In the today scenario, you must have noticed, every one is thinking/taking about buying and selling the asset. But the question arises that, ‘Is every transaction of sale or purchase are taxable and exigible for Capital Gain Tax’. Hence, as a common person by listening the word Tax first question comes to in the mind that how to minimize the Tax through the Legal provision.

So first we need to under-stand the, “what is capital Asset” as per Income Tax, on which Government can ask and compel for Tax requisition.

 “Capital asset” means—

(a) property of any kind held by an assessee, whether or not connected with his business or profession;

– Its Include Both Movable and Immovable

 (b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992),

but does not include—

(i) any stock-in-trade [other than the securities referred to in sub-clause (b)], consumable stores or raw materials held for the purposes of his business or profession ;

 (ii) 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; This are all Taxable under Capital Gain.
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; or
(f) any work of art.

Explanation 1.—For the purposes of this sub-clause, “jewellery” 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 stone, 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.

(iii) Agricultural land in India, not being land situate

(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than 10,000 ; or

(b) in any area within the distance, measured aerially,—

 (I) Less than 2 Kms, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than 10,000 but not exceeding 1,00,000; or

(II) Less than 6 Kms, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than 1,00,0000 but not exceeding 10,00,000; or

(III) Less than 8 Kms, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than 10,00,000.

Explanation.—For the purposes of this sub-clause, “population” means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;

(iv) 6½ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, or National Defence Gold Bonds, 1980, issued by the Central Government;

(v) Special Bearer Bonds, 1991, issued by the Central Government ;

(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2015 notified by the Central Government.

After having the under-standing the another question comes in to the mind if transaction comes under the Capital Gain Tax. “What is the Liablity and How its arrived”?

Basically it is based on the period of Holding of said asset and its bifurcated in to Two Parts

– Long –Term Gain

– Short tem Gain

Asset Duration of the Asset Tax Rate
Short Term Long Term Short Term Long Term
Immovable Property e.g. House property Less than 2 year More than 2 year Income Tax Slab rate 20% with Indexation
Movable Property e.g. Gold/Jewellery Less than 3 year More than 3 year Income Tax Slab rate 20% with Indexation
Listed Shares* Less than 1 year More than 1 year 15% Exempt
Equity Oriented Mutual Funds Less than 1 year More than 1 year 15% Exempt
Debt Oriented Mutual Funds Less than 3 year More than 3 year Income Tax Slab rate 20% with Indexation

*As per Section 112A, long-term capital gains arising from transfer of an equity share, or a unit of an equity oriented fund or a unit of a business trust shall be taxed at 10% (without indexation) of such capital gains. The tax on capital gains shall be levied in excess of Rs. 1 lakh.

After this we have understanding that what is Capital Gain, Asset and About Long Term and Short Term with rate annexed. But another question also comes that “How it is to be calculated” if its Short term or Long term period?

Short Term Capital Gain =

Sale Consideration – Cost of acquisition- Cost of improvement (if any) – Expenses incurred exclusively for the sale of the Asset.

Long Term Capital Gain =

Sale consideration –Indexed cost of acquisition- Indexed cost of improvement (if any)-Expenses incurred exclusively for the sale of the Asset-Exemption u/s 54, 54F, 54EC if any availed.

Indexed Cost of acquisition =

Cost of acquisition * Cost Inflation Index of the year of sale

Indexed Cost of Improvement=

Cost of improvement * Cost Inflation Index of the year in which improvement took place

These are the basic points by following which, can easily be calculate the Capital Gain on any asset.

Further going to ahead the main question which Pop-up is still remained un-answered that how to minimiza tax arise on sale of Capital Asset.

So, here we can invest said sale proceeds or Gain in various Investable Property through which can minimize our Tax and benefitted as narrated below.

That are,

Section:54

– Long Term Capital Gain arise on sale Residential Property, shall be exempted to the extent of capital if any arise is invested in

1. Purchase of another Residential Property within 1 year before or 2 years after transfer of property.

2. In case of Construction of Property the limit extend to 3 years from transfer take place.

Provided that where the amount of the capital gain does not exceed two crore rupees, the assessee may, at his option, purchase or construct two residential houses in India, and where such option has been exercised,—

 (a) the provisions of this sub-section shall have effect as if for the words “one residential house in India”, the words “two residential houses in India” had been substituted;

 (b) any reference in this sub-section and sub-section (2) to “new asset” shall be construed as a reference to the two residential houses in India:

Section:54EC

– Capital Gain arises on sale of any Long term capital Asset are exempt subject to if assesse has invested capital gain with in 6 months from the date of transfer, in long term bond as specified by the government for prescribed period.

– Maximum Exemption is Rs. 50 Lacs.

Section: 54F 

– Any Capital Gain arises on sale of any Long term Capital Gain other than Residential Property shall be exempted, Subject to, if entire proceeds invested in to

1. Purchase of another Residential Property within 1 year before or 2 years after transfer of property.

2. In case of Construction of Property the limit extend to 3 years from transfer take place.

if whole consideration is not invested then

Exemption:-

Capital Gain* Amount Invested
Net Consideration

Disclaimer:-

The view presented in the article based on the personal opinion and extraction of data available from various sources.

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