Income Under The head Capital Gains 1
INCOME UNDER THE HEAD
CAPITAL GAINS
Including
EXAMINATION QUESTIONS
INCOME UNDER THE HEAD
CAPITAL GAINS
SECTION 45 TO 55A
PARTICULARS SECTIONS
Meaning of capital asset 2(14)
Transfer of capital assets 45(1)
Capital gains in case of insurance claims 45(1A)
Transfer of capital assets into stock-in-trade 45(2)
Transfer of securities by a depository 45(2A)
Profits or gains arising from the transfer of a capital asset by a person to a firm 45(3)
or Association of person or Body of individual
Profits or gains arising from the transfer of a capital asset by way of distribution 45(4)
of capital assets on the dissolution of a firm or Association of person or Body of
individual
Transfer of a capital asset by way of compulsory acquisition 45(5)
Capital gains on distribution of assets by companies in liquidation 46
Capital gains on purchase by company of its own shares or other specified 46A
securities
Transactions not regarded as transfer 47
Cost with reference to certain modes of acquisition 49
Special provision for computation of capital gains in case of depreciable assets 50
, Income Under The head Capital Gains 2
Special provision for cost of acquisition in case of power generating units 50A
Special provision for computation of capital gains in case of slump sale 50B
Special provision for full value of consideration in certain cases 50C
Fair market value deemed to be full value of consideration in certain cases 50D
Advance money received 51
Exemption from capital gains on transfer of property used for residence 54
Exemption from capital gain on transfer of land used for agricultural purposes 54B
Exemption from capital gains on compulsory acquisition of lands and buildings 54D
of industrial undertaking.
Exemption from capital gain on transfer of any capital asset 54EC
Exemption from capital gain on transfer of long term capital assets except 54F
residential house
Exemption from capital gains on transfer of assets in case of shifting of industrial 54G
undertaking from urban area
Exemption of capital gains on transfer of assets in cases of shifting of industrial 54GA
undertaking from urban area to any Special Economic Zone
Capital gain on transfer of residential property not to be charged in certain cases 54GB
Determination of time period in case of compulsory acquisition of capital asset 54H
Meaning of “cost of improvement” 55(1)
Meaning of “cost of acquisition” 55(2)/55(3)
Reference to valuation officer 55A
Computation of tax on long term capital gains 112
Computation of tax on short term capital gains in certain cases 111A
Exemption from long term capital gains on transfer of foreign exchange asset in 115F
case of non-resident Indians
What is transfer 2(47)
Fair market value defined 2(22B)
Long-term capital asset 2(29A)
Long-term capital gain 2(29B)
Short-term capital asset 2(42A)
Short-term capital gain 2(42B)
Slump sale defined 2(42C)
Capital gains on compulsory acquisition of agricultural land 10(37)
Capital gains on transfer of equity shares or units 10(38)
THEORY QUESTION
Q1. [V. Imp.] Explain the meaning of capital asset under Income Tax Act?
Q2. Differentiate short term capital asset and long term capital asset.
Q3. [Imp.] Write a note on mode of computation of capital gains.
Q4. Write a note on computation of capital gains in case of insurance claims.
Q5. [Imp.] Write a note on computation of capital gains in case of conversion of capital assets into
stock-in-trade.
Q6. Write a note on computation of capital gains in case of transfer of capital asset by a depository.
Q7. Write a note on computation of capital gains in case of transfer of a capital asset by a person to a
Firm, Association of person or Body of individual.
Q8. Write a note on computation of capital gains in case of transfer of a capital asset by way of
distribution of capital asset on the dissolution of a firm etc.
Q9. [V. Imp.] Write a note on computation of capital gains on compulsory acquisition of a capital
asset.
Q10. Write a note on capital gains on distribution of assets by a company on liquidation.
Q11. Write a note on capital gains in case of own shares or other specified securities purchased by
, Income Under The head Capital Gains 3
company.
Q12. [V. Imp.] Write a note on transactions not regarded as transfer.
Q13. Write a note on cost with reference to certain modes of acquisition.
Q14. Explain reverse mortgage.
Q15. Write a note on capital gains in case of depreciable assets.
Q16. Write a note on computation of capital gain in case of slump sale covered under section 50B.
Q17. [Imp.] Write a note on full value of consideration in certain cases.
Q18. Write a note on fair market value deemed to be full value of consideration in certain cases
covered under section 50D
Q19. [V. Imp.] Write a note on advance money or forfeiture of advance money under section 51.
Q20. [V. Imp.] Write a note on exemption under section 54.
Q21. [V. Imp.] Write a note on exemption under section 54B.
Q22. Write a note on exemption under section 54D.
Q23. [V. Imp.] Write a note on exemption under section 54EC.
Q24. [V. Imp.] Write a note on exemption under section 54F.
Q25. Write a note on exemption under section 54G.
Q26. Write a note on exemption under section 54GA.
Q27. Write a note on exemption under section 54GB.
Q28. Write a note on computation of capital gains in case of transfer of shares.
Q29. Write a note on computation of capital gains on conversion of debentures etc. into shares.
Q30. [V. Imp.] Write a note on computation of capital gains on the transfer of shares or the units of
Mutual fund on which securities transaction tax has been paid.
Q31. [Imp.] Write a note on reference to valuation officer.
Q32. Write a note on cost of improvement.
Q33. Write a note on cost of acquisition.
Q34. Write a note on determining of the period of holding of a capital asset. Section 2(42A).
Q35. What types of transactions are included in the term ‘transfer’ in relation to a capital asset?
Q36. Write a note on taxability of Long Term Capital Gains.
Q37. Write short note on special provisions for full value of consideration in certain cases, in the
context of capital gains liability.
Q38. Write a note on set off and carry forward of loss under the head capital gains.
, Income Under The head Capital Gains 4
Question 1.[V. Imp.]: Explain the meaning of Capital Asset under Income Tax Act?
Answer:
Chargeability of capital Gains Section 45(1)
Any profits or gains arising from the transfer of a capital asset effected in the previous year shall be deemed
to be the income of the previous year in which the transfer took place.
Meaning of Capital Asset
Capital assets Section 2(14)
“Capital asset” means property of any kind held by an assessee, whether or not connected with his business
or profession, accordingly, capital assets shall include any land, building, precious metals, precious
stones, plant and machinery, furniture and fixtures, goodwill, tenancy rights, loom hours, route
permits etc., but does not include—
Explanation.—For the removal of doubts, it is hereby clarified that “property” includes and shall be deemed
to have always included any rights in or in relation to an Indian company, including rights of management or
control or any other rights whatsoever.
1. Stock in trade
Any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession
shall not be considered to be capital asset.
Example
If a dealer of Maruti cars has sold ten motor cars and there is a gain of `1,00,000, it will be considered to be
income under the head business/profession and not under the head Capital Gains.
2. Personal movable effects
Personal effects, that is to say, movable property (including wearing apparel and furniture) held for
personal use by the assessee or any member of his family dependent on him, but excludes—
(a) jewellery;
(b) archaeological collections;
(c) drawings;
INCOME UNDER THE HEAD
CAPITAL GAINS
Including
EXAMINATION QUESTIONS
INCOME UNDER THE HEAD
CAPITAL GAINS
SECTION 45 TO 55A
PARTICULARS SECTIONS
Meaning of capital asset 2(14)
Transfer of capital assets 45(1)
Capital gains in case of insurance claims 45(1A)
Transfer of capital assets into stock-in-trade 45(2)
Transfer of securities by a depository 45(2A)
Profits or gains arising from the transfer of a capital asset by a person to a firm 45(3)
or Association of person or Body of individual
Profits or gains arising from the transfer of a capital asset by way of distribution 45(4)
of capital assets on the dissolution of a firm or Association of person or Body of
individual
Transfer of a capital asset by way of compulsory acquisition 45(5)
Capital gains on distribution of assets by companies in liquidation 46
Capital gains on purchase by company of its own shares or other specified 46A
securities
Transactions not regarded as transfer 47
Cost with reference to certain modes of acquisition 49
Special provision for computation of capital gains in case of depreciable assets 50
, Income Under The head Capital Gains 2
Special provision for cost of acquisition in case of power generating units 50A
Special provision for computation of capital gains in case of slump sale 50B
Special provision for full value of consideration in certain cases 50C
Fair market value deemed to be full value of consideration in certain cases 50D
Advance money received 51
Exemption from capital gains on transfer of property used for residence 54
Exemption from capital gain on transfer of land used for agricultural purposes 54B
Exemption from capital gains on compulsory acquisition of lands and buildings 54D
of industrial undertaking.
Exemption from capital gain on transfer of any capital asset 54EC
Exemption from capital gain on transfer of long term capital assets except 54F
residential house
Exemption from capital gains on transfer of assets in case of shifting of industrial 54G
undertaking from urban area
Exemption of capital gains on transfer of assets in cases of shifting of industrial 54GA
undertaking from urban area to any Special Economic Zone
Capital gain on transfer of residential property not to be charged in certain cases 54GB
Determination of time period in case of compulsory acquisition of capital asset 54H
Meaning of “cost of improvement” 55(1)
Meaning of “cost of acquisition” 55(2)/55(3)
Reference to valuation officer 55A
Computation of tax on long term capital gains 112
Computation of tax on short term capital gains in certain cases 111A
Exemption from long term capital gains on transfer of foreign exchange asset in 115F
case of non-resident Indians
What is transfer 2(47)
Fair market value defined 2(22B)
Long-term capital asset 2(29A)
Long-term capital gain 2(29B)
Short-term capital asset 2(42A)
Short-term capital gain 2(42B)
Slump sale defined 2(42C)
Capital gains on compulsory acquisition of agricultural land 10(37)
Capital gains on transfer of equity shares or units 10(38)
THEORY QUESTION
Q1. [V. Imp.] Explain the meaning of capital asset under Income Tax Act?
Q2. Differentiate short term capital asset and long term capital asset.
Q3. [Imp.] Write a note on mode of computation of capital gains.
Q4. Write a note on computation of capital gains in case of insurance claims.
Q5. [Imp.] Write a note on computation of capital gains in case of conversion of capital assets into
stock-in-trade.
Q6. Write a note on computation of capital gains in case of transfer of capital asset by a depository.
Q7. Write a note on computation of capital gains in case of transfer of a capital asset by a person to a
Firm, Association of person or Body of individual.
Q8. Write a note on computation of capital gains in case of transfer of a capital asset by way of
distribution of capital asset on the dissolution of a firm etc.
Q9. [V. Imp.] Write a note on computation of capital gains on compulsory acquisition of a capital
asset.
Q10. Write a note on capital gains on distribution of assets by a company on liquidation.
Q11. Write a note on capital gains in case of own shares or other specified securities purchased by
, Income Under The head Capital Gains 3
company.
Q12. [V. Imp.] Write a note on transactions not regarded as transfer.
Q13. Write a note on cost with reference to certain modes of acquisition.
Q14. Explain reverse mortgage.
Q15. Write a note on capital gains in case of depreciable assets.
Q16. Write a note on computation of capital gain in case of slump sale covered under section 50B.
Q17. [Imp.] Write a note on full value of consideration in certain cases.
Q18. Write a note on fair market value deemed to be full value of consideration in certain cases
covered under section 50D
Q19. [V. Imp.] Write a note on advance money or forfeiture of advance money under section 51.
Q20. [V. Imp.] Write a note on exemption under section 54.
Q21. [V. Imp.] Write a note on exemption under section 54B.
Q22. Write a note on exemption under section 54D.
Q23. [V. Imp.] Write a note on exemption under section 54EC.
Q24. [V. Imp.] Write a note on exemption under section 54F.
Q25. Write a note on exemption under section 54G.
Q26. Write a note on exemption under section 54GA.
Q27. Write a note on exemption under section 54GB.
Q28. Write a note on computation of capital gains in case of transfer of shares.
Q29. Write a note on computation of capital gains on conversion of debentures etc. into shares.
Q30. [V. Imp.] Write a note on computation of capital gains on the transfer of shares or the units of
Mutual fund on which securities transaction tax has been paid.
Q31. [Imp.] Write a note on reference to valuation officer.
Q32. Write a note on cost of improvement.
Q33. Write a note on cost of acquisition.
Q34. Write a note on determining of the period of holding of a capital asset. Section 2(42A).
Q35. What types of transactions are included in the term ‘transfer’ in relation to a capital asset?
Q36. Write a note on taxability of Long Term Capital Gains.
Q37. Write short note on special provisions for full value of consideration in certain cases, in the
context of capital gains liability.
Q38. Write a note on set off and carry forward of loss under the head capital gains.
, Income Under The head Capital Gains 4
Question 1.[V. Imp.]: Explain the meaning of Capital Asset under Income Tax Act?
Answer:
Chargeability of capital Gains Section 45(1)
Any profits or gains arising from the transfer of a capital asset effected in the previous year shall be deemed
to be the income of the previous year in which the transfer took place.
Meaning of Capital Asset
Capital assets Section 2(14)
“Capital asset” means property of any kind held by an assessee, whether or not connected with his business
or profession, accordingly, capital assets shall include any land, building, precious metals, precious
stones, plant and machinery, furniture and fixtures, goodwill, tenancy rights, loom hours, route
permits etc., but does not include—
Explanation.—For the removal of doubts, it is hereby clarified that “property” includes and shall be deemed
to have always included any rights in or in relation to an Indian company, including rights of management or
control or any other rights whatsoever.
1. Stock in trade
Any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession
shall not be considered to be capital asset.
Example
If a dealer of Maruti cars has sold ten motor cars and there is a gain of `1,00,000, it will be considered to be
income under the head business/profession and not under the head Capital Gains.
2. Personal movable effects
Personal effects, that is to say, movable property (including wearing apparel and furniture) held for
personal use by the assessee or any member of his family dependent on him, but excludes—
(a) jewellery;
(b) archaeological collections;
(c) drawings;
