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No. 1 e - Service Plateform in India

What is capital gain?

DigitalCA
Aug 12, 2019

The Meaning of Capital Gain Any Profit or gain arising from the sale or transfer of a capital asset is chargeable to tax under the head capital gain.

it is deemed to be the income of the previous year in which the transfer of the capital assets take place capital gains arising from the transfer of immovable property are chargeable to tax in the previous year in which the effective  transfer of title is conveyed and registered { in the case of transfer of property under section 53A  of the transfer of property  Act when agreement to sell is made and possession is transferred}it is deemed to be the income of the previous year in which the transfer of the capital assets take place capital gains arising from the transfer of immovable property are chargeable to tax in the previous year in which the effective  transfer of title is conveyed and registered { in the case of transfer of property under section 53A  of the transfer of property  Act when agreement to sell is made and possession is transferred}

Meaning of capital gain {sec. 2(14)

Capital gain is defended to include property of any kind whether fixed or circulation movable or immovable tangible or intangible.

Positive list – it includes the following –

  1. The property includes any rights in or with an Indian company, including rights of management or control or any other rights whatsoever.

  2. Property of any kind held by an assessee ( whether or not connected with his business or profession)

  3. Any securities held by a foreign institutional investor which has invested in such securities following the regulation made under the SEBI Act ( Applicable with effect from the assessment year 2015-16)

 

Negative list – the following assets are excluded from the definition of capital gain “-

 

  1. Any stock in trade { other than securities mentioned in 3 (supra) consumable stores or raw material held for business or procession.

  2. Personal effects of the assessment that is to say movable property including wearing apparel and furniture held for his personal use or the use of any member of his family dependent upon him ( jewellery, archaeological collections, drawings. paintings sculptures: or any work of art are treated as a capital asset even though it is meant for the personal use of the assesses 

  3. Agricultural land in a rural area in India

  4. 6.5 per cent gold bonds, 1977 or 7 per cent gold bonds, 1980 or national defence gold bonds 1980 issued by the central government

  5. Special bearer bonds, 1991 and

  6. Gold deposits bonds issued under the gold deposits scheme. 1999 ( with the effect the  assessment year  2016-17) deposits certificates issued the fold monetisation scheme 2015

  7. Rural area - rural area for the above purpose is as follows-

    From the assessment year 2014-15 -  any area which is outside the jurisdiction of  a municipality or cantonment board having a population of 10000 or more and also which does not fall within a distance ( to be measured aerially ) given below

    2 kilometres from the local limits of municipality/ cantonment board

    If the population of the municipality/cantonment board is more than 10000 but not more than 1 lakh

    6 kilometres from the local limits of municipality/cantonment board

     

    If the population of the municipality /cantonment more than 1 lakh but not more than 10 lakh

     

    8 kilometres from the local limits of municipality/cantonment board

    If the population of the municipality/cantonment board is more than 10 lakh

    For the above purpose “ population means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.

    Up to the assessment year 2013-14 - any area which is outside the jurisdiction of a municipality or cantonment board having a population of 10000 or more and also which does not fall within such notified  distance ( up to  8 kilometres –see notification no .so 77(E) dated February 6, 1973) from the local limits of such municipality or cantonment board.

    Shares – in respect of listed shares and securities held for a period of more then 12 months immediately preceding the date of its transfer if the assesses desires to rerate the income arising from the transfer thereof as capital gain the same shall not be put to dispute by the assessing officer. The taxpayers shall be not allowed to adopt a different /contrary stand in this regard in subsequent years. However these principles shall not apply in case where genuineness of transaction itself is questionable (such as bogus claims of long term capital gain /short term capital gains loss or any other sham transaction) – circular n .6 /2016$, date February 26, 2016, similarly, CBDT has decided that the income arising from transfer of unlisted shares would be considered under the head capital gain irrespective of period of holding with a view to avoid disputes litigation and to maintain uniform approach  - letter F.No .225/12/2016 / ITA .II Date May 2, 2016

     

     

    Types of capital gain

    Short term capital asset means a capital asset held by an assessee for not more than 36 months immediately prior to its date of transfer an asset other than a short term capital asset is regarded as a long term capital asset.

by: Vikash Kumar Choudhary ( Tax Executive at Digital CA)