In simple language, Capital Gain can be defined by any profit received through the Sale of any Capital Asset (which is defined under sec 2(14) ).
We can also say that.
- There should be Capital Asset
- And it is transferred by the Assessee
- Such transfer takes place during the previous year
- And Profits and Gains arising from the transfer of Capital Asset
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MEANING OF ASSESSEE Assessee means any person liable to pay tax or any other sum (fees, penalty) under Income Tax Act, 1961. MEANING OF PREVIOUS YEAR The year in which income is earned is known as the previous year. The previous year means the Financial year immediately preceding the Assessment year. The Previous year shall be the period from 1st April to 31st march except in the case of Newly set up Business and Profession, in this case, the period beginning from the date of setting up of the business and profession and ending on the last date of the previous year, i.e., 31st March. |
What is Capital Asset
Definition of Capital Assets is given under section 2(14), it means:-
- Any Property
- Any securities held by Foreign Institutional Investor which has invested by a regulation made by SEBI Act,1992
EXCEPTION:-
1) Any Stock in trade (held by Assessee for Business and Profession)
2) Movable Personal Asset (like Car, TV, Refrigerator, etc.) ( Any immovable property of an Assessee is not a Personal effect)
Except:- It means following are the Capital Asset:-
- Jewelry
- Archeological collection
- Paintings
- Drawings
- Sculptures
- Any work of art
3) Rural Agricultural Land in India
4) Gold deposit bonds issued under Gold Deposit Scheme
5) Deposit certificates issued under Gold Monetisation Scheme
TYPES OF CAPITAL ASSET
1) Long Term Capital Asset (If Asset Is Held for More Than 1/2/3 Years)
2) Short Term Capital Asset(If Asset is Held for 1/2/3 Years or Less)
NATURE OF ASSET
| CAPITAL ASSETS | YEARS |
| SECURITY LISTED IN RECOGNISED STOCK EXCHANGE | 1 year |
| UNIT OF EQUITY-ORIENTED FUND | 1 year |
| UNIT OF UTI ZERO COUPON BOND | 1 year |
| UNLISTED SHARES | 2 years |
| IMMOVABLE PROPERTY | 2 years |
| UNIT OF DEBT-ORIENTED FUND | 3 years |
| ANY OTHER ASSETS | 3 years |
TYPES OF CAPITAL GAIN
- LONG TERM CAPITAL GAIN:- Profit And Gains arising from the transfer of Long Term Capital Assets.
- SHORT TERM CAPITAL GAINS:- Profit And Gains arising from the Transfer of Short Term Capital Assets.
HOW TO CALCULATE CAPITAL GAIN
Short Term Capital Gain Or Capital Loss
Full Value of Consideration( Sale Value)
Less:- Expenditure Incurred Wholly and Exclusively
In Connection with Such Transfer ( Transfer Expenses)
Less:- Cost of Acquisition
Less:- Cost of Improvement
Long Term Capital Gain Or Capital Loss:-
Full Value of Consideration( Sale Value)
Less:- Expenditure Incurred Wholly and Exclusively
In Connection with Such Transfer ( Transfer Expenses)
Less:- Indexed Cost of Acquisition
Less:- Indexed Cost of Improvement
EXAMPLE:-
Mr. Y has a Plot of which Details are as Under:-
Purchase Date:- 8/09/2019
Purchase Value:- Rs. 8,50,000/-
Cost of Improvement:- Rs. 1,05,000/-
Sale Date:- 06/05/2020
Sell Value :- Rs.16,50,000/-
Transfer expenses:- Rs 2,500/-
Capital Gain Calculations are as Under:-
Full Value of Consideration( Sale Value) Rs.16,50,000
Less:- Expenditure Incurred Wholly and Exclusively
In Connection with Such Transfer ( Transfer Expenses) Rs. 2,500
Less:- Cost of Acquisition Rs. 8,50,000
Less:- Cost of Improvement Rs. 1,05,000
Short Term Capital Gains Rs. 6,92,500
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