Capital Gains Tax Filing and related Exemptions covered as frequently asked questions (FAQs). Considers all aspects of Capital Gains, reinvestment options, section 54, 54B, 54EC, 54EE, 54F, 54D, 54G, 54GA, 54GB, unutilized capital gains, sale of assets, plot, flat, residential, commercial property, inherited property, agriculture land, computation
Any securities held by a FII which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.
Jewellery, archaeological collections, drawings, paintings, sculptures, or any work of art are not treated as personal effects and, hence, are included in the definition of capital assets.
However, the following items excluded from the definition of "capital asset" are: any stock-in-trade, consumable stores, or raw materials held by a person for the purpose of his business or profession.
E.g., Motor car for a motor car dealer or gold for a jewellery merchant, are their stock-in-trade and, hence, they are not capital assets for them.
Personal effects of a person, that is to say, movable property including wearing apparels (*) and furniture held for use, by a person or for use by any member of his family dependent on him..Agricultural Land in India, not being a land situated:
Within jurisdiction of municipality, notified area committee, town area committee, cantonment board and which has a population of not less than 10,000;
Within range of following distance measured aerially from the local limits of any municipality or cantonment board:
Not being more than 2 KMs, if population of such area is more than 10,000 but not exceeding 1 lakh;
Not being more than 6 KMs , if population of such area is more than 1 lakh but not exceeding 10 lakhs; or
Not being more than 8 KMs, if population of such area is more than 10 lakhs.
Any capital asset held by a person for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.
However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India, 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 in a company, the period of holding to be considered is 24 months instead of 36 months.
Capital gain broadly calculated as Capital gain = ( full value of consideration received on transfer) - ( cost of acquisition of capital asset + cost of improvement of capital asset + expenditure incurred in connection with transfer of capital asset).
By investing in capital gain bonds
By reinvesting in residential properties.
Personal expenses of the assesse.
Any interest which is payable outside India on which income tax has not been paid or deducted at source.
Any sum paid on account of wealth tax in India or abroad.
Any amount not allowable by virtue of it being unreasonable.
Any expenditure in connection with income from winning from lotteries, crosswords, crosspuzzles, races including race horses, car race and other games of races, gambling, betting of any form.
Stamp duty and registration fee
Land should have been used by the assesse or his parents for agricultural purposes for the last two preceding years.
The assesse shall purchase agricultural land within 2 years from the date of transfer and shall not sell the same for three years.
If the assesse does not purchase the agricultural property within 2 years, he may deposit the capital gain in the CGAS (Capital Gain Account Scheme) of the specified bank .
Check more on When to consider Agriculture Land as Capital Asset?
Gain arising on transfer of long-term capital asset is termed as long-term capital gain and gain arising on transfer of short-term capital asset is termed as short-term capital gain. However, there are a few exceptions to this rule, like gain on depreciable asset is always taxed as short-term capital gain.
The benefit of indexation is available only in case of long-term capital assets and is not available in case of short-term capital assets.
Generally, cost of acquisition of a capital asset is the cost incurred in acquiring the capital asset. It includes the purchase consideration plus any expenditure incurred exclusively for acquiring the capital asset. However, in respect of capital asset acquired before 1st April, 1981, the cost of acquisition will be higher of the actual cost of acquisition of the asset or fair market value of the asset as on 1st April, 1981. This option is not available in the case of a depreciable asset.
|54||Long-term capital gain arising on transfer of residential house property.||Gain to be re-invested in purchase or construction of one residential house property in India.|
|54B||Long-term or short-term capital gain arising on transfer of agricultural land.||Gain to be re-invested in purchase of agricultural land.|
|54EC||Long-term capital gain arising on transfer of any capital asset.||Gain to be re-invested in bonds issued by National Highway Authority of India or by the Rural Electrification Corporation Limited.|
|54EE||Long-term capital gain arising on transfer of any capital asset.||Gain to be re-invested in units of specified fund, as may be notified by Govt. to finance start-ups.|
|54F||Long-term capital gain arising on transfer of any capital asset other than residential house property.||Net sale consideration to be re-invested in purchase or construction of one residential house property in India.|
|54D||Gain arising on transfer of land or building forming part of industrial undertaking which is compulsorily acquired by Government and was used for industrial purpose for a period of 2 years prior to its acquisition.||Gain to be re-invested to acquire land or building for industrial purpose.|
|54G||Gain arising on transfer of land, building, plant or machinery in order to shift an industrial undertaking from urban area to rural area||Gain to be re-invested to acquire land, building, plant or machinery in order to shift the industrial undertaking from an urban area to a rural area|
|54GA||Gain arising on transfer of land, building, plant or machinery in order to shift an industrial undertaking from urban area to any Special Economic Zone||Gain to be re-invested to acquire land, building, plant or machinery in order to shift the industrial undertaking from urban area to any Special Economic Zone.|
|54GB||Long-term capital gain arising on transfer of residential property (a house or a plot of land). The transfer should take place during 1st April, 2012 and 31st March 2017. However, in case of investment in “eligible start-up”, sunset limit of 31st march 2017 is extended to 31st march 2019.|| The net sale consideration should be utilised for subscription in equity shares of an "eligible company". w.e.f. April 1, 2017, eligible start-up is also included in definition of eligible company|
CBDT Circular 06/2022 : Claiming exemption u/s 54, 54B, 54EC, 54F, 54G, 54GA (CG Reinvestment) to 54GB (eligible 'Startups') whose last date falls between 01st Apr 2021 to 25th Feb 2022 can be invested on or before 31st Mar 2023.
The amount so deposited under this scheme would be required to be utilised by the tax payer, within the specified period, for acquisition of new asset under the respective Section. Under this scheme, the tax payers can avail of the benefit of exemption from Capital Gains, if the amount of Capital Gains or the net consideration is deposited in the bank on or before the due date of filing the return of income.
Few Important Points to Remember:
Interest earned in this account is taxable.
It does not allow any withdrawals, except for the specified purpose (of buying the house).
Any unutilised amount after withdrawal has to deposit back.
Amount can be easily transferable from Account Type – A to Account Type – B and vice-versa.
If the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires