Ahmedabad University H.L.Institute of Commerce S.Y. Semester -I Direct Taxes: Capital Gains Faculty: Poonam Dugar Basis of Charge: Any profits or gains from transfer of a capital asset effected in the previous year shall be chargeable to income tax under the head Capital Gains in the previous year in which transfer took place. According to Section 45, the charge of income under the head „Capital Gains‟ arises if the following conditions are fulfilled: 1. There is a capital asset. 2. There is a „transfer‟ of such capital asset. 3. The transfer of such capital asset as set has been effected during the previous year. 4. Profits or gains arise from the transfer of such capital asset affected during the previous year. (Profit or gain includes negative profit or gain i.e . loss also) 5. Such profits or gains are not exempt from tax. What is Capital Asset? According to Section 2(14), capital asset means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include – 1. Any stock-in-trade, consumable stores or raw materials held for purpose of his business or profession.
2. Personal effects i.e. movable property (including wearing apparel and furniture but excluding jewellery, archaeological collections, Drawings, Paintings, Sculptures and any work of art) held for personal use by assessee or his family member dependent on personal use by assessee or his family member dependent on him. Jewellery is a capital asset. It includes – includes – A. Ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones and whether or not worked or sewn into any wearing apparel; B. Precious or semi-precious stones whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel. 3. Rural agricultural land i.e. agricultural land in India not being a land situated i. Within the jurisdiction of a municipality or a cantonment board having a population of 10,000 or more according to the last preceding census; and ii. In any notified notified area given belowbelow2 kms from the local limits of municipality If the population of the municipality is more more than 10,000 but not more than 1 lakh l akh 6 kms from the local limits of municipality If the population of the municipality is more more than 1 lakh but not more than 10 lakh 8 kms from the local limits of municipality If the population of the municipality is more more than 10 lakh
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4. Gold Bonds issued by Central Government including the Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999. 5. Special Bearer Bonds, 1991. Identify which of the following are capital assets: 1. Goodwill of a business 2. Leasehold right in a mine 3. Property held by dealer in property 4. Gold held by jeweller 5. Personal Car and air Conditioner 6. Residential House for personal use 7. Residential House for the purpose of giving it as rent free house to an employee 8. Personal mobile phone 9. Loose Diamonds 10. Gold and Silver Coins used for Puja 11. Gold watch for personal use 12. Silver Utensils 13. Furniture held for personal use 14. Furniture in the office of a CA Short-term Capital Asset : „Short-term Capital Asset‟ means a capital asset held by assessee for not more than 36 months immediately preceding the date of its transfer. However, in case of These assets shall (a) Equity or Preference Shares in a company (listed or unlisted) be treated as short (b) Other securities listed in recognized stock exchange in India (listed) term capital assets (c) Units of UTI or Units of mutual fund (listed or unlisted) if they are held (d) Zero Coupon Bonds (listed or unlisted) for not more than 12 months immediately preceding the date of transfer Note: 1. An asset held exactly for 36 months or 12 months, as the case may be, will also be a short-term capital asst. For computing the period of 36 months or 12 months, as the case may be, the date on which the asset was acquired is to be included while the date on which the asset is transferred is to be excluded. 2. In case of unlisted debentures they become long term if held for more than 36 months before the date of transfer. Long-term Capital Asset: Any capital asset other than a short-term capital asset is a longterm capital asset. In other words, a capital asset held for more than 36 months (12 months in case of specified assets given in table above) shall be a long term capital asset Determine the type of capital asset in the following cases: 1. A house property purchased on 10.3.2011 and sold on 6.6.2013 2. Shares purchased in an Indian company on 10.3.2011 and sold on 6.6.2013 3. Units of Mutual fund acquired on 7.7.2012 and sold on 10.7.2013 4. Unlisted Debentures of a company purchased on 10.3.2011 and sold on 5.1.2014(What if the debentures are listed??) 2
5. B purchases shares in a company through a NSE broker(date of purchase 21.11.2012, the company transfers the shares in the name of B on 5.1.2013) These shares are transferred by B on 20.12.2013 Types of Capital Gains The tax incidence under the head „Capital Gains‟ depends upon whether the capital gain is short term or long term. Long Term capital gain is generall y taxable at a lower rate. If the asset transferred is a short term capital asset, capital gain will be short term capital gain. Conversely, long term capital gain arises on transfer of a long term capital asset. Transfer of Capital Asset: Transfer, in relation to capital asset, includes – a. sale, exchange or relinquishment of the asset b. extinguishment of any rights therein c. compulsory acquisition thereof under any law d. maturity or redemption of zero coupon bond e. Disposing or parting with an asset or interest therein Transactions not regarded as Transfer: 1. Transfer of capital asset at the time of liquidation in kind by a company to its shareholders 2. Transfer of capital asset in kind by a HUF at the time of total or partial partition of family 3. Transfer of capital asset in kind by gift or will. Exception: This clause does not include transfer under a gift of a capital asset being shares, debentures or warrants allotted by a company directly or indirectly to its employees under ESOP‟s offered to its employees in accordance with the guideline issued by the Central Government 4. Transfer of capital asset by a 100% holding company to an Indian subsidiary company 5. Transfer of capital asset by a wholly owned subsidiary company to its 100% holding company Exception: However in both 4 and 5 above if the capital asset is transferred as stock in trade then it will be treated as transfer. 6. Transfer of capital asset by the amalgamating company to the Indian amalgamated company in a scheme of amalgamation 7. Transfer of capital asset being shares in Indian company in a scheme of amalgamation of two foreign companies provided persons holding atleast 25% of the shares of the amalgamating foreign company should become shareholders in the amalgamated foreign company 8. Transfer in a scheme of amalgamation of banking company 9. Transfer of any work of art, archaeological, scientific or art collection, book, manuscript, drawing, painting, photograph or print, to Government/ University/National Museum/National Art Gallery/National Archives or any other notified public institution/museum. 10. Conversion of bonds or debentures, debenture-stock or deposit certificates in any form, of a company into shares or debentures of that company 11. Transfer of capital asset in the case of conversion of firm/ proprietary concern into company 12. Transfer in the case of conversion of a company into LLP
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Identify whether the following transactions are transfer for the purpose of Capital Gain: 1. A house property is purchased by a HUF in 1950 for Rs.40,000. It is given to one of the family members in 2013-14 at the time of partition of the family. 2. Y purchases gold in 1974 for Rs.10,000. In 2013-14 it is gifted to his son at the time of his marriage. 3. Z purchases 10 Convertible Debentures in 1986 which are converted into 100 shares in 2013 by the company. 4. A Ltd. Is a 100% holding company of B ltd. A ltd. Transfers a capital asset (acquired in 1947 for Rs.50,000) to B Ltd. On 16.6.2013 for Rs.2,70,000. B Ltd. Is an Indian company. The capital asset is transferred as a capital asset. 5. What if the capital asset is transferred as a stock in trade? Computation of Capital Gains:
Short Term
Full Value of consideration Deduct: Cost of acquisition Deduct: Cost of improvement Deduct: Expenses on transfer Deduct: Exemptions
Long Term
Full Value of consideration
Deduct: Indexed cost of acquisition Deduct: Indexed Cost of improvement Deduct: Expenses on transfer Deduct: Exemptions
Full Value of Consideration: Full value of consideration means & includes the whole/complete sale price or exchange value or compensation including enhanced compensation received in respect of capital asset in transfer. The following points are important to note in relation to full value of consideration. The consideration may be in cash or kind. The consideration received in kind is valued at its fair market value. It may be received or receivable. The consideration must be actual irrespective of its adequacy. Expenses on Transfer: Expenditure incurred wholly and exclusively for transfer of capital asset is called expenditure on transfer. It is fully deductible from the full value of consideration while calculating the capital gain.
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Examples of expenditure on transfer are the commission or brokerage paid by seller, any fees like registration fees, and cost of stamp papers etc., travelling expenses, and litigation expenses incurred for transferring the capital assets are expenditure on transfer. Note: Expenditure incurred by buyer at the time of buying the capital assets like brokerage, commission, registration fees, cost of stamp paper etc. are to be added in the cost of acquisition before indexation. Cost of Acquisition: Cost of Acquisition (COA) means any capital expense at the time of acquiring capital asset under transfer, i.e., to include the purchase price, expenses incurred up to acquiring date in the form of registration, storage etc. expenses incurred on completing transfer. In other words, cost of acquisition of an asset is the value for which it was acquired by the assessee. Expenses of capital nature for completing or acquiring the title are included in the cost of acquisition. Cases on Cost of Acquisition: 1. Interest on Loan taken to acquire the asset: A lady taxpayer had raised a loan from her mother in law for acquiring a land. When she sold the land she included the amount paid towards interest on loan in the actual cost and disclosed the remaining amount as capital gain on sale of land. Cost incurred for acquiring the capital asset vs expenditure for retaining or maintaining the capital asset Amount of loan paid to the vendor and interest paid to a different person does it make a difference from the point of view of the taxpayer? Does it make a difference if interest is paid on the date of purchase or subsequently?
2. Sum paid to clear the mortgage on a property sold: On 1.6.2009, X took a loan of Rs.5 lakh by mortgaging his house property. X could not repay the loan during his lifetime and after his death on 2.7.2011, the property (with mortgage) is transferred to Mrs. X. Mrs. X transfers the property on 2.5.2013 and before transfer, a sum of Rs.7.2 lakhs is paid to clear of the mortgage. Will Rs.7.2 lakhs be treated as a COA in the hands of Mrs.X? What if the loan was in the name of Mrs.X? (repayment of loan) Different Types of Cost of Acquisition: 1. Cost of acquisition to the previous owner: The cost to the previous owner is deemed to be the cost of acquisition in cases where capital asset became the property of assessee under any of the following modes: i. Acquisition of property on distribution of assets on the total or partial partition of a HUF ii. Acquisition of property under a gift or will iii. Acquisition of property by succession or inheritance Acquisition of property on any distribution of assets on the liquidation of a company iv. v. Acquisition of property on any transfer by a wholly owned Indian subsidiary company from its holding company vi. Acquisition of property on any transfer by an Indian holding company from its wholly owned subsidiary company
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Where the previous owner has acquired the property in the aforesaid manner, the previous
owner of the property means the last previous owner who acquired the property by means other than those discussed above. Period of holding of the previous owner will be taken into consideration to find out whether the capital asset is short term or long term. Solve the following: 1. X (HUF) acquires a residential house at Delhi, for Rs.2,10,000 on 1.4.2011. The family undergoes complete partition on 1.11.2011 and the residential house is allotted to Y, a member of the family. Y sells the house on 15.3.2014 for Rs.6,90,000. Determine the capital gain in the hands of X (HUF) and Y. 2. X purchases debentures in A Ltd. On 1.1.2010 for Rs.20,000. He gifts these debentures to his friend Y, on 10.6.2010 (fair market value on 10.6.2010: Rs.33,000). Y dies on 13.3.2011 and as per his will debentures are transferred to his son Z ( fair market value on 13.3.2011: Rs.40,000). Z sells debentures on 10.11.2013 for Rs.86,000. Determine the amount of capital gain arising to X, Y and Z. Debentures are unlisted. 2. Cost of Acquisition being the fair market value as on 1.4.1981: The assessee has an option to take either the actual cost of the capital asset or the fair market value of the asset as on 1.4.1981 as the cost of acquisition in the following cases: i. Where the capital asset is acquired by the assessee before 1.4.1981 ii. Where the capital asset is acquired by the assessee by any mode applicable in case of a previous owner and the capital asset has been acquired by the previous owner before 1.4.1981. The option is not available in case of depreciable assets. 3. Cost of Acquisition in case of Depreciable Assets: The following two situations exist in case of depreciable assets for the purpose of calculating Capital Gains: i. When the W.D.V. of the block of assets is zero on the last day of the previous year ii. When the block of assets is empty on the last day of the previous year Capital Gain in both the above cases can be calculated as follows:
Sale consideration of depreciable assets in a block which are transferred Less: Cost of Acquisition (i) Expenses on transfer (ii) W.D.V. of the block of assets at the beginning of the previous year (iii)Actual cost of assets falling in the same block acquired during the year. In both the cases capital gain /loss is a SHORT TERM CAPITAL GAIN /LOSS When W.D.V. is Zero:
X owns the following assets on 1.4.2013 ( Rate of Depreciation 15%) Assets W.D.V. on 1.4.2013 Date of Acquisition Plant A 3,00,000 1.4.1975 Plant B 2,00,000 10.5.1974 Plant C 5,00,000 13.3.1987
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Assets
Rate
Date of purchase/ sale
Selling Price
Cost Price
Plant D Plant E Plant A Building A Plant C Plant F
15% 15% 15% 10% 15% 40%
10.3.2014 1.3.2014 1.4.2013 10.6.2013 10.5.2013 10.6.2013
--------6,00,000 ----12,50,000 -----
4,08,000 20,000 ---2,00,000 ----15,00,000
Determine the amount of depreciation and capital gain/loss for A.Y.2014-15(Expenditure incurred on sale of plants A and C is Rs.10,000) When Block Ceases to exist
X ltd. owns the following assets on 1.4.2013 Assets Rate of Depreciation Depreciated Value on 1.4.2013 Plant A 15% 4,05,000 Plant B 15% 1,95,000 Plant C 15% 7,05,700 On 10.6.2013, it acquires Plant D for Rs.20,000 (rate of depreciation: 15%) The company sells the following assets during the year 2013-14: Assets Sale Consideration Expenses on transfer Plant A 2,12,000 12,000 Plant B 6,17,500 ----Plant C 4,30,000 ----Plant D 95,000 200 Determine the amount of depreciation and capital gain/loss for A.Y.2014-15. Is it possible to avoid tax on capital gain? 4. Cost of Acquisition in case of Bonus Shares: Situation Provision Cost of Acquisition of bonus shares allotted Fair Market Value as on 1.4.1981 is taken before 1.4.1981 as cost of acquisition Cost of Acquisition of bonus shares allotted Cost of acquisition is taken as zero on or after 1.4.1981 Period of Holding of Bonus shares The period of holding shall be determined from the date of allotment of bonus shares 5. Cost of Acquisition in case of Right Shares: Different Situations Cost of Acquisition Original shares Actual amount paid for acquiring shares Rights entitlement NIL Right shares Actual amount paid for acquiring asset Right shares purchased by a person in Purchase price paid to renouncer of rights whose favour rights entitlement has been entitlement plus amount paid to the renounced company which has allotted right shares Solve the following: X holds 1,000 equity shares in A Ltd. since 1978 (cost of acquisition: Rs.10,000, fair
market value on 1.4.1981: Rs.14,000) A Ltd. offers 2,000 right shares of Rs.10 each to X on 1.5.2013 at a premium of Rs.50. X subscribes for 800 right shares and 7
renounces 1,200 shares in favour of C by transferring the rights entitlement for a consideration of Rs.4,800. X sells 1,800 shares in A Ltd. on 30.3.2014 @ Rs.120 per share. What if C transfers 1,100 shares @Rs.79 per share on 29.3.2014. CII for 2013-14:939, 1981-82:100 Cost of Improvement: Cost of improvement is the capital expenditure incurred by an assessee in making any additions/ improvement to the capital asset. It includes any expenditure incurred to increase the value of capital asset. Cost of Improvement incurred before 1.4.1981: Any cost of improvement incurred before 1.4.1981 is not taken into consideration for calculating capital gain chargeable to tax. In other words any cost of improvement incurred on or after 1.4.1981 either by the current owner or the previous owner (if applicable) will be considered for the purpose of calculating capital gains. Indexed Cost of Acquisition and Indexed Cost of Improvement: Indexed cost of acquisition/ improvement is the amount which bears to the cost of acquisition / improvement the same proportion as Cost Inflation Index for the year in which asset is transferred bears to the Cost Inflation Index for the first year in which asset was held by the assessee/ in which improvement took place. Solve the following:
1. X purchases a house property for Rs.76,000 on 30.6. 1967. The following expenses are further incurred by him: Cost of construction of first floor in 1975-76 Rs.1,10,000 Cost of construction of the second floor in 1983-84 Rs.3,40,000 Alteration/reconstruction of the property in 1992-93 Rs.2,90,000 F.M.V. of the property on 1.4.1981 is Rs.4,50,000. The house property is sold by X on 15.6.2013 for Rs.99,50,000 (expenses on transfer Rs.10,000). Cost Inflation Index for 1983-84: 116, 1981-82: 100, 1992-93:223, 2013-14: 939 2. X sells the following capital assets during the previous year 2013-14. Non Listed Shares House Property Sale Consideration 24,00,000 6,80,000 Year of Acquisition 1992-1993 1985-86 Cost of Acquisition 2,90,000 18,000 Cost of Improvement in 1991-92 -----70,000 Cost Inflation index for 1985-86:133, 1991-92: 199, 1992-93: 223, 2013-14: 939 3. X purchases a house property for Rs.26,000 on 10.5.1962. He gets the first floor constructed in 1967-68 by spending Rs.40,000. He dies on 12.9.1978. the propert y is transferred to Mrs. X by his will. Mrs. X spends Rs.30,000 and Rs.26,700 during 1979-80 and 1985-86 respectively for renewals/ reconstruction of the property. Mrs. X sells the house property for Rs.21,50,000 on 15.3.2014)brokerage paid by Mrs. X Rs.11,500) The F.M.V. of the house on 1.4.1981 is Rs.1,60,000. Cost Inflation index for 1981-82: 100, 1985-86: 133, 2013-14:939 8
*Specified Asset: Any bond redeemable after 3 years iss ued by the National Highways Authority of India or Rural Electrification Corporation of India. Deposit Scheme: If the new asset is not acquired up to the due date of submission of return of income, then the assessee will have to deposit the money in “Capital Gain Deposit Scheme” with a nationalized bank. On the basis of the actual investment and the amount deposited in the deposit account, exemption will be given to the taxpayer. Exemption u/s 10(38): This exemption is applicable if the following conditions are satisfied: Taxpayer can be any person The asset transferred is a long term capital asset Such asset is equity share in a company or units of equity oriented mutual fund Such transaction takes place on or after 1.10.2004 The transaction is chargeable to Securities Transaction Tax (STT) If all the above conditions are satisfied, long term capital gain is exempt from tax. If the capital gain is a short term capital gain it is taxable at a flat rate of 15%.
Section 112: Tax on Long Term Capital Gains Long Term Capital Gains are taxed at a Flat rate of 20% Long Term Capital Gain on Listed shares and securities may be taxed @10% if benefit of indexation is not taken Benefit of Section 80C is not available against LTCG Relief is available to a resident taxpayer if other income other than LTCG is below exemption limit 9
Calculation of Total Tax Liability when total income includes Short Term Capital Gain and Long Term Capital Gains Gross Total Income (A) GTI excluding (B) and (C)
(B) LTCG u/s 112
(C) STCG u/s 111A
Step 1 A 1: Find GTI from all sources
B 1: Find LTCG
C 1: Find STCG u/s 111A
Step 2 A 2: Deduct deduction u/s 80 and calculate tax on the balance net income
B 2: Find tax on B1 @ u/s 112
C 2: Find tax on C1 @ u/s 111A
Step 3: Add A2, B2 and C2
Step 4:Add Surcharge on the total of Step 3
Step 5: Add Education and Higher Secondary Education Cess @3% on total of Step 4
Step 6: Total Tax Liabil ity
Case Study 1:
For A.Y. 2014-15 Mr. X has total income of Rs.1,90,000, comprising only of STCG on sale of STT paid shares. What will be the tax payable by Mr. X? Case Study 2: The estimated TI of Mrs. X for A.Y. 2014-15 is Rs.2,20,000, comprising of other income of Rs.80,000and STCG of Rs.1,40,000. What will be the tax payable by Mrs. X? Case Study 3: For A.Y. 2014-15 , the TI of Mr. Z, a senior citizen (aged 70 years) is Rs.5,00,000, comprising of other income Rs.90,000 and STCG of RS.4,10,000. He has investe d Rs.1,00,000 in PPF eligible for deduction u/s 80 C. Calculate the tax payable by Mr.Z Case Study 4: Mr. NRI is a non resident in A.Y. 2014-15. During the year his various sources of income include Dividend from Indian companies of Rs.25,000, LTCG (STT paid ) of RS.50,000, STCG on securities (STT paid) of RS.60,000 and Bank Interest of Rs.1,30,000.
Set Off and Carry Forward of Capital Losses Long Term Capital Losses : It can be set off against any LTCG of the year only. 10
Short Term Capital Losses : It can be set off against STCG or LTCG of the year only. Long Term Capita Loss/Short Term Capital Loss not set off during the year: It can be carried forward for set off against gain in any subsequent year in the above manner for 8 years.
Case Study 1:
X has sold a plot of land during FY 2013-14 in respect of which his taxable LTCG works out to Rs.15,00,000. Due to steep fall in the Sensex, X‟s stock portfolio has also suffered an erosion of over Rs.30,00,000. Suggest the best course of action that X should take to reduce his capital gain tax. Case Study 2:
Y has earned STCG of RS.5,00,000 on sale of gold during FY 2013-14. His other income is assumed to be Rs.10,00,000. If Y plans to sell in November 2013, some of the shares purchased six months ago and book STCL of Rs.5,00,000. Suggest the best course of action that Y should take to reduce his capital gain tax. Case Study 3:
In Case 2 if Y has also earned a STCG of Rs.5,00,000on sale of shares, apart from STCG of RS.5,00,000 on sale of gold. Suggest the best course of action that Y should take to reduce his capital gain tax. Problem Solving Exercise: 1. Shri Rituraj purchases a house property in Jaipur for Rs. 12,00,000 on 15-10-2012. He constructed first floor on 15-12-2012 and spent Rs. 1,80,000 on such construction. On 1512-2013 he sold this house for Rs 22,00,000. The expenses on transfer were Rs. 29,000. Calculate capital gains in the hands of Shri Rit uraj for A.Y. 2014-15.
2. On 30.6.2013 Mr. X has sold some of his assets (other than land and buildings) for Rs.4,18,000 which were brought in December 1973 for Rs.35,000. The fair market value of these assets on 1.4.1981 was Rs.42,000. Ascertain the taxability of capital gain arising on sale of assets for the A.Y. 2014-15 considering the following Cost Inflation Index: 1981-82: 100 2013-14: 939 3. Mr. A had acquired painting worth Rs. 10 lakhs on 1-6-2009. On same date, he inherited a sculpture and a rare archaeological collection from his father. His father had acquired the sculpture on 1-7-1996 for Rs. 5 lakhs. His father had found the rare archeological collection from the earth underneath his house. He sells all the three things for Rs. 20 lakhs each on 1-6-2013. Compute the amount of capital gains chargeable to tax for A.Y. 2014-15. Relevant CII are: 1996-97: 305 2009-10:632 2013-14: 939 4. Mr. Prem has sold his residential house on 15.10.2013 for a consideration of Rs. 35,00,000. He had bought this house in 1969 at Rs.2,00,000, but its fair market value as on 1.4.1981 was Rs.3,00,000. Mr. Prem bought another residential house on 15.1.2014 at Rs.10,00,000 ( inclusive of Rs.20,000 of documentation of charges). Determine the taxable capital gain for A.Y.2014-15 { Section 54}
5. On 11.10.2013 Mr.Raja has sold his self-residential house for Rs.23,00,000. Brokerage paid amounts to 20,000. He had bought this house in 1984-85 for Rs.1,87,500 and had incurred Rs.75,000 in 1987-88 for additional construction made.
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On 1.3.2014 Rs.2,00,000 was invested in 3 years bonds of NHAI. Relevant Cost Inflation Indices are: 1984-85: 125 1987-88: 150 2013-14: 939 Determine the taxable capital gain for A.Y. 2014-15. {Section 54EC} 6. On 15.11.2013 Mr. Ram has sold his personal jewellery for Rs.40,24,000. The original cost of jewellery, bought in 1968-69 was Rs.2,50,000 but its fair market value on 1.4.1981 was Rs.4,00,000. On 10.2.2014 he has invested Rs.5,00,000 in 3 years Bonds of Rural Electrification Corporation Ltd. Relevant Cost Inflation Indices are: 1981-82:100 2013-14: 939 Determine the taxable capital gain for A.Y. 2014-15. {Section 54EC} 7. Miss Sudha sold her jewellery for Rs.16,20,000 on 1.8.2013. The original cost of the jewellery purchased in 1982-83 was Rs.1,19,900. A brokerage of Rs.20,000 was paid on sale of the said jewellery. From the proceeds , Miss Sudha purchased on 1.1.2014 for Rs.12,00,000, the residential house in which she was staying as a tenant. Determine the amount of capital gains arising on sale of jewellery that would be exempt from tax. Assuming that this house was purchased at Rs. 8,00,000 what amount of capital gain would be exempt? Relevant Cost Inflation Indices are: 1982-83: 109 2013-14: 939.
8. Mr. A has sold a residential house for Rs.26,07,500 on 15.11.2013. This house was bought on 1.5.1976 at a cost of Rs.1,20,000, but its fair market value on 1.4.1981 was Rs.2,00,000. During 1989-90 additional construction cost incurred was Rs.86,000. On 15.2.2014 he has paid Rs.1,00,000 towards the construction cost of a new residential house and on 30.6.2014 has also deposited Rs.1,00,000 in a scheduled bank under the Capital Gains Account Scheme notified by the Central Government. On 30.6.2013, 1,000 equity shares of Z Ltd. (not listed) were sold @451.50 (net) per share. Of the above 500 shares were bought during 1985-86 @Rs.133 and remaining 500 shares were received by him as bonus during 1989-90. {Section 54} Relevant Cost Inflation Index nos. are: 1981-82:100 1985-86: 133 1989-90: 172 2013-14: 939 9. Shri Chankya had purchased a residential house for Rs.1,33,000 on1.1.86. He sold this house on 1.4.2013 for Rs.10,37,000. This was the only house owned by him. Part of the proceeds were utilized for the education of his son and Rs.5,50,000 was used on 31.12.2013 to acquire another residential house. On 31.12.2013 he sold some of the Government Securities for Rs.1,57,125 which were purchased by him 1.3.1984 for Rs.17,400. Rs.25,000 of the sales price was invested on 1.2.2014 in 3 year bonds of NHAI. Relevant Cost Inflation Index nos. are: 1983-84: 116 1985-86: 133 2013-14: 939 Determine the taxable capital gain for A.Y.2014-15 {Section 54 and 54EC} 10. Ms. Vimla sold a residential building at Jodhpur for Rs. 15,00,000 on 1-7-2013. The building was acquired for Rs. 1,50,000 on 1-6-1996. She paid brokerage @ 2% at the time of sale of the building. She invested Rs. 7 lakhs in purchase of a residential building in December, 2013 and deposited Rs. 2 lakhs in NHAI Capital Gains Bond in March, 2013. Compute her taxable capital gains for the assessment year 2014-15. 1996-97:305 2013-14: 939 11. Following are the details of Miss Juhi for the year ending 31.3.2014. Calculate the Capital Gain for A.Y.2014-15: 12
1. 2. 3. 4. 5.
1100 shares of X Ltd. were sold on 15.6.2013 at Rs.299.25 per share (for which brokerage at Rs.2.50 per share has been paid). The details about the shares sold are: Original 300 shares were purchased on 15.1.1978 at Rs.20 per share. X Ltd. had allotted 600 bonus shares on 15.4.1980 at the rate of 2 shares for every 1 share held. The fair market value of shares on 1.4.1981 was Rs.30 per share. X Ltd. had allotted 450 bonus shares on 1.11.06 @ of 1 share for every 2 shares held. Shares sold on 15.6.2013 include 300 original shares, 600 bonus shares received first and 200 shares out of bonus shares received at second allotment. This transaction was not subject to Securities Transaction Tax. Relevant Cost Inflation Index nos. are: 2013-14: 939 1981-82: 100
12. Calculate the taxable Capital 2013-14: 939) Date of Selling Price Purchase 1.1.68 35,49,000 1.6.2005 3,25,920
Gain from the following details for A.Y.2014-15 (CII for Transfer Charges 11,000 ----
Purchase Cost 1,50,000 1,59,040
Asset
Relevant index Self occ. house 100 Shares of 497 Reliance Ltd 1.3.1994 3,31,000 4,000 73,200 Shares of A Ltd 244 1.9.1985 34,69,100 11,000 3,99,000 Jewellery 133 1.1.2013 --------2,02,000 Res. house(new) He sold old self occupied house and jewellery on 15.3.2014. On 1.4.1981 the fair market values of self occupied house and jewellery were Rs.3,00,000 and Rs.1,80,000 respectively. Shares of both the companies (sold on 1.11.2013) were subject to STT.
13. The following assets were sold during the year ended 31.3.2014. Asset Purchase Purchase Date of Sales Price Transfer Date Price sales Expenses Residential 10.7.77 2,00,000 10.6.13 35,87,500 33,750 House (one) X Ltd. shares 1.8.06 1,03,800 1.10.13 1,62,000 1,800 Y Ltd. 1.12.80 50,000 1.10.13 4,00,000 1,500 Shares Jewellery 1.10.84 2,50,000 21.9.13 17,55,000 3,000 Debentures 10.7.80 2,00,000 2.2.14 2,42,000 2,000 Motor Car( 15.10.06 3,10,000 12.12.13 2,75,000 ---- personal use) New Flat 31.12.13 10,00,000 -----------------1. In 2004-05 additional construction was made of Rs.1,20,000. 2. The fair market value of the assets on 1.4.1981 were: Residential house: Rs.3,50,000, Jewellery: Rs.4,00,000, Y Ltd. shares Rs.40,000. 3. STT has been paid on sale of X Ltd. shares but no STT is paid on the sale of Y Ltd. shares. 4. Relevant Cost Inflation Index nos. are: 1981-82:100 , 1984-85: 125, 2004-05: 480, 2006-07: 519, 2013-14: 939. Determine the taxable capital gain for A.Y.2014-15.
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14. From the information calculate the Capital Gain chargeable to tax in the hands of X Particulars (Section 54)
Rs.
Date of transfer
10.7.2013
Date of Purchase
6.10.1984
Sale Consideration
20,00,000
Cost of acquisition
50,000
Expenses on transfer
10,000
New house purchased on
20.12.2013
Cost of Acquisition of new house
2,00,000
Sale consideration of new house
3,20,000
Date of transfer of new house
10.4.2015
CII for 1984-85
125
CII for 2013-14
939
15. X ltd. sells the following assets: { Section 54EC} Urban Agri. land
Bonus Shares
House Property
Sale date
31.1.2014
7.11.2013
25.3.2014
Purchase Date
9.5.1993
4.4.1983
6.6.1982
Sale Price
9,00,000
3,50,000
8,90,000
Purchase cost
70,000
-----
1,00,000
CII
1993-94: 244
1983-84: 116
1982-83:109
X ltd. invests in the following assets on 2.4.2014 Bonds of NHAI (redeemable on 1.6.2017): Rs.4,00,000 Bonds of REC (redeemable on 10.5.2019): Rs.5,00,000 16. From the information calculate the Capital Gain chargeable to tax in the hands of X for different assessment years: { Section 54 F} CII for 1982-83:109, 2013-14:939 Particulars
Rs.
Date of transfer
10.5.2013
Date of Purchase
23.6.1982
Sale Consideration
36,55,000
Cost of acquisition
3,00,000 14
17.
Expenses on transfer
55,000
New house purchased on
12.5.2013
Cost of Acquisition of new house
27,00,000
Sale consideration of new house
30,00,000
Date of transfer of new house
29.6.2015
X sells the following long term assets on 11.1.2014: ( Section 54 and 54EC )
Res. House Gold Silver Diamonds Sale price 3,90,000 8,10,000 2,96,000 6,40,200 ICA 70,000 1,15,000 1,78,000 4,30,000 Exp. On trf 10,000 81,000 6,000 32,000 st The due date for filling return of income for A.Y.2014-15 is 31 July 2014. The following investments are made: Assets Land (for constructing a resi house) Bank Deposit (for constructing house) Bonds of REC Bonds of NHAI
Date of Acq. 2.4.14 5.8.14 5.7.14 10.7.14
Amount 1,00,000 50,000 7,50,000 3,05,000
18. X purchases 1,000 (non listed) shares in Y Ltd. on 16.8.1990 for Rs.8,000. On May 17,1992 he gets 500 bonus shares . On 20.10.2012 he acquires 1500 right shares at the rate of Rs.11 per share. He sells 3,000 (non listed) shares in Y Ltd. on 12.2. 2014 @ RS.110 per share(brokerage on sale : 1%) He owns one residential property. He purchases a residential house on 29.6.2014 for Rs.2,90,000. Calculate the Capital Gains taxable for A.Y.2014-15 CII for 2011-12 : 785 1992-93: 182 2013-14: 939 (Section 54F)
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