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8/8/2019 Pfp Ppt. Final
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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