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Profits or gains arising from transfer of a capital asset are called “Capital Gains” and are charged to tax under the head "Capital Gains". Income from capital gains is classified as "Short Term Capital Gains" and "Long Term Capital Gains".
Capital Asset defined as
The following items are excluded from the definition of "capital asset":
In respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.
Period of holding to be considered as 24 months instead of 36 months in case of unlisted shares of a company or an immovable property being land or building or both.
Any capital asset held by the taxpayer for a period of not more than 36 months immediately preceding the date of its transfer will be treated as short-term capital asset.
Only a resident individual and resident HUF can adjust the exemption limit against STCG covered under section 111A. Thus, a non-resident individual/HUF cannot adjust the exemption limit against STCG covered under section 111A.
A resident individual/HUF can adjust the STCG covered under section 111A against the basic exemption limit but such adjustment is possible only after making adjustment of other income.
In other words, first income other than STCG covered under section 111A is to be adjusted against the exemption limit and then the remaining limit (if any) can be adjusted against STCG covered under section 111A.
Any capital asset held by the taxpayer for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.
In respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.
In case of unlisted shares, period of holding is to be considered as 24 months instead of 36 months.
An immovable property being land or building or both, period of holding is to be considered as 24 months from AY 2018-19. Before AY 2018-19, the holding period is 36 months.
Particulars | Rs. |
---|---|
Full value of consideration (i.e., Sales consideration of asset) | XXXXX |
Less: Expenditure incurred wholly and exclusively in connection with transfer of capital asset (E.g., brokerage, commission, etc.) | (XXXXX) |
Net sale consideration | XXXXX |
Less: Indexed cost of acquisition (i.e. Purchased cost of asset with indexation ) | (XXXXX) |
Less: Indexed cost of improvement, if any (*) | (XXXXX) |
Exemptions provided under sections 54, 54EC, 54F, and 54B | - |
Long-Term Capital Gain | XXXXX |
Indexation is the process that takes into account inflation from the time taxpayer bought the asset to the time taxpayer sell it. The way it works is that it allows taxpayer to inflate the purchase price of the asset to take into account the impact of inflation. The end result is that you get the benefit of lowering your tax liability.
Sl. No. | Financial Year | Cost Inflation Index |
---|---|---|
1 | 2001-02 | 100 |
2 | 2002-03 | 105 |
3 | 2003-04 | 109 |
4 | 2004-05 | 113 |
5 | 2005-06 | 117 |
6 | 2006-07 | 122 |
7 | 2007-08 | 129 |
8 | 2008-09 | 137 |
9 | 2009-10 | 148 |
10 | 2010-11 | 167 |
11 | 2011-12 | 184 |
12 | 2012-13 | 200 |
13 | 2013-14 | 220 |
14 | 2014-15 | 240 |
15 | 2015-16 | 254 |
16 | 2016-17 | 264 |
17 | 2017-18 | 272 |
18 | 2018-19 | 280 |
All the above allowances can be understood by their names but yet there are some allowances, which needs an explanation.
Sale of equity shares and equity-oriented mutual funds held for more than one year, on or after April 1, 2018 will be chargeable to tax at 10% plus cess @ 4%. Budget 2018 has increased cess from 3% to 4%. Therefore, cess of 4% will be added for the taxes to be paid from FY2018-19 onwards. Before FY 2018-19, all the STT transaction, equity shares and equity-oriented mutual funds held for more than one year are exempted.
No indexation benefit will be allowed on such transactions. However, capital gains up to Rs.100000 in a single financial year will be exempt from tax FY 2018-19.
Apart from the sale of equity shares and equity-oriented mutual funds remaining all tax on long term asset is 20%.
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