1. Chargeability u/s 45

Profits or gains arising from the transfer of a capital asset is chargeable to tax in the year in which transfer take place under the head “Capital Gains”.

Definitions

Transfer: Sec. 2(47): Transfer in relation to a capital asset includes sale, Exchange, or relinquishment of the asset or extinguishment of any rights therein or the compulsory acquisition thereof under any law or conversion of the asset by the owner in stock-in-trade of a business carried on by him or the maturity or redemption of a zero coupon bond.

Capital Asset: Sec. 2(14): Capital Asset means property of any kind (Fixed, Circulating, movable, immovable, tangible or intangible) whether or not connected with his business or profession.

Exclusions —

1. Stock-in- trade

2. Personal effects of the assessee

3. Agricultural land in a rural area

4. 6½% Gold Bonds 1977 or 7% Gold Bonds 1980 or National Defence Bonds 1980 issued by the Central Government

5. Special Bearer Bonds 1991 issued by the Central Government.

6. Gold Deposit Bonds issued under Gold Deposit Scheme 1999

Short-term capital asset: Sec. 2(42A): means a capital asset held by an assessee for not more than thirty six months immediately preceding the date of its transfer. However, in the following cases, an asset, held for not more than twelve months, is treated as short-term capital asset—

Quoted or unquoted equity or preference shares in a company

Quoted Securities

Quoted or unquoted Units of UTI

Quoted or unquoted Units of Mutual Funds specified

u/s. 10(23D)

Quoted or unquoted zero coupon bonds

Long-term capital asset: Sec. 2(29): means a capital asset which is not a short-term capital asset

2. Year of chargeability to tax

Capital gains are generally charged to tax in the year in which ‘transfer’ takes place. Exceptions —

1. Sec. 45(1A) — Insurance Claim — In the year of receipt.

2. Sec. 45(2) — Conversion of capital asset into Stock-in-trade — In the year of actual sale of the stock.

3. Sec. 45(5) — Compulsory acquisition — When consideration or part thereof is first received.

Exempt Capital Gains under Section 10

10 (33):	Transfer of US 64 on or after April 1, 2002
10 (37):	Compulsory acquisition of Urban Agriculture Land where consideration is received after March 31, 2004.
10 (38):	Long-term capital gain arising on transfer on or after October 1, 2004 of equity shares or units of equity oriented mutual fund and the STT is paid at the time of transfer.

3. Computation of capital gains (Sec. 48)

The method of computation depends on the nature of capital asset transferred. It is as follows:—

Short-term Capital Gain			Long-term Capital Gain
A.	Find out Full Value of Consideration		A.	Find out Full Value of Consideration
B.	Deduct:		B.	Deduct:
	(i)	expenditure incurred wholly and exclusively in connection with such Transfer.		(i)	expenditure incurred wholly and exclusively in connection with such Transfer.
	(ii)	Cost of Acquisition		(ii)	Indexed Cost of Acquisition
	(iii)	Cost of Improvement		(iii)	Indexed Cost of Improvement
	(iv)	Exemption provided by Ss. 54B, 54D, & 54G, 54GA		(iv)	Exemption provided by Ss. 54, 54B, 54D, 54EC, 54ED, 54F & 54G, 54GA
C.	(A-B) is short-term capital gain		C.	(A-B) is a long-term capital gain

4. Full value of consideration for transfer of land or building or both: Sec. 50C

Higher of the followings:—

1. Full value of the consideration received or accruing

2. Value adopted or assessed (w.e.f. 1st day of October, 2009 the word “or assessed” shall be substituted by “or assessed or assessable”) by any authority of a State Government for the purpose of payment of stamp duty in respect of such transfer.

5. Indexed

Cost of acquisition = Cost of acquisition * Cost inflation index for the year In which the asset is transferred/ Cost inflation index for the first year in which the asset was held by the assessee or the year beginning on 1.4.1981, whichever is later or the year of Improvement of the asset

However, in case of Bonds, Debentures except capital indexed bonds depreciable assets,and for non residents even if they are long term capital assets the benefit of indexation is not available.

Cost inflation Index

Financial Year	Cost Inflation Index
1981-82	100
1982-83	109
1983-84	116
1984-85	125
1985-86	133
1986-87	140
1987-88	150
1988-89	161
1989-90	172
1990-91	182
1991-92	199
1992-93	223
1993-94	244
1994-95	259
1995-96	281
1996-97	305
1997-98	331
1998-99	351
1999-2000	389
2000-01	406
2001-02	426
2002-03	447
2003-04	463
2004-05	480
2005-06	497
2006-07	519
2007-08	551
2008-09	582

CAPITAL GAINS - VARIOUS EXEMPTIONS DETAILS

CAPITAL GAINS - VARIOUS EXEMPTIONS DETAILS

NOTES

1. In case New Asset is transferred before 3 years from date of purchase/construction, the Capital Gains exempted earlier will be chargeable to tax in year of transfer.

2. In order to avail the exemption, gains are to be reinvested, before the due date of return u/s 139(1). If the amount is not so reinvested, it is to be deposited on or before that date in account of specified bank/institution and it should be utilised within specified time limit for purchase/construction of New Asset.

3. U/s 54F Capital Gains exempted earlier shall be chargeable to tax — if a) If the assessee purchases within 2 years or constructs within 3 years any residential house other than the one in which reinvestment is made & b) If the new asset is transferred within a period of 3 years from the date of its purchase/construction.

4. As per Section 54H, where the transfer is by way of compulsory acquisition, the period available for acquiring the new asset u/ss. 54, 54B, 54D, 54EC and 54F shall be computed from the date of receipt of compensation

5. If cost of new house is more than the net consideration of original asset, the whole of the gains. If cost of specified asset is less than net consideration, the proportionate amount of the gains will be exempt.