Any income that arises on transfer capital asset “Movable or Immovable” is taxable under the head Capital Gain of income tax act 1961. Capital Gain is segregated into two parts i.e. Short Terms Capital Gain and Long Term Capital Gain.
Meaning of Capital Asset
- Any kind of property held by an assessee, whether or not belonging to business or profession of the assessee.
- Any securities held by a Foreign Institutional Investors (FIIs) which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.
- Any ULIP to which exemption u/s 10(10D) does not apply on account of the applicability of the fourth & fifth proviso thereof.
Term ‘capital asset’ shall exclude the following:
- Any stock-in-trade (other than securities, consumable stores or raw materials held for the purposes of his business or profession.
- Personal effects, that is, movable property (including wearing apparel and furniture) held for personal use by an assesse or any member from his family dependent on him, However—Jewelry, Archaeological collections, Drawings , Paintings, Sculptures, Any work of art shall be considered as capital assets even if it is used for personal purposes;
- Specified Gold Bonds and Special Bearer Bonds
- Deposit certificates issued under the Gold Monetisation Scheme, 2015
- Within jurisdiction of municipality, notified area committee, town area committee, cantonment board and which has a population of not less than 10,000
- 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 more than 2 KMs, if the population of area is more than 10,000 but not exceeding 1 lakh
- Not more than 6 KMs , if the population of area is more than 1 lakh but not exceeding 10 lakhs
- Not more than 8 KMs , if the population area is more than 10 lakhs.
Classification of Capital Assets
Long Term Capital Assets:
Capital assets held more than 36 months immediately prior to the date of transfer shall be deemed as short-term capital assets.
Exceptions:
- In case of Following assets: Period of holding for more than 12 months.
- Equity or preference shares in a company which are listed in any recognized stock exchange in India;
- Other listed securities like debentures and Government securities;
- Units of UTI;
- Units of equity oriented funds; or
- Zero Coupon Bonds.
- In case of Unlisted shares and immovable property (such as land or building or both) Period of Holding for more than 24 months immediately prior to the date of transfer.
Short Term Capital Assets:
Capital assets held for not more than 36 months immediately prior to the date of transfer shall be considered as short-term capital assets.
Exceptions:
- In case of Following assets: Period of holding not more than 12 months.
- Equity or preference shares in a company which are listed in any stock exchange Bombay Stock Exchange and National Stock Exchange (BSE and NSE) in India ;
- Other listed securities like debentures and Government securities;
- Units of UTI;
- Units of equity oriented mutual funds; or
- Zero Coupon Bonds.
- In case of Unlisted shares and immovable property (being land or building or both) Period of Holding for not more than 24 months immediately prior to the date of transfer.
Type of Capital Gain
Long Term Capital Gain: Capital Gain emerging from transfering of long-term capital asset is termed as long-term capital gain
Short Term Capital Gain: Capital Gain arising on transfer of short-term capital asset is termed as short-term capital gain.
Exceptions: Capital Gain on depreciable assets is always considered as short-term capital gain.
Computation of Capital Gain
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Long Term Capital Gain
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Short Term Capital Gain
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- COA: Cost of Acquisition
- COI: Cost of Improvement
In case of Depreciable Assets: Short-term capital gain or loss from sale of depreciable asset will emerge only in the following two situations:
- When on last day of the previous year, WDV of the block of asset is nil; or
- When on the last day of the previous year, the block ceases to exist.
Calculation of Indexed Cost of Acquisition:
Cost of Acquisition × Cost Inflation index (CII) for the year of transfer |
CII for the year of acquisition or for the Financial Year 2001-02, whichever is later |
Calculation of Indexed Cost of Improvement:
Cost of Improvement × CII for the year of transfer) |
CII for the year of Improvement |
Note: If any capital asset (acquired before April 1, 2001) is transferred then the assessee has an option to take its cost of acquisition either as fair market value as on April 1,2001 or its actual cost.
Taxability on Long term Capital Gain:
POH- More Than 12 Months | POH- More Than 24 Months | POH- More Than 36 Months |
Taxability: u/s 112A- 10% on exceeds from 1 lakh (without Indexation)
a. Other listed securities like debentures and Government securities b. Units of UTI c. Units of equity oriented funds; or d. Zero Coupon Bonds.
Taxability u/s 112- 20% on exceeds from 1 lakh (without Indexation) |
Taxability: u/s 112- 20% (with Indexation) |
Taxability: u/s 112- 20% (with Indexation) |
Note: Basic Exemptions are available while calculating tax liability.
Taxability on Short term Capital Gain:
POH- Up to 12 Months | POH- Up to 24 Months | POH- Up to 36 Months |
a) Listed Equity or preference shares b) Other listed securities like debentures and Government securities c) Units of UTI d) Units of equity oriented funds; or e) Zero Coupon Bonds. Taxability u/s 111A- 15% if *STT paid Normal Slab Rate – If STT not paid |
Taxability: Normal Slab rate |
Taxability: Normal Slab Rate |
Note: Basic Exemptions are available while calculating tax liability
*STT- Security Transaction tax which is levied on buying/ selling of financial instruments like equity, debentures, bonds, derivatives, mutual funds.
**STT is not payable on Debt and Debt oriented schemes
Set off and carry forward of loss
- Loss emerging from short term capital can be set off with short term capital and long term capital gain.
- Short term capital loss can be carried forward & set off for 8 years.
- Loss arrived from long term capital can be set off only with long term capital gain.
- You can maximum carry forward your loss for 8 years.
FAQ's
Any income that arises on transfer capital asset “Movable or Immovable” is taxable under the head Capital Gain of income tax act 1961. Capital Gain is segregated into two parts i.e. Short Terms Capital Gain and Long Term Capital Gain.
Capital Gain arising on transfer of short-term capital asset is termed as short-term capital gain.
- Capital Gain emerging from transferring of long-term capital asset is termed as long-term capital gain.
POH- Up to 12 Months | POH- Up to 24 Months | POH- Up to 36 Months |
c) Units of UTI d) Units of equity oriented funds; or e) Zero Coupon Bonds.
Taxability
u/s 111A- 15% if *STT paid Normal Slab Rate - If STT not paid |
Taxability: Normal Slab rate |
Taxability: Normal Slab Rate |
Note: Basic Exemptions are available while calculating tax liability
*STT- Security Transaction tax which is levied on buying/ selling of financial instruments like equity, debentures, bonds, derivatives, mutual funds.
**STT is not payable on Debt and Debt oriented schemes
POH- More Than 12 Months | POH- More Than 24 Months | POH- More Than 36 Months |
Taxability: u/s 112A- 10% on exceeds from 1 lakh (without Indexation)
c) Units of UTI d) Units of equity oriented funds; or e) Zero Coupon Bonds. Taxability u/s 112- 20% on exceeds from 1 lakh (without Indexation) |
Taxability: u/s 112- 20% (with Indexation) |
Taxability: u/s 112- 20% (with Indexation) |
Note: Basic Exemptions are available while calculating tax liability.
Short-term capital gain or loss from sale of depreciable asset will emerge only in the following two situations:
- When on last day of the previous year, WDV of the block of asset is nil; or
- When on the last day of the previous year, the block ceases to exist.
