First of all, Let's understand what do we mean by a 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 assessee.
b) Any securities held by a FII which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.
However, the term ‘capital asset’ shall exclude the following:
a) Stock-in-trade, consumable stores, raw materials held for the purpose of business or profession;
b) Movable property held for personal use of taxpayer or for any member of his family dependent upon him. However, jewellery, costly stones, and ornaments made of silver, gold, platinum or any other precious metal, archaeological collections, drawings, paintings, sculptures or any work of art shall be considered as capital asset even if used for personal purposes;
c) Specified Gold Bonds and Special Bearer Bonds;
d) Agricultural Land in India, not being a land situated:
a. Within jurisdiction of municipality, notified area committee, town area committee, cantonment board and which has a population not less than 10,000;
b. Within range of following distance measured aerially from the local limits of any municipality or cantonment board:
i. not being more than 2 KMs, if population of such area is more than 10,000 but not exceeding 1 lakh;
ii. not being more than 6 KMs , if population of such area is more than 1 lakh but not exceeding 10 lakhs; or
iii. not being more than 8 KMs , if population of such area is more than 10 lakhs.
e) Deposit certificates issued under the Gold Monetisation Scheme, 2015
- General point
A capital asset is defined to include property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession. It includes all kinds of property, movable or immovable, tangible or intangible, fixed or circulating. Thus, land and building, plant and machinery, motorcar, furniture, jewellery, route permits, goodwill, tenancy rights,patents, trademarks, shares, debentures, securities, units, mutual funds, zero-coupon bonds etc. are capital assets.
When we transfer a capital asset, the transferor is liable to pay tax on such gains as per income tax. It is known as capital gains. So lets look out for the thoughts while purchasing a capital asset.
Following are the points to look out for in brief:-
Transfer of capital asset is divided into
- Long Term Capital Asset
- Short Term Capital Asset
Transfer of capital asset attracts a tax at the rate of 10% and 20% (flat rate - means no slabs - Even one rupee of gain is taxable) even it attracts a surcharge when crossed the threshold limit.
Often people buy capital asset for long term appreciation. The disadvantage here is a huge amount of our capital (money) is blocked in that asset.
Holding a capital asset for a short term is not beneficial compared to holding it for a long term as in long term benefit of indexation is given.
Benefit of buying a capital asset is, in future a big amount of money is received with appreciation
You must be logged in to post a comment.