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Pfp Ppt. Final

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CAPITAL GAINS CAPITAL GAINS PRESNTED BY: PRESNTED BY: Rudrakshi Rud rakshi Mong a Monga Prashant Sharma Prashant Sharma Soumya Soumya Maroo Maroo
Transcript

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CAPITAL GAINSCAPITAL GAINSPRESNTED BY:PRESNTED BY:

RudrakshiRudrakshi MongaMongaPrashant SharmaPrashant Sharma

SoumyaSoumya MarooMaroo

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INCOME FROMINCOME FROM

CAPITAL GAINSCAPITAL GAINSGain or loss on transfer of capital assetsGain or loss on transfer of capital assets

affected during the course of previous year isaffected during the course of previous year is

taxable under this head.taxable under this head.

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Capital AssetsCapital Assets

It includes all type of assets Whether movable/It includes all type of assets Whether movable/immovable, tangible/intangible etc.,immovable, tangible/intangible etc.,

It excludes the following:It excludes the following:--

Stock in trade, consumable stores/raw materials held forStock in trade, consumable stores/raw materials held for

business/profession.business/profession.

Personal effects including wearing apparel and furniture.Personal effects including wearing apparel and furniture.

 Agricultural Land (Conditions on Situation applies) Agricultural Land (Conditions on Situation applies) Certain Specified Gold BondsCertain Specified Gold Bonds

Special Bearer BondsSpecial Bearer Bonds

Gold Deposit BondsGold Deposit Bonds

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 Judicial points on Judicial points on

what is taxable andwhat is taxable and

what is not taxablewhat is not taxable

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Capital gains

Short termCapital gains

Long termCapital gains

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Short term capital gainsShort term capital gains

If theIf the asset is held for Less than 36 Monthsasset is held for Less than 36 Monthsthen they are Short Term capital assets.then they are Short Term capital assets.

I

n case of Equity/Preference Shares in aI

n case of Equity/Preference Shares in aCompany, Securities such as Debentures/Company, Securities such as Debentures/Government Securities and Units of UTI andGovernment Securities and Units of UTI andUnits of Mutual funds and Zero Coupon bondsUnits of Mutual funds and Zero Coupon bonds

the term is 12 months instead of 36 months.the term is 12 months instead of 36 months.Depreciable assets is always treated as shortDepreciable assets is always treated as short

term capital assetsterm capital assets

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Long term Capital GainsLong term Capital Gains

If the asset is held for More than 36 MonthsIf the asset is held for More than 36 Months

then they are Long Term Capital Assets.then they are Long Term Capital Assets.

In case of Equity/Preference Shares in aIn case of Equity/Preference Shares in aCompany, Securities such as Debentures/Company, Securities such as Debentures/

Government Securities and Units of UTI andGovernment Securities and Units of UTI and

Units of Mutual funds and Zero Coupon bondsUnits of Mutual funds and Zero Coupon bonds

the term is more than 12 months.the term is more than 12 months.

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 Tax Liability Tax Liability

Short term capital gains

To determine the Value of Consideration

To deduct expenditure incurred

for the transfer To deduct the cost of acquisition. To deduct cost of improvement.

To avail exemption u/s 54 B, 54 D,54 G, and 54 G A.

The balance amount is Short TermCapital Gains.

Short Term Capital Gains arechargeable to Tax based on SLABRATES.

To determine the Value of Consideration

To deduct expenditure incurred

for the transfer To deduct the cost of acquisition. To deduct cost of improvement.

To avail exemption u/s 54 B, 54 D,54 G, and 54 G A.

The balance amount is Short TermCapital Gains.

Short Term Capital Gains arechargeable to Tax based on SLABRATES.

Long term capital gains

To determine the Value of Consideration

To deduct expenditure incurred

for the transfer. To deduct indexed cost of 

acquisition

To deduct indexed cost of improvement.

To avail exemption u/s 54, 54 B,54

D, 54 EC, 54F, 54 G, 54 G A, The balance amount is Long Term

Capital Gains. Long Term Capital Gains are

chargeable to Tax on Flat Rate i.e20%

To determine the Value of Consideration

To deduct expenditure incurred

for the transfer. To deduct indexed cost of 

acquisition

To deduct indexed cost of improvement.

To avail exemption u/s 54, 54 B,54

D, 54 EC, 54F, 54 G, 54 G A, The balance amount is Long Term

Capital Gains. Long Term Capital Gains are

chargeable to Tax on Flat Rate i.e20%

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 TRANSFERS TRANSFERS

Means change in the ownership.Means change in the ownership.

a)a) By sale, exchange of any asset.By sale, exchange of any asset.b)b) Extinguishment of any right in the asset.Extinguishment of any right in the asset.

c)c) Compulsory acquisition of any asset under law.Compulsory acquisition of any asset under law.

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TRANSACTION NOT REGARDED ASTRANSACTION NOT REGARDED AS

TRANSFERTRANSFER

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Following shall not be regarded asFollowing shall not be regarded as

 TRANSFER  TRANSFER  Any distribution of capital assets on the total Any distribution of capital assets on the total

OR partial partition of a Hindu undividedOR partial partition of a Hindu undivided

family.family. Any transfer of a capital asset under a GIFT or Any transfer of a capital asset under a GIFT or

 W ILL or IRREVOVABLE TRUST. W ILL or IRREVOVABLE TRUST.

 Any transfer of a capital asset by a company to Any transfer of a capital asset by a company toits subsidiary company if :its subsidiary company if :

-- parentparent co.toco.to hold whole of the share ANDhold whole of the share AND

-- subsidiary is an Indian Co.subsidiary is an Indian Co.

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 Any transfer of a capital asset by a subsidiary co. Any transfer of a capital asset by a subsidiary co.to the holding co. if :to the holding co. if :

-- share capital of subsidiary co. held by share capital of subsidiary co. held by holding co. ANDholding co. AND

-- holding holding co.isco.is Indian co.Indian co.

 Any transfer of a capital asset in a scheme of  Any transfer of a capital asset in a scheme of 

amalgamation by the amalgamating co. to theamalgamation by the amalgamating co. to theamalgamated co. provided amalgamated co. isamalgamated co. provided amalgamated co. isIndian Co.Indian Co.

SEC 47 ²Transactions NOT regarded as ´Transferµ

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 Any transfer of a capital asset being a share or shares Any transfer of a capital asset being a share or sharesheld in an Indian Co. by the amalgamating Foreign Co.held in an Indian Co. by the amalgamating Foreign Co.to the amalgamated Foreign Co. if:to the amalgamated Foreign Co. if:

-- more than 25% shareholders of the amalgamating co.more than 25% shareholders of the amalgamating co.continue to remain share holders of the amalgamatedcontinue to remain share holders of the amalgamatedCo. ANDCo. AND

-- such transfer is not liable to capital gains tax in thesuch transfer is not liable to capital gains tax in thecountry, in which amalgamating Co. is Incorporated.country, in which amalgamating Co. is Incorporated.

SEC 47 ²Transactions NOT regarded as ´Transferµ

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 Any transfer, in a demerger of a capital asset by the Any transfer, in a demerger of a capital asset by thedemerged company to the resulting company , provideddemerged company to the resulting company , providedresulting company is an Indian Company.resulting company is an Indian Company.

 Any transfer in a demerger of a capital asset being a Any transfer in a demerger of a capital asset being ashare held in an Indian Co. by the demerged foreign toshare held in an Indian Co. by the demerged foreign tothe resulting Foreign Co. if :the resulting Foreign Co. if :-- more than 75% of share holders of demerged Co.more than 75% of share holders of demerged Co.remain share holders of resulting Co.remain share holders of resulting Co.

-- such transfer does not attract capital gains tax in thesuch transfer does not attract capital gains tax in theCountry in which foreign Co. is incorporated.Country in which foreign Co. is incorporated.

SEC 47 ²Transactions NOT regarded as ´Transferµ

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 Any transfer or issue of shares by the resulting co. to Any transfer or issue of shares by the resulting co. tothe shareholders of demerged co. provided, transfer orthe shareholders of demerged co. provided, transfer orissue is made in consideration of demerger of Co.issue is made in consideration of demerger of Co.

 Any transfer in a scheme of amalgamation , by a Any transfer in a scheme of amalgamation , by ashareholder of a capital asset held by him in theshareholder of a capital asset held by him in theamalgamating co. provided :amalgamating co. provided :

-- the transfer is made in consideration for the sharesthe transfer is made in consideration for the shares

allotedalloted to him in the amalgamated Co. ANDto him in the amalgamated Co. AND-- the amalgamated Co. in Indian Co.the amalgamated Co. in Indian Co.

SEC 47 ²Transactions NOT regarded as ´Transferµ

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 Any transfer of a capital asset being any Art Any transfer of a capital asset being any Art

 Work , Archaeological Work , Scientific OR Art Work , Archaeological Work , Scientific OR Art

collection , Drawing , Painting , Photograph ,collection , Drawing , Painting , Photograph ,

etc. to Govt., National Museum , National Artetc. to Govt., National Museum , National Art

Gallery notified by Central Govt.Gallery notified by Central Govt.

 Any transfer by way of conversion of Bonds or Any transfer by way of conversion of Bonds or

debenture in any form into shares OR debenture in any form into shares OR Debentures.Debentures.

SEC 47 ²Transactions NOT regarded as ´Transferµ

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 Any transfer of a capital asset being land of a Any transfer of a capital asset being land of a

sick industrial unit made under a schemesick industrial unit made under a scheme

prepared & sanctioned U/S 18 of ´Sick prepared & sanctioned U/S 18 of ´Sick 

Industrial Companies Act 1985µ provided suchIndustrial Companies Act 1985µ provided such

transfer takes place from the period in whichtransfer takes place from the period in which

unit became sick & ends when NETWORTH of unit became sick & ends when NETWORTH of 

such unit equals to OR exceed thesuch unit equals to OR exceed the ACCUMULATED LOSSES. ACCUMULATED LOSSES.

SEC 47 ²Transactions NOT regarded as ´Transferµ

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 Any transfer of a capital asset or intangible asset by a firm Any transfer of a capital asset or intangible asset by a firm

to a company in succession of the firm by that company to a company in succession of the firm by that company provided :provided :-- all the asset & liabilities of the firm immediately beforeall the asset & liabilities of the firm immediately beforesuccession becomes asset & liabilities of the Company.succession becomes asset & liabilities of the Company.-- all the partners in the firm becomes shareholders of theall the partners in the firm becomes shareholders of the

company in the ratio of their capital balances as on date of company in the ratio of their capital balances as on date of succession.succession.-- the partners of the firm do not receive any considerationthe partners of the firm do not receive any considerationor benefit in any manner except allotment of shares in theor benefit in any manner except allotment of shares in the

company.company.-- the partners of the firm holds more than 50% of voting the partners of the firm holds more than 50% of voting powers in the company & such power continues for 5 yearspowers in the company & such power continues for 5 yearsfrom the date of succession.from the date of succession.

SEC 47 ²Transactions NOT regarded as ´Transferµ

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 Any transfer of a capital asset being a membership right Any transfer of a capital asset being a membership right

held by a member of aheld by a member of a recognisedrecognised stock exchange inI

ndiastock exchange inI

ndiafor acquisition of shares & trading rights acquired by suchfor acquisition of shares & trading rights acquired by suchmember in thatmember in that recognisedrecognised stock exchange in accordancestock exchange in accordance with the scheme approved by SEBI. with the scheme approved by SEBI. Any transfer OR sale by a sole proprietary concern of a Any transfer OR sale by a sole proprietary concern of a

capital asset to the successor company provided :capital asset to the successor company provided :-- all asset & liability of a sole proprietary concern becomesall asset & liability of a sole proprietary concern becomesasset & liability of the company.asset & liability of the company.-- the shareholding of the sole proprietor concern is morethe shareholding of the sole proprietor concern is morethan 50% of total voting power & the same is continuedthan 50% of total voting power & the same is continued

for next 5 years. ANDfor next 5 years. AND-- the sole proprietor does not receive any considerationthe sole proprietor does not receive any considerationOR benefit in any manner from the company except shareOR benefit in any manner from the company except shareallotment.allotment.

SEC 47 ²Transactions NOT regarded as ´Transferµ

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SECSEC ²  ² 47A WITHDRAWL47A WITHDRAWL

 Where at any time before the expiry of 8 years from Where at any time before the expiry of 8 years fromthe date of transfer of capital asset as discussed inthe date of transfer of capital asset as discussed inclause (iv) & (v) of secclause (iv) & (v) of sec ²  ²47 :47 :

-- such capital asset is converted by the transfereesuch capital asset is converted by the transfereecompany into stock in trade OR company into stock in trade OR 

-- the parent Co. or the holding Co. cease to hold wholethe parent Co. or the holding Co. cease to hold wholeof shares in capital of subsidiary Co.of shares in capital of subsidiary Co.

 The profit thereafter The profit thereafter arisedarised from transfer is to befrom transfer is to becharged to tax as Capital Gains.charged to tax as Capital Gains.

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 Where at any time conditions laid down in Where at any time conditions laid down in

proviso to clause (xiii) OR (xiv) are notproviso to clause (xiii) OR (xiv) are not

complied with, the profit or gains earlier exemptcomplied with, the profit or gains earlier exempt

shall now be charged to tax under headshall now be charged to tax under head

´CAPI TAL G AINSµ.´CAPI TAL G AINSµ.

SEC 47A ² Withdrawal

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COMPUTATION OF CAPTALCOMPUTATION OF CAPTAL

GAINSGAINSCOST OF ACQUISI TION:COST OF ACQUISI TION:

Cost at which the asset was acquiredCost at which the asset was acquired

In case the asset was acquired without paying In case the asset was acquired without paying any price i.e. partition of HUF, will, successionany price i.e. partition of HUF, will, succession

or amalgamation, the cost of previous owneror amalgamation, the cost of previous owner

remains the cost of present owner.remains the cost of present owner.

In the case of shares received. On amalgamationIn the case of shares received. On amalgamation

of a company, the cost of original sharesof a company, the cost of original shares

remains the cost of new shares.remains the cost of new shares.

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In the case of depreciable assets it always W.D.V.In the case of depreciable assets it always W.D.V.

 which is taken as cost u/s 50 (2), as been claimed which is taken as cost u/s 50 (2), as been claimed

on. If straight line method is opted then also it ison. If straight line method is opted then also it is

calculated under W.D.V. method.calculated under W.D.V. method.

Cost of acquisition of goodwill:Cost of acquisition of goodwill:

I.I. If goodwill was purchased the price paid is its cost.If goodwill was purchased the price paid is its cost.

II.II. If it is self created then the cost taken is NIL.If it is self created then the cost taken is NIL.

 At the time of conversion the cost remains the At the time of conversion the cost remains the

same of any debenture or share.same of any debenture or share.

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 The cost of bonus shares shall be taken as NILL. The cost of bonus shares shall be taken as NILL.

COST OF IMPROVEMENTCOST OF IMPROVEMENT

Incurred before 1Incurred before 1--44--1981 is to be ignored.1981 is to be ignored. Incurred after the above is treated as cost.Incurred after the above is treated as cost.

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COST OF INFLATION u/s 48COST OF INFLATION u/s 48

 As per provisions of section 48 the cost of an asset As per provisions of section 48 the cost of an asset

is to be inflated by COST OF INFLATIONis to be inflated by COST OF INFLATION

INDEX ( CII ) to be noted in respect of eachINDEX ( CII ) to be noted in respect of each

previous year separately.previous year separately.

For example, if a property purchased in 1991For example, if a property purchased in 1991--9292

for Rs 20for Rs 20 lakhlakh were to be sold were to be sold in A.Y. 2009in A.Y. 2009 --1010

for Rs 80for Rs 80 lakhlakh, indexed cost = (582/199) x 20 =, indexed cost = (582/199) x 20 =Rs 58.49Rs 58.49 lakhlakh. And the long . And the long--term capital gainsterm capital gains

 would be Rs 21.51, that is Rs 80 would be Rs 21.51, that is Rs 80 lakhlakh minus Rsminus Rs

58.4958.49 lakhlakh .( Inflation of 09.( Inflation of 09--10 = 582 and 9110 = 582 and 91--9292

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CASE STUDY CASE STUDY r.r. NaveenNaveen is a share holder in D Ltd. Holding 1000 shareis a share holder in D Ltd. Holding 1000 share

acquired for a consideration of Rs. 12 L . D ltd. Transferacquired for a consideration of Rs. 12 L . D ltd. Transferthe asset and liabilities of one of its undertakings to R ltd.the asset and liabilities of one of its undertakings to R ltd.

In consequence of such a demerger,In consequence of such a demerger, NaveenNaveen is issuedis issued

certain shares in R ltd. in lieu of certain shares held in Dcertain shares in R ltd. in lieu of certain shares held in Dltd. You are informed that the book value of assetsltd. You are informed that the book value of assets

transferred is Rs. 175 L and liabilities are Rs. 175L. Paidtransferred is Rs. 175 L and liabilities are Rs. 175L. Paid

up share capital is Rs. 400L and general reserve is Rs.up share capital is Rs. 400L and general reserve is Rs.

100L as appearing in books immediately before the100L as appearing in books immediately before thedemerger. You are required to compute the cost of demerger. You are required to compute the cost of 

acquisition of shares held in R ltd. And D Ltd. by acquisition of shares held in R ltd. And D Ltd. by NaveeNavee

after demerger.after demerger.

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EXEMPTIONS OF CAPITAL GAINSEXEMPTIONS OF CAPITAL GAINSSECTIO

N

CONDITIONS TIME FRAME QUANTUM

OF

EXEMPTIO

N

SEC 54 Transfer of a Long

Term Residential

House Property and

Purchasing/Constru

cting a NewResidential House

Property

Purchase of new

Residential

House: One year 

 before or 2 years

after the date of transfer 

Construction:

Within period of 

3years after the

date of transfer 

Cost of the

new residential

house >

Capital Gain=

Up to wholecapital gain is

exempted

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Cont.Cont.SECTIO

N

CONDITIONS TIME FRAME QUANTUM

OF

EXEMPTIO

N

SEC 54B Transfer of an

Agricultural land

and it must have

 been used for 

2years precedingthe date of the

transfer 

Purchase of 

another 

agricultural land

within 2years

from date of transfer 

Cost of the

Agricultural

Land > Capital

Gain= Up to

whole capitalgain is

exempted

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Cont.Cont.SECTIO

N

CONDITIONS TIME FRAME QUANTUM

OF

EXEMPTIO

N

SEC 54D Compulsory

acquisition of land or 

 building forming part

of industrial

undertaking and Assetmust have been used

for 2years

immediately

 preceding the date of 

the transfer 

Purchase or 

construction of 

land or building:

Within period of 

3 years after thedate of transfer 

Cost of the

new asset >

Capital Gain=

Up to whole

capital gain isexempted

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Cont.Cont.SECTI

ON

CONDITIONS TIME FRAME QUANTUM

OF

EXEMPTIO

N

SEC

54EC

After the transfer of 

long term Capital

Asset ,within 6months

the amount is invested

in specified bondsissued by REC or 

 NHAI

Assessee shall not

transfer or convert

or avail loan or 

advance on the

security of theabove bonds within

a period of 3years

from the date of its

aquisition

Amount of 

investment in

the specified

 bonds or the

capital gainswhichever is

lower 

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Cont.Cont.SECTIO

N

CONDITIONS TIME FRAME QUANTUM

OF

EXEMPTIO

N

SEC 54F Transfer of long term

capital asset, not

 being residential

house and the

assessee does notown more than one

residential house on

the date of transfer 

Purchase of 

residential

house: Within a

 period of 1year 

 before or 2yearsafter the date of 

transfer 

Construction:

Within period of 

3years after the

Cost of the

new

Residential

House >

Capital Gain=Up to whole

capital gain is

exempted

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 THANK YOU THANK YOU


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