1. Group 10

2.  Why charged differently ?
 Benefit to long term investors / encourages
safer investments
 Buffett (15% slab) vs his secretary (30-40%
slab)

3.  Should be a capital asset (in view of assessee)
 Transfer takes place; during previous year
 Profit is realized
 Not exempted under any section 54 and
other 54s

4.  Stock in trade, consumables, raw material
 Personal effects like clothes, furniture
 Agricultural land in India (except in
municipality)
 Gold bonds, National defense bonds etc
 Special bearer bonds
 Gold deposit bonds under Gold deposit
scheme 1999

5.  Held by assessed for not more than 36
months is short term capital asset; longer
than that is long term capital asset
 For shares period is 12 months

6.  Distribution of assets during liquidation
 Partition of family
 Gift
 Under gift rules
 By will
 Under irrevocable transfer
 Transfer from holding to subsidiary domestic
company and vice-versa
 Scheme of amalgamation, amalgamation of
banking company, demerger
 And many others

7.  Find full value of consideration
 Deduct following costs
 Expenditure incurred for transfer (stamp duty
papers etc)
 Cost of acquisition (Indexed for long term)
 Cost of improvement (Indexed for long term)
 Deduct exemptions under sections
54B,D,G,GA,EC,F

8.  In money, in kind, in reverse transfers
 Not necessarily market value, maybe more
maybe less
 Consideration received may not be accepted
by AO
 Accrual not receipt considered

9.  Brokerage, stamp duty
paid, papers, registration fees, travel
expenses etc
 Vague claims not accepted eg relocation
charges or food consumed at court
 Cannot be same as heads allowed for
deduction under exemption under sec 54

10.  Cost of asset to previous owner
 Purpose important
 Son inheriting house worth 50,000 bought at
value 10,000 is capital gains exempt. But if son
sells house for 65,000 total capital gains would be
65,000 realization minus 10,000 cost of
acquisition = 55,000
 Cost of asset being fair market value
 Actual cost or cost on 1/4/1981 as fair market
value

11.  Depreciable assets always under short term
capital gains
 Bonus shares, rights
 Advance money, forfeiture
 Deducted from cost of acquisition
 Not free money, government closes window of
tax free money transfer

12.  Additions to the capital asset
 Added to expenditure for subtraction while
calculating capital gains

13.  Adjusting acquisition and improvement prices to
reflect inflation effect; to protect assessed from
unfair taxation
 If asset is acquired before 1/4/81
 Indexed cost = (Fair market value of asset on 1/4/81 or
cost of acquisition whichever is higher / cost inflation
index of 1981-82) * Cost inflation index of previous
year or year of transfer
 If asset acquired after 1/4/81
 Indexed cost = (Cost of acquisition / Cost inflation
index of year of acquisition) * Cost inflation index of
year of transfer

14.  When capital asset is converted to stock in
trade (45(2))
 Fair value taken in the year of conversion
 Capital gain for total period of asset holding
 Business gain there-after
 Capital asset transferred from partnership
firm to partners
 Transfer on dissolution of firm

15.  Compulsory acquisition
 Taxable as long term gain; cost of acquisition is
fair market value of asset
 Enhanced compensation
 No re-consideration of cost of acquisition or
improvement considered
 Receipt is reduced by court after being
appreciated
 Assessee can re-open previous assessment

16.  Gains counted in same currency in which
shares/debentures acquired and reconverted to
INR
 No benefit of indexation
 How to compute-
 Sale consideration, cost of acquisition & improvement
taken on average conversion rate of the previous year
from State Bank of India
 All amounts would be converted into INR and the
capital gain is Sale consideration (-) cost of acquisition
(-) cost of improvement

17.  For self generated assets eg.
Goodwill, process patent, manufacturing
right etc
 Purchase price considered as cost of acquisition
Bonus shares, rights etc.
Holding period from allotment date to sale
date, cost of acquisition is zero, for rights cost of
acqu. Is amount paid

18.  Liquidation
 Transfer in demat form
 Insurance claim on damage/destruction
 Share buybacks

19.  State governments set aside value given by
Stamp duty authority to prevent income-
degradation
 Consideration value shall be greater than or
equal to the value adopted by stamp duty
authority (jantri)

20.  Residential house property for-
 Individual or HUF
 Long term house property is transferred ONLY IF
 Another house is purchased within 1 year before
transfer or 2 years after transfer
 Constructed 3 years within transfer
 Amount not less than consideration

21.  Transfer of agricultural land for agricultural
purposes only
 Compulsory acquisition
 Bonds

22.  Asset other than house property
 Cap gain on any asset can be set-off against
acquiring a house property with same conditions
as above;
 Exemptions limited to amount of capital gain
When any industrial undertaking transfers from
urban to rural area, exemption upto investment in
new asset or capital gain, whichever is lower

23.  Long term gains
 For shares and securities – 10%
 Others – 20%
Short term gains
On shares zero, if STT has been paid