation - yr. of receipt of first installment entire compensation is chargeable
- enhanced compensation - taxable in the year as and when received
- enhanced compensation through interim order - taxable in the year final order is passed
- interest on compensation / enhanced compensation - taxable under IFOS in yr of receipt (50% deduction allowed)
Advance money forfeited
- If any advance money is forfeited by the owner , it shall be reduced from COA before indexing
- If any advance money is forfeited after 1/4/14 , it is taxable under IFOS
Should site and building be treated as seperate assets for capital gain
Yes, POH should be seperately determined
How to compute indexed cost of acquisition
COA* CII for year of trf/ CII of yr in which asset was held by assessee or CII for 2001-02 (100) whichever is later
CII for 2021 is 301
For asset acquired before 1/4/2001
COA = Actual cost or FMV as on 1/4/2001 whichever is higher)
How to compute indexed cost of improvement
COI* CII for year of trf/ CII of yr in which improvement was done
Improvement done before 1/4/2001 to be ignored
Fourth proviso to Section 48 : Indexation in case of debentures and bonds
No indexation available incase of bonns / debentures except for sovereign gold bonds issued by RBI and capital indexation bonds
For individuals - who redeem sovereign gold bonds on maturity there is no CG
First proviso - Capital gain in case of non-resident
What is the proviso? Applicable to whom Condition Is indexation available How to calculate capital gain
- Capital gain shall be calculated in FC and after tht reconverted into indian currency
- Applicable to non-resident ( including foreign company) who has acquired shares or debentures in indian company in FC by way of purchase or reinvestment
- Assesee should be NR in year of sale
- Indexation benefit not available
-COA (Avg TTBR+TTSR) on dt of acquisition
-Trf expd and sale conds( (Avg TTBR+TTSR) on dt of acquisition
Convert CG intoindian currency TTBR on dt of trf
COA,POH,Indexation of asset declared under IDS Income declaration scheme
- COA=FMV as on 1/6/2016
- POH (For classification) from date of acquisition if sale deed is registered or otherwise 1/6/2016
- Indexation benefit available only from 1/6/2016
What is FVOC
Trf of Capital asset from partner to partnership firm /AOP/BOI
Trf of Capital asset from partnership firm/AOP/BOI to partner
Trf of Capital asset from partner to partnership firm /AOP/BOI -
FVOC= FMV as per books of firm
Trf of Capital asset from partnership firm/AOP/BOI to partner
FVOC = FMV on date of transfer
What can be done if SDV is more than FMV
If SDV has not been disputed in any appeal then the A.O. may refer to valuation officer
- If value ascertained by V.O is more than SDV : Value of V.O is ignores
- If value ascertained by V.O. is less than SDV : FVOC (- ) Value ascertained by valuation officer
Bonus shares COA and POH
Acquired after 1.4.2001 - Nil
Acquired before 1.4.2001 - COA = FMV as on 1.4.2001
POH - from date of allotment to transfer date
COA of rights shares and POH
If the right shares are acquired by shareholder
POH : From allotment of rights
COA : Ant paid to company for the rights
If the rights are renounced
POH: From offer date to renouncement date
COH : NIL
Incase of demutalisation/ corporatisation of stock exchange
COA of equity shares allotted to memebers of Stock exchange- Cost of his original membership of exchange
COA of trading and clearing right - NIL
When and under which head is Forfeiture of advance money / token money taxable
After 1/4/2014 by present owner (assessee) , then taxed in yr of forfeiture under ifos
- Forefeited before 1/4/2014 then reduced from cost of acquisition before indexation
4 cases in which indexation benefit is not available
- Slump sale
- First proviso - Non Resident
- Fourth proviso - Capital gain incase of debentures / bonds
- Sec.112A - Listed equity shares, equity oriented units, units of MF
