Format for computation of Capital gains:

Income from Capital Gains  

 

· Consideration received on sale

· (less) Expenses incurred in relation to sale

· NET CONSIDERATION

· (less) Cost / Indexed cost of acquisition

· Long term / Short term capital gain

· (less) Exemption u/s 54 of the I.T act

· TAXABLE LONG / SHORT TERM CAPITAL GAIN / LOSS

Capital Gain arises on the fulfillment of the following conditions:

• There should be a capital asset
• The capital asset should be transferred by the assessee
• The transfer must take place in the previous year
• There has to be profit or gain as a result of the transfer
• Such profit or gain is not exempt under section 54, 54B, 54EC, 54ED, 54F and 54G

Capital asset includes any property held up the assessee whether or not connected with his business or profession. But the following are excluded from the definition of capital asset

• Any stock in trade
• Consumable store
• Personal affect of the assessee, any movable property including wearing apparel or furniture held for personal use
• Agricultural land in India provided it is not situated
• In any area within the jurisdiction of a municipality of a cantonment board
• In any area specified by the government
• 6.4% Gold bonds, 7% Gold Bonds, National Defense bonds
• Special Bearer bonds
• Gold deposit bonds

PERMISSABLE EXEMPTIONS UNDER CAPITAL GAINS

SECTION 54

• Applicability: This exemption can be availed only by individuals or HUF.
• Kind of asset: Residential house property or land appertained thereto
• Nature of the asset: The house property is a long term capital asset
• Investments: To be invested in residential house property or deposited in a bank a/c under the Capital gain account scheme.
• Amount to be invested: Capital gains
• Time limit: Residential house property to be purchased within 1 year before the date of such transfer or within 2 years after the date of transfer OR residential house must be constructed within 3 years after the date of transfer
• Lock In period: The new house property that is acquired should not be sold within 3 years. In case if the property is sold within 3 years then the amount of capital gains that was exempted earlier and the capital gains accruing on the sale of the asset both, will be taxed in the year of receipt of consideration.

SECTION 54B

• Applicability: This exemption can be availed only by individuals.
• Kind of asset: Agricultural land
• Nature of the asset: The agricultural land may be short term or a long term capital asset. Agricultural land must be used by the tax payer or his parents for agricultural purposes for a period of 2 years preceding the date of transfer
• Investments: To be invested in another agricultural land or deposited in a bank a/c under the Capital gain account scheme.
• Amount to be invested: Capital gains
• Time limit: Within a period of 2 years from the date of such transfer
• Lock In period: The agricultural land that is acquired shall not be transferred within 3 years.In case of a transfer then the capital gains arising on the transfer and the capital gains earlier exempt will be taxed in the year in which the gains are received

Section 54EC

• Applicability: This exemption can be availed by anyone.
• Kind of asset: Any capital asset
• Nature of the asset: The capital asset must be long term.
• Investments: To be invested in specified long term capital bonds. Specified long term capital bonds which are redeemable after 3 years are as follows:
  Issued on or after April 1st 2000 by REC or by NHAI
• Amount to be invested: Capital gains
• Time limit: Within 6 months from the date of such transfer
• Lock In period: If the specified assets are transferred or converted into money within a period of 3 years then the capital gain arising on the transfer and the earlier exempted capital gain will be clubbed and taxed in the year of the receipt of the consideration

SECTION 54F

• Applicability: This exemption can be availed only by individuals or HUF.
• Kind of asset: Capital asset other than Residential house.
• Nature of the asset: The asset must be a long term capital asset.
• Investments: To be invested in residential house property or deposited in a bank a/c under the Capital gain account scheme.
• Amount to be invested: Net consideration on sale.
• Time limit: Residential house property to be purchased within 1 year before the date of such transfer or within 2 years after the date of transfer OR residential house must be constructed within 3 years after the date of transfer
• Lock In period: The new house property that is acquired should not be sold within 3 years. In case if the property is sold within 3 years then the amount of capital gains that was exempted earlier shall be treated as long term capital gain, & will be taxed in the year in which the asset is transferred