TaxationCAPITAL GAINS

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Capital assets include property of any kind whether fixed or circulating; movable or immovable; tangible or intangible.

3Section 44 to 55 deals with capital gains

Profit arising on account of movable or immovable property is known as capital gains. Such gains may be of short term and long term.

The term transfer of ‘capital assets’ include sale, exchange, relinquishment of assets or extinguishment of any right or the compulsory acquisition thereof under any law.

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Short Term Capital Asset Long Term Capital Asset

It means a capital assets, which has been transferred by assesses before the expiry of 36 months from the date of its acquisition.

It means a capital assets, which has been transferred by assesses after the expiry of 36 months from the date of its acquisition.

5From the assessment year 1997-98, in the following cases on asset held not for more than 12 months is treated as short term capital asset.

Equity or preference shares in company (whether shares are quoted or not)

Securities like debentures, government securities listed in a recognised stock exchange in India.

Unit of UTI (whether quoted or not) Unit of mutual fund specified under section 10

(23D) (whether quoted or not) Zero coupon bond (quoted or not quoted). Assets

other than a short term capital asset is regarded as a long term capital asset.

6Capital Gain Exempted from the Tax Any distribution of capital assets in kind by a

H.U.F. to its members at the time of total or partial partition.

Distribution of assets in kind by a company to its shareholders at the time of its liquidation.

Any transfer of a capital asset under a gift or a will or an irrevocable trust.

7 Any transfer of agriculture land in India effected

before March, 1970.

Any transfer of capital asset, being any work of art, archaeological, scientific or art collection to the government, university or museum or national art gallery.

Any transfer by way of conversion of bonds or debentures of a company into shares of that company.

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Computation of Capital Gain

9Short term Capital Gain According to section 48 of Income Tax act,

1961 the short term capital gain are computed as under:

Out of the transfer price or consideration received on transfer of short term capital asset the following amount are deductable.1. Cost of capital asset.2. Cost of improvement of capital asset.3. The expenses in relation to transfer of capital

assets. Eg. Stamp registration fee, brokerage, advocate fee etc.

10Long-term Capital Gain

With effect from assessment year 1996-97 the computation of long term capital gain is done as under as per section – 48(2)

The following amount shall be deductible from the transfer of long term capital asset:

The fair market value of the asset on April 1st,, 1981 or cost of acquisition, whichever is more

Cost inflation index for the year in which the asset is transferred

Cost inflation index for the year in which acquisition

Cost of improvement Cost of inflation index for the year in which the asset is transferred

Inflationary cost of improvement