Capital Gains and Assets Overview in Income Tax Law and Accounts

This content provides an overview of capital gains and assets in income tax law and accounts, covering topics such as types of capital assets, assets not considered capital assets, kinds of capital assets (short-term and long-term), transfer year of chargeability, computation of capital gains, and cost inflation index with base year 2001-02.

• Income tax
• Capital gains
• Assets
• Tax law
• Accounts

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1. INCOME TAX LAW AND ACCOUNTS - II MUTHUMON.T.R Assistant Professor Department of Commerce NSS College Pandalam

2. CAPITAL GAINS Main points Profits or gains earned from the transfer of capital assets are assessed under this head Elements essential for a transaction to be assessed under this head There should be transfer of asset The transferred asset should be a capital asset The transfer must be effected during the P/yr

3. Assets Assets not considered as capital assets -Stock in trade, consumable stores/ raw materials -Personal effects like wearing apparel, furniture, car, home appliances etc. -Agricultural land in Indian rural areas. -6.5% Gold bonds, -Special bearer bonds -Gold deposit bonds -Deposit certificate issued under Gold monetisation scheme

4. Kinds of Capital assets -Short term capital assets -Long term capital assets Short term capital gains: Capital gain resulting from the transfer of short term capital asset Long term capital gains: Capital gain resulting from the transfer of Long term capital asset

5. Transfer Year of chargeability Transactions not regarded as Transfer Full value of consideration Computation of Capital gains: Short term capital gain 1) Find out the full value of consideration and deduct a) Expenditure incurred wholly and exclusively in connection with the transfer b) Cost of acquisition c) Cost of improvement 2) Make deductions in sections 54B, 54D, 54G and 54GA.. 3) The balance amount is short term capital gain.

6. Long term capital gain: 1) Find out the full value of consideration and deduct a) Expenditure incurred wholly and exclusively in connection with the transfer b) Indexed Cost of acquisition c) Indexed Cost of improvement 2) Make deductions in sections 54B, 54D, 54G and 54GA.. 3) The balance amount is Long term capital gain.

7. COST INFLATION INDEX WITH BASE YEAR 2001-02 YEAR COST INFLATION INDEX 2001-02 100 2002-03 105 2003-04 109 2004-05 113 2005-06 117 2006-07 122

8. Cost of acquisition Cost to the previous owner Cost of bonus share Cost of acquisition of shares in amalgamated company Cost of acquisition of converted shares or debentures. Cost of acquisition on rights issue of share or security. Cost of acquisition on consolidation or conversion

9. INCOME FROM OTHER SOURCES Income of an assessee during the previous year which is not attributable to a particular income is assessed under the head Income from other sources Incomes chargeable under Other sources Dividends Winnings from lottery, crossword puzzles, gambling, betting, card games, horse races etc Fund of employees Interest on securities, if not chargeable under the head Profits and gains of Business or Profession. Income from Machinery, Plant, furniture etc Amount received under Keyman insurance policy

10. Situations where gift is not taxable Relatives for the purpose of tax on gift. Incomes commonly included under Other sources Deductions allowable from Income from other sources Certain expenses or payments not deductible. Ex-interest transactions of securities Income from Deep discount bonds Bond washing transactions Deduction of tax at source

11. Rates for TDS On interest other than interest on securities- 10% On winnings from lotteries, crossword puzzles, card games - 30% On income by way of winnings from horse races -30% On income by way of insurance commission 10% Education cess Surcharge Grossing up of interest on securities Grossing up of Income from lottery, cross word puzzles

12. CLUBBING OF INCOME Meaning Income belonging to certain other persons will be compulsorily added to the income of an assessee in some cases. This process is called CLUBBING OF INCOME. Income of spouse Income from asset transferred Income of daughter in law Income from asset transferred to a person or association of persons for the benefit of spouse Income from assets transferred to a person or AOP for the benefit of son s wife. Income from business

13. Income of a minor child Cross transfers. Income from converted property Benami transaction

14. SET OFF OF LOSSES AND CARRY FORWARD AND SET OFF OF LOSSES Set off of losses Set off of loss from one head against income from another head. Losses of AOP or BOI Set off of losses is not allowed against exempted incomes Situations where set off is not allowed. Unabsorbed depreciation. Practical problems

15. THANK YOU