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Capital Gains
Gains arising on transfer of capital asset is capital gain, which can be either short term or long term, as follows:1.) Gain arising on transfer of Long-term capital asset is Long Term Capital Gain. Notes :a.) In case of financial asset such as shares, debentures, mutual funds etc, if the period of holding of such asset is one year or more, the same shall be treated as long term capital asset. b.) In case of capital asset being other than financial asset as discussed above, if the period of holding is 3 years or more, the same shall be treated as long term capital asset. c.) Period of holding means, the period between the date of acquisition of asset and ending with the date of transfer of asset. d.) Gains arising on, transfer of short term capital asset is short term capital gain. e.) Short Term Capital asset means, other than long term capital asset. 2.) In case of long term capital asset, the indexation benefit is available in case of cost of acquisition as well as cost of improvement. However, no such benefit is available in case of short term capital gain. 3.) In case of Long term capital gain, such gains are taxable at special rates as follows:a) Shares or securities which are transferred on recognized stock exchange, where security transaction tax is paid on such transfer, such long term capital gain is exempt from tax.
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In case of short term capital gain, the above procedure shall be adopted except no indexation benefit is available. Notes:1.) Expenses on transfer means expenses incurred on transfer of legal title in favor of the transferee such as brokerage, stamp duty, registration charges etc on transfer. 2.) Cost of Acquisition means in case the capital asset being acquired by the assessee after 1.4.1981, cost being paid for acquiring such asset. 3.) In case capital asset being acquired before 1.4.1981, cost of acquisition shall be market value of such asset as on 1.4.1981. 4.) In case as capital asset being acquired under the modes such as gift, will, inheritance etc. where the assessee has not paid any cost for acquiring
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