The Article Discusses about Tax Treatment of Long Term Capital Gain arising from Transfer of Capial Assets under Income Tax Act, 1961. Articles discusses Meaning of Capital Assets, What Constitutes a Capital and what is not a capital Asset, How to Apply Indexation Provisions, Period for Computation of Long Term Capital Asset, Tax on long-term capital gain @ 10% in certain special cases, Adjustment of LTCG against the basic exemption limit and Deductions under sections 80C to 80U and LTCG.
Introduction
Gain arising on transfer of capital asset is charged to tax under the head “Capital Gains”. Income from capital gains is classified as “Short Term Capital Gains” and “Long Term Capital Gains”. In this part you can gain knowledge about the provisions relating to tax on Long Term Capital Gains.
Meaning of Capital Gains
Profits or gains arising from transfer of a capital asset are called “Capital Gains” and are charged to tax under the head “Capital Gains”.
Meaning of Capital Asset
Capital asset is defined to include:
(a) Any kind of property held by an assessee, whether or not connected with business or profession of the assesse.
(b) Any securities held by a FII which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.
(c) Any ULIP to which exemption under section 10(10D) does not apply on account of the applicability of the fourth & fifth proviso thereof.
However, the following items are excluded from the definition of “capital asset”:
(i) any stock-in-trade (other than securities referred to in (b) above), consumable stores or raw materials held for the purposes of his business or profession ;
(ii) personal effects, that is, movable property (including wearing apparel and furniture) held for personal use by the taxpayer or any member of his family dependent on him, but excludes—
(a) jewellery;
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; or
(f) any work of art.
“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 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;
(iii) Agricultural Land in India, not being a land situated:
a. Within jurisdiction of municipality, notified area committee, town area committee, cantonment board and which has a population of not less than 10,000;
b. Within range of following distance measured aerially from the local limits of any municipality or cantonment board:
i. not being more than 2 KMs, if population of such area is more than 10,000 but not exceeding 1 lakh;
ii. not being more than 6 KMs , if population of such area is more than 1 lakh but not exceeding 10 lakhs; or
iii. not being more than 8 KMs , if population of such area is more than 10 lakhs. Population is to be considered according to the figures of last preceding census of which relevant figures have been published before the first day of the year.
(iv) 61/2 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;
(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under the Gold Monetisation Scheme, 2016.
Following points should be kept in mind:
- The property being capital asset may or may not be connected with the business or profession of the taxpayer. E.g. Bus used to carry passenger by a person engaged in the business of passenger transport will be his capital asset.
- 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 will always be treated as capital asset, hence, such securities cannot be treated as stock-in-trade.
Illustration
Mr. Kumar purchased a residential house in January, 2018 for Rs. 84,00,000. He sold the house in April, 2022 for Rs. 90,00,000. In this case residential house is a capital asset of Mr. Kumar and, hence, the gain of Rs. 6,00,000 arising on account of sale of residential house will be charged to tax under the head “Capital Gains”.
Illustration
Mr. Kapoor is a property dealer. He purchased a flat for resale. The flat was purchased in January, 2019 for Rs. 84,00,000 and sold in April, 2022 for Rs. 90,00,000. In this case Mr. Kapoor is dealing in properties in his normal business. Hence, flat purchased by him would form part of stock-in-trade of the business. . In other words, for Mr. Kapoor flat is not a capital asset and, hence, gain of Rs. 6,00,000 arising on account of sale of flat will be charged to tax as business income and not as capital gain.
Meaning of long-term capital asset and short-term capital asset
For the purpose of taxation, capital assets are classified into two categories as given below :
Short-Term Capital Asset |
Long-Term Capital Asset |
Any capital asset held by the taxpayer for a period of not more than 36 months immediately preceding the date of its transfer will be treated as short-term capital asset.
However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months Note: Period of holding to be considered as 24 months instead of 36 months in case of unlisted shares of a company and immovable property being land or building or both. |
Any capital asset held by the taxpayer for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.
However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months Note: Period of holding to be considered as 24 months instead of 36 months in case of unlisted shares of a company and immovab |
Illustration
Mr. Kumar is a salaried employee. In the month of April, 2013 he purchased a piece of land and sold the same in December, 2022. In this case, land is a capital asset for Mr. Kumar. He purchased land in April, 2013 and sold in December, 2022 i.e. after holding it for a period of more than 24 months. Hence, land will be treated as long-term capital asset.
Illustration
Mr. Raj is a salaried employee. In the month of April, 2021, he purchased a piece of land and sold the same in December, 2022. In this case land is a capital asset for Mr. Raj. He purchased land in April, 2021 and sold it in December, 2022, i.e., after holding it for a period of less than 24 months. Hence, land will be treated as short-term capital asset.
Illustration
Mr. Vipul is a salaried employee. In the month of July, 2017, he purchase a piece of land and sold the same in January 2023. In this case land is a capital asset for Mr. Vipul and it was sold in the Assessment Year 2023-24. He purchased land in July, 2017 and sold it in January 2023, i.e. after holding it for a period of more than 24 months. Hence land will be treated as long-term capital asset.
Illustration
Mr. Raj is a salaried employee. In the month of April, 2021 he purchased equity shares of SBI Ltd. (listed in BSE) and sold the same in December, 2022. In this case shares are capital assets for Mr. Raj. He purchased shares in April, 2021 and sold them in December, 2022, i.e., after holding them for a period of more than 12 months. Hence, shares will be treated as long-term capital assets.
Illustration
Mr. Kumar is a salaried employee. In the month of April, 2022 he purchased equity shares of SBI Ltd. (listed in BSE) and sold the same in January, 2023. In this case shares are capital assets for Mr. Kumar. He purchased shares in April, 2022 and sold them in January, 2023, i.e., after holding them for a period of less than 12 months. Hence, shares will be treated as short-term capital assets.
Illustration
Mr. Kumar is a salaried employee. In the month of April, 2021 he purchased un-listed shares of XYZ Ltd. and sold the same in January, 2023. In this case shares are capital assets for Mr. Raj and to determine nature of capital gain, period of holding would be considered as 24 month as shares are unlisted. He purchased shares in April, 2021 and sold them in January, 2023, i.e., after holding them for a period of less than 24 months. Hence, shares will be treated as Short Term Capital Assets.
Illustration
Mr. Raj is a salaried employee. In the month of April, 2013 he purchased un-listed shares of XYZ Ltd. and sold the same in December, 2022. In this case shares are capital assets for Mr. Raj and to determine nature of capital gain, period of holding would be considered as 24 month as shares are unlisted. He purchased shares in April, 2013 and sold them in December 2022, i.e., after holding them for a period of more than 24 months. Hence, shares will be treated as Long Term Capital Assets.
Illustration
Mr. Vikas is a salaried employee. In the month of September, 2017 he purchased unlisted shares of ABC ltd. and sold the same in May 2022. In this case, shares are sold in assessment year 2023-24. Hence, period of holding for unlisted shares to be considered as 24 months instead of 36 months.
Mr. Vikas purchased shares in September 2017 and sold them May 2022, i.e. after holding them for a period of 24 months or more. Hence, shares will be treated as Long Term Capital Assets.
Meaning of short-term capital gain and long-term capital gain
Gain arising on transfer of short-term capital asset is termed as short-term capital gain and gain arising on transfer of long-term capital asset is termed as long-term capital gain. However, there are few exceptions to this rule like gain on depreciable asset is always taxed as short-term capital gain.
Illustration
In April, 2022 Mr. Raja sold his residential house property which was purchased in May, 2002. Capital gain on such sale amounted to Rs. 8,40,000. In this case the house property is a long-term capital asset and, hence, gain of Rs. 8,40,000 will be charged to tax as long-term capital gain.
Illustration
In April, 2022 Mr. Rahul sold his residential house property which was purchased in May, 2020. Capital gain on such sale amounted to Rs. 8,40,000. In this case the house property is a short-term capital asset and, hence, gain of Rs. 8,40,000 will be charged to tax as short-term capital gain.
Reason for bifurcation of capital gains into long-term and short-term gains :–
The taxability of capital gains depends on the nature of gain, i.e., whether short-term or long-term. Hence, to determine the taxability, capital gains are classified into short-term capital gain and long-term capital gain. In other words, the tax rates for long-term capital gain and short-term capital gain are different.
Computation of long-term capital gains
Long-term capital gain arising on account of transfer of long-term capital asset will be computed as follows :
Particulars |
Rs. |
Full value of consideration (i.e., Sales consideration of asset) | XXXXX |
Less: Expenditure incurred wholly and exclusively in connection with transfer of capital asset (E.g., brokerage, commission, advertisement expenses, etc.). | (XXXXX) |
Net sale consideration | XXXXX |
Less: Indexed cost of acquisition (*) | (XXXXX) |
Less: Indexed cost of improvement if any (*) | (XXXXX) |
Long-Term Capital Gains | XXXXX |
(*) Indexation is a process by which the cost of acquisition is adjusted against inflationary rise in the value of asset. For this purpose, Central Government has notified cost inflation index. The benefit of indexation is available only to long-term capital assets. For computation of indexed cost of acquisition following factors are to be considered:
- Year of acquisition/improvement
- Year of transfer
- Cost inflation index of the year of acquisition/improvement
- Cost inflation index of the year of transfer
Indexed cost of acquisition is computed with the help of following formula : Cost of acquisition × Cost inflation index of the year of transfer of capital asset Cost inflation index of the year of acquisition
= not in short term
Indexed cost of improvement is computed with the help of following formula :
Cost of improvement × Cost inflation index of the year of transfer of capital asset = not in
short term
Cost inflation index of the year of improvement
The Central Government has notified the following Cost Inflation Indexes:-
Sl. No. | Financial Year | Cost Inflation Index |
(1) | (2) | (3) |
1 | 2001-02 | 100 |
2 | 2002-03 | 105 |
3 | 2003-04 | 109 |
4 | 2004-05 | 113 |
5 | 2005-06 | 117 |
6 | 2006-07 | 122 |
7 | 2007-08 | 129 |
8 | 2008-09 | 137 |
9 | 2009-10 | 148 |
10 | 2010-11 | 167 |
11 | 2011-12 | 184 |
12 | 2012-13 | 200 |
13 | 2013-14 | 220 |
14 | 2014-15 | 240 |
15 | 2015-16 | 254 |
16 | 2016-17 | 264 |
17 | 2017-18 | 272 |
18 | 2018-19 | 280 |
19 | 2019-20 | 289 |
20 | 2020-21 | 301 |
21 | 2021-22 | 317 |
Illustration
Mr. Raja purchased a piece of land in May, 2005 for Rs. 84,000 and sold the same in April, 2021 for Rs. 10,10,000 (brokerage Rs. 10,000). What will be the taxable capital gain in the hands of Mr. Raja?
Computation of capital gain will be as follows :
Particulars |
Rs. |
Full value of consideration (i.e., Sales consideration of asset) | 10,10,000 |
Less: Expenditure incurred wholly and exclusively in connection with transfer of capital asset (brokerage) | 10,000 |
Net sale consideration | 10,00,000 |
Less: Indexed cost of acquisition (*) | 2,16,103 |
Less: Indexed cost of improvement, if any | Nil |
Long-Term Capital Gains | 7,83,897 |
(*) The cost inflation index notified for the year 2005-06 is 117 and for the year 2021-22 is 317. Hence, the indexed cost of acquisition, i.e., the inflated cost of acquisition will be computed as follows:
Cost of acquisition × Cost inflation index of the year of transfer of capital asset Cost inflation index of the year of acquisition
Rs. 84,000 × 317 = Rs. 2,27,589
117
Tax on long-term capital gain
Generally, long-term capital gains are charged to tax @ 20% (plus surcharge and cess as applicable), but in certain special cases, the gain may be (at the option of the taxpayer) charged to tax @ 10% (plus surcharge and cess as applicable). The benefit of charging long-term capital gain @ 10% is available only in following cases:
1) Long-term capital gains arising from sale of listed securities and it exceeds Rs. 1,00,000 (Section 112A);
2) Long-term capital gains arising from transfer of any of the following asset:
a) Any security (*) which is listed in a recognised stock exchange in India;
b) Any unit of UTI or mutual fund (whether listed or not) ($); and
c) Zero coupon bonds
(*) Securities for this purpose means “securities” as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956. This definition generally includes shares, scrips, stocks, bonds, debentures, debenture stocks or other marketable securities of a like nature in or of any incorporated company or other body corporate, Government securities, such other instruments as may be declared by the Central Government to be securities and rights or interest in securities.
($) This option is available only in respect of units sold on or before 10-7-2014.
Long-term capital gains arising from sale of listed securities
The Finance Act, 2018 inserts a new Section 112A with effect from Assessment Year 2019-20. As per the new section capital gains arising from transfer of a long term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust shall be taxed at the rate of 10 per cent of such capital gains exceeding Rs. 1,00,000.
This concessional rate of 10 per cent will be applicable if:
a) in a case of an equity share in a company, securities transaction tax has been paid on both acquisition and transfer of such capital asset; and
b) in a case a unit of an equity oriented fund or a unit of a business trust, STT has been paid on transfer of such capital asset.
The cost of acquisitions of a listed equity share acquired by the taxpayer before February 1, 2018, shall be deemed to be the higher of following:
a) The actual cost of acquisition of such asset; or
b) Lower of following:
(i) Fair market value of such shares as on January 31, 2018; or
(ii) Actual sales consideration accruing on its transfer.
The Fair market value of listed equity share shall mean its highest price quoted on the stock exchange as on January 31, 2018. However, if there is no trading in such shares on January 31, 2018, the highest price of such share on a date immediately preceding January 31, 2018 on which trading happens in that share shall be deemed as its fair market value.
In case of units which are not listed on recognized stock exchange, the net asset value of such units as on January 31, 2018 shall be deemed to be its FMV.
In a case where the capital asset is an equity share in a company which is not listed on a recognised stock exchange as on 31-1-2018 but listed on the date of transfer, the cost of unlisted shares as increased by cost inflation index for the financial year 2017-18 shall be deemed to be its FMV.
Long-term capital gains arising from transfer of specified asset
A taxpayer who has earned long-term capital gains from transfer of any listed security or any unit of UTI or mutual fund (whether listed or not), not being covered under Section 112A, and Zero coupon bonds shall have the following two options:
a. Avail of the benefit of indexation; the capital gains so computed will be charged to tax at normal rate of 20% (plus surcharge and cess as applicable).
b. Do not avail of the benefit of indexation; the capital gain so computed is charged to tax @ 10% (plus surcharge and cess as applicable).
The selection of the option is to be done by computing the tax liability under both the options, and the option with lower tax liability is to be selected.
Illustration
Mr. Janak is a salaried employee. In the month of January, 2016 he purchased 100 shares of X Ltd. @ Rs. 1,400 per share from Bombay Stock Exchange. These shares were sold through BSE in April, 2022 @ Rs. 2,600 per share. The highest price of X Ltd. share quoted on the stock exchange on January 31, 2018 was Rs. 1,800 per share. What will be the nature of capital gain in this case?
**
Shares were purchased in January, 2016 and were sold in April, 2020, i.e., sold after holding them for a period of more than 12 months and, hence, the gain will be long-term capital gain (LTCG).
In the given case, shares are sold after holding them for a period of more than 12 months, shares are sold through recognised stock exchange and the transaction is liable to STT. Therefore, section 112A is applicable in this case.
The cost of acquisition of X Ltd. shares shall be higher of:
a) Cost of acquisition i.e., 1,40,000 (1,400 × 100);
b) Lower of:
a. Highest price quoted as on 31-1-2018 i.e., 1,80,000 (1,800 × 100);
b. Sales consideration i.e., 2,60,000 (2,600 × 100)
Thus, the cost of acquisition of shares shall be Rs. 1,80,000.Accordingly, Long-term capital gains in hands of Mr. Janak would be Rs. 80,000 (i.e., 2,60,000 – 1,80,000). Since long-term capital gains doesn’t exceed Rs. 1,00,000, nothing is taxable in hands of Mr. Janak.
Illustration
Mr. Saurabh is a salaried employee. In the month of July, 2017 he purchased 100 shares of XYZ Ltd. @ Rs. 2,000 per share from Bombay Stock Exchange. These shares were sold through NSE in June, 2022 @ Rs. 4,900 per share. The highest price of XYX Ltd. share quoted on the stock exchange on January 31, 2018 was Rs. 3,800 per share. What will be the nature of capital gain in this case?
**
Shares were purchased in July, 2017 and were sold in June, 2022, i.e., sold after holding them for a period of more than 12 months and, hence, the gain will be long-term capital gain (LTCG).
In the given case, shares are sold after holding them for a period of more than 12 months, shares are sold through recognised stock exchange and the transaction is liable to STT. Therefore, section 112A is applicable in this case.
The cost of acquisition of X Ltd. shares shall be higher of:
a) Cost of acquisition i.e., 2,00,000 (2,000 × 100);
b) Lower of:
(i) Highest quoted price as on 31-1-218 i.e., 3,80,000 (3,800 × 100);
(ii) Sales consideration i.e., 4,90,000 (4,900 × 100)
Thus from above, the cost of acquisition of shares shall be Rs. 3,80,000. Accordingly, Long-term capital gains taxable in hands of Mr. Saurabh would be Rs. 1,10,000 (i.e., 4,90,000 – 3,80,000). Since the long-term capital gains exceeds Rs. 1,00,000, hence it will be covered under section 112A. Mr, Saurabh would be liable to pay at the rate of 10% on Rs. 10,000 i.e., gains exceeding Rs. 1,00,000.
Illustration
Mr. Kumar (a non resident) purchased equity shares (listed) of Shyamal Ltd. in December 1995 for Rs. 28,100. These shares are sold (outside recognised stock exchange) in April, 20220 for Rs. 5,00,000. He does not have any other taxable income in India. What will be his tax liability.
**
In this situation, Mr. Kumar has following two options:
Particulars |
Option 1 (Avail indexation) |
Option 2 (Do not avail indexation) |
Full value of consideration | 5,00,000 | 5,00,000 |
Less: Indexed cost of acquisition (Rs. 28,100 × 301/100) | 84,581 | ——— |
Less: Cost of acquisition | ——— | 28,100 |
Taxable Gain | 4,15,419 | 4,71,900 |
Tax @ 20% on Rs. 4,15,419 | 83,084 | ——— |
Tax @ 10% on Rs. 4,71,900 | ——— | 47,190 |
From the above computation, it is clear that Mr. Kumar should exercise option 2, since in this situation the tax liability (excluding cess as applicable) comes to Rs. 47,190 which is less than tax liability (excluding cess as applicable) under option 1 i.e. Rs. 83,084.
Illustration
Mr. Kumar (a non-resident) purchased a piece of land in December, 2006 for Rs. 28,100 and sold the same, in April, 2021 for Rs. 5,00,000. Can he claim the option of not availing of the indexation and paying tax @ 10% on the capital gain?
**
In this situation, the asset transferred is land and hence the options discussed in preceding illustration are not available and the gain will be computed after availing of the indexation and the resulting gain will be charged to tax @ 20% (plus surcharge and cess as applicable). The computation in this case will be as follows :
Particulars |
(Rs.) |
Full value of consideration | 5,00,000 |
Less: Indexed cost of acquisition (Rs. 28,100 ×317/122) | 73,014 |
Less: Indexed cost of improvement | Nil |
Long term capital gain | 4,26,986 |
Tax @ 20% on Rs. 4,26,986 | 85,397 |
Add: Health & education cess @ 4% | 3,416 |
Net tax payable | 88,813 |
Adjustment of LTCG against the basic exemption limit
Basic exemption limit means the level of income up to which a person is not required to pay any tax. The basic exemption limit applicable in case of an individual for the financial year 2022-23 is as follows :
For resident individual of the age of 80 years or above, the exemption limit is Rs. 5,00,000.
- For resident individual of the age of 60 years or above but below 80 years, the exemption limit is Rs. 3,00,000.
- For resident individual of the age of below 60 years, the exemption limit is Rs. 2,50,000.
- For non-resident individual, irrespective of the age of the individual, the
- exemption limit is Rs. 2,50,000.
- For HUF, the exemption limit is Rs. 2,50,000.
Illustration: Basic exemption limit
Mr. Kapoor (resident and age 25 years) is a salaried employee earning a salary of Rs. 1,84,000 per annum. Apart from salary income, he has earned interest on fixed deposit of Rs. 6,000. He does not have any other income. What will be his tax liability for the year 2022-23?
**
For resident individual of age of below 60 years, the basic exemption limit is Rs. 2,50,000. In this case the taxable income of Mr. Kapoor is Rs. 1,90,000 (Rs. 1,84,000 + Rs. 6,000), which is below the basic exemption limit of Rs. 2,50,000, hence, his tax liability will be nil.
Illustration: Basic exemption limit
Mr. Viren (resident and age 62 years) is a businessman. His taxable income for the year 2022-23 is Rs. 2,25,200. He does not have any other income. What will be his tax liability for the year 2022-23?
**
For resident individual of the age of 60 years and above but below 80 years, the basic exemption limit is Rs. 3,00,000. In this case, the taxable income of Mr. Viren is Rs. 2,25,200, which is below the basic exemption limit of Rs. 3,00,000, hence, his tax liability will be nil.
Illustration: Basic exemption limit
Mrs. Raja (resident and age 82 years) is a doctor. Her taxable income for the year 202223 is Rs. 4,84,000. She does not have any other income. What will be her tax liability for the year 2022-23?
**
For resident individual of the age of 80 years and above, the basic exemption limit is Rs. 5,00,000. In this case, the taxable income of Mrs. Raja is Rs. 4,84,000, which is below the basic exemption limit of Rs. 5,00,000, hence, her tax liability will be nil.
Illustration: Basic exemption limit
Mr. Raj (a non-resident and age 82 years) is a retired person. He is residing in Canada. He owns a house in Mumbai which is given on rent. The taxable rental income for the year 2022-23 amounts to Rs. 1,84,000. What will be his tax liability for the year 202223?
**
For non-resident individual, irrespective of the age, the basic exemption limit is Rs. 2,50,000. In this case the taxable income of Mr. Raj is Rs. 1,84,000, which is below the basic exemption limit of Rs. 2,50,000, hence, his tax liability will be nil.
Adjustment of LTCG against the basic exemption limit
In the preceding illustrations we observed that if the income is below the basic exemption limit, then there will be no tax liability. Now a question arises that can an individual adjust the basic exemption limit against long-term capital gain? The answer will depend
on the residential status of the individual (i.e., resident or non-resident). The provisions in this regard are as follows :
Only a resident individual/HUF can adjust the exemption limit against LTCG. Thus, a non-resident individual and non-resident HUF cannot adjust the exemption limit against LTCG.
A resident individual can adjust the LTCG but such adjustment is possible only after making adjustment of other income. In other words, first income other than LTCG is to be adjusted against the exemption limit and then the remaining limit (if any) can be adjusted against LTCG.
Illustration
Mr. Kapoor (age 67 years and resident) is a retired person. He purchased a piece of land in December, 2013 and sold the same in April, 2022. Taxable long-term capital gain on such sale amounted to Rs. 1,84,000. Apart from gain on sale of land, he is not having any other income. What will be his tax liability for the year 2022-23?
*
For resident individual of the age of 60 years and above but below 80 years, the basic exemption limit is Rs. 3,00,000. Further, a resident individual can adjust the basic exemption limit against LTCG. In this case, LTCG of Rs. 1,84,000 can be adjusted against the basic exemption limit. In other words, Mr. Kapoor can adjust the LTCG on sale of land against the basic exemption limit.
Considering the above discussion, the tax liability of Mr. Kapoor for the year 2022-23 will be nil.
Illustration
Mr. Kapoor (age 67 years and non-resident) is a retired person. He purchased a piece of land (at Delhi) in December, 2013 and sold the same in April, 2022. Taxable long-term capital gain on such sale amounted to Rs. 1,84,000. Apart from gain on sale of land, he is not having any other income. What will be his tax liability for the year 2022-23?
*
For non-resident individual of any age, the basic exemption limit is Rs. 2,50,000. Further, a non-resident individual cannot adjust the basic exemption limit against LTCG. Hence, in this case the exemption limit of Rs. 2,50,000 cannot be adjusted against LTCG. In other words, Mr. Kapoor cannot adjust the LTCG on sale of land against the basic exemption limit. Thus, LTCG of Rs. 1,84,000 will be charged to tax @ 20% (plus health & education cess @ 4%). Thus, the tax liability will come to Rs. 38,272.
Illustration
Mr. Kapoor (age 67 years and resident) is a retired person earning a monthly pension of Rs. 5,000. He purchased gold in December, 2012 and sold the same in April, 2022. Taxable LTCG amounted to Rs. 3,70,000. Apart from pension income and gain on sale of gold he is not having any other income. What will be his tax liability for the year 202223?
*
For resident individual of the age of 60 years and above but below 80 years, the basic exemption limit is Rs. 3,00,000. Further, a resident individual can adjust the basic exemption limit against LTCG. However, such adjustment is possible only after adjusting income other than LTCG. In this case, he is having pension income of Rs. 60,000 (Rs. 5,000 × 12) and LTCG on gold of Rs. 3,70,000. Thus, first we have to adjust the pension income against the exemption limit and the balance limit will be adjusted against LTCG.
The basic exemption limit in this case is Rs. 3,00,000, after adjustment of pension income of Rs. 60,000 from the exemption limit of Rs. 3,00,000 the balance limit available will come to Rs. 2,40,000. The balance of Rs. 2,40,000 will be adjusted against LTCG.
Total LTCG on gold is Rs. 3,70,000 and the available limit is Rs. 2,40,000, hence, the balance LTCG left after adjustment of Rs. 2,40,000 will come to Rs. 1,30,000. The gain of Rs. 1,30,000 will be charged to tax @ 20% (plus health & education cess @ 4%). Thus, the tax liability before cess will come to Rs. 26,000 and after deducting rebate of Rs. 12,500 as per section 87A, he would be liable to pay tax of Rs. 14,040 (including health & education cess @ 4%).
Illustration
Mr. Gagan (age 67 years and non-resident) is a retired person earning a monthly pension of Rs. 5,000 from Indian employer. He purchased a piece of land in Delhi in December, 2012 and sold the same in April, 2022. Taxable LTCG amounted to Rs. 2,20,000. Apart from pension income and gain on sale of land he is not having any other income. What will be his tax liability for the year 2022-23?
*
For non-resident individual, irrespective of the age, the basic exemption limit is Rs. 2,50,000. Further, a non-resident individual cannot adjust the basic exemption limit against LTCG covered under section 112. In other words, Mr. Gagan can adjust the pension income against the basic exemption limit but the remaining exemption limit cannot be adjusted against LTCG on sale of land.
The basic exemption limit in this case is Rs. 2,50,000, and the same will be adjusted against pension income of Rs. 60,000. The balance limit of Rs. 1,90,000 (i.e., Rs. 2,50,000 less Rs. 60,000) cannot be adjusted against LTCG. Hence, in this case Mr. Gagan has to pay tax @ 20% (plus health & education cess @ 4%) on LTCG of Rs. 2,20,000. Thus, the tax liability will come to Rs. 45,760.
Deductions under sections 80C to 80U and LTCG
No deduction under sections 80C to 80U is allowed from long-term capital gains.
Illustration
Mr. Kapoor (age 57 years and resident) is a retired person. He purchased a piece of land in December, 2012 and sold the same in April, 2022. Taxable LTCG on such sale amounted to Rs. 6,00,000. Apart from gain on sale of land he is not having any income. He deposited Rs. 1,00,000 in Public Provident Fund (PPF) and Rs. 50,000 in NSC. He wants to claim deduction under section 80C on account of Rs. 1,50,000 deposited in PPF and NSC. Can he do so?
**
Deduction under sections 80C to 80U cannot be claimed from long-term capital gains. Hence, Mr. Kapoor cannot claim deduction under section 80C of Rs. 1,50,000 from LTCG of Rs. 4,00,000. The taxable income of Mr. Kapoor will be computed as follows :
Particulars | Rs. |
Long-Term Capital Gains | 6,00,000 |
Gross Total Income | 6,00,000 |
Less: Deduction under sections 80C to 80U | Nil |
Total Income or Taxable Income | 6,00,000 |
He can claim basic exemption of Rs. 2,50,000 (being resident individual) and has to pay LTCG on remaining Rs. 3,50,000 @ 20% (+HEC). Thus, his tax liability before cess will come to Rs. 70,000 and he would be liable to pay tax of Rs. 72,800 (including cess @ 4%).
[As amended by Finance Act, 2022]
income tax mater regarding LTC deposit closing which is pending since 2019 onwards where the assessing officer issued various notices on different sections under income tax just on receipt of request letter for NOC in form G to close the LTC deposit account opened earlier in 2015 with the nationalized bank.
This is pending since 2019 and in between COVIND-19 lockdown exercise in 2020, 2021and in between faceless assessment, reopening of assessment of 2016-17 etc etc. How can the normal salary income earnings tax payer is to handle the matter. No CA NOR ADVOCATE ARE READY TO HELP EVEN OTHERWISE WHY INDIVIDAL ASSESS TO INCURE COST OF LITICATION WHICH IS TOTALLY AVOIDABLE.
SINCE 2019 ONLY NOTICES ISSUED ON VARIOUS SECTIONS INSTEASD OF ISSUING NOC FORM G FOR CLOSE LTC DEPOSITS IN THE BANK. ALREADY MONEY IS BLOCKED SINCE 2015 YEAR DEPOSIT AND INSPITE AO ISSUING NOTICE UNDER SEC 281B FOR PROVISIONAL ATTAtCHNENT OF BANK LTC DEPOSITS
LOT OF ARTCLES ARE WRITEN ON LTCG PROPERTY. COMMENTS ARE POSTED IN TAX GURU
THERE ARE SO MANY SETTLED CASE LAWS INSPITE OF ALL THE AO AND SENIORS IN TAX DEPT FOR THE SAKE OF REVENUE TARGETING TAKING DIFFERENT VIEWS.
On my personal capacity I have also reported the difficulties raised out of the above matter to CBDT and pmo’s office and inturn they also reverted back the grivency to the concerned principle commissioner etc to settle the case but inspite of the fact the assessing officer initiated faceless assessment proceedings and to meet out these challenge how can an individual assessee to handle this matter when a person doesn’t have facilities or volunteer guidence from learnered professionals
From 2019 onwards I would have interacted with many of professional who were posted so many articles in TaxGuru espicially in LTCG of property matter and noone is ready to help and keeping quiet just because of the reasons that I am presuming that the assessee is individual and not a corporate management etc etc. Where the handling of tax litigation are much more beneficial
One of my friend three houses in India. Kindly advise whether capital exemptions can be availed on sale of all three houses
I have sold flat in feb 20 accourding incme tax act EC 54 Ihave to take long term bond witin 6 month But due to covid i sinor citizen cant go away . Is theŕe any extension given by income tax CBDt department.Can i take the bond up to which date
Dear Sir,
In the new ITR2 Form for AY 2020-21, just released, in the section on Schedule CG, under B4 – LTCG on sale of MF units, no provision has been made for deduction of allowance of Rs 1 lakh from the calculated LTCG, nor in the accompanying Sch 112A. Instructions have also not been issued so far.
Please let me know how to account for this permissible deduction of Rs 1 lakh while filling in this ITR2 Form.
1) Is there any order or manner of Adjustment of Inter-head Loss ?
2) Based on 1) above:
Case: (Ref :FY 18-19 & No B/f Loss of PYs)
Income from HP = -30000/-
Income from BGBP= 120000/-
Income from CG= 500000/-
Other Sources(other than 80TTA)= 15000/-
Deductions u/s 80C= 150000/-
a) Method beneficial as per my working:
Income from BPGP =120000
Income from CG=(500000-30000HP)= 470000
Income from OS= 15000
Total before Deduction=605000
Deduction from Normal Income= -135000
Total Income= 470000/-
Tax (470000-250000=220000 @20%)= 44000/-
b) Method as per Income tax Department:
Income from BPGP =(120000-30000HP)=90000
Income from CG=500000
Income from OS= 15000
Total before Deduction=605000
Deduction from Normal Income= -105000
Total Income= 500000/-
Tax (500000-250000=250000 @20%)= 50000/-
Difference of Tax Liability (a-b) = 6000 increased
which method is correct as per IT provisions ?
Please guide me…..
what is the long term or short term capital gain tax on sale of paintings for A.Y. 2020 – 2021?
What is the advice or response of my posting comments on LTCG
The incometax authorities somehow messed up the issues and try to levy tax on LTCG. For instance when honest assessee deposited LTCG in bank out of full sale proceeds of an apartment and declared in his returns and paid tax on LTCG as well and after 3-4 years when applied form G closure of LTCG deposits the assessing officer screw up the assess and intercepted the case and try to levy full tax. Assess is just salary person. The assessing officer did not follow any time limitation for reopening the case and even assessment order under 143(2) not completed with in six months but issues notices for reopening the assessment order after 3-4 years when form G applied for NOC to close the LTCG deposit in the bank. Assessing officer issue notices that construction agreement not registered only land agreement registered for saledeed registration and construction agreement value does not applicabke for capital INDEXATION and the value to be taxed full rate. Since August 2019 matter pending for relevant assessment year 2015-16,, because of COVIND-19 carona virus crises lockdown exercise etc entire proceeding kept under abyeances and assessee amount Rs. 1.00 crore blocked in bank LTCG deposit and nationalized bank also keeping quiet unable to close the LTCG deposit account for the reason that bank doesn’t want to FDs deposited with them.
Query. I sold a property at rs 28 lacs in Apr 2017.. I invested in long term capital gains in Mar 2018. Two years are over. I have not not found a suitable property yet. I am looking for one. What are the options for me. Colonel rk Sinha sun pharma Halol Vadodara gujarat
Sir, may I know formula for arriving at cost of acquisition for inherited land in 12/2015 which was inherited by my father in 2/1960.I could not obtain MVR or FMV of land as on 1/4/2001 for indexation. Please guide me.
A person sells a property in August 2019 and puts the money in a nationalised SB account to pay up Capital Gains tax and related investment. But that person dies in January 2020. Is Capital Gains tax applicable to be paid by deceased or by her legal heirs.
advice sought for getingFMV of IPOs
I SOLD MY12 YEAR OLD FLAT IN 16MARCH 2019 AND AMOUNT RECEIVEDIN MAR 2019.AND CAPITAL GAIN OF RS. 10 LAC INVESTED IN 54EC BONDS APRIL2019.CAN I SHOW THIS INCOME IN F.YEAR 2019-20.
Respected Sir, I have sold my house property in Rs 60 lacs on 28th March 2018, and invested entire sale amount in Bank Capital Gain Account in June 2018. Since I am not found a suitable property to purchase. Please guide me how long I keep this funds in bank Capital Account. If convenient Please reply on my e mail. Thanks and Regards.
r
LTCG on equity is applicable from FY 2018-19 which is higher of cost of acquisition (COA) or lower of FMV & sale value {SV}. If someone has LTCG for 20 shares. While calculating LTCG for some shares, he has to take COA, for some FMV & for some SV. However, Schedule CG section B-9(ii) has a provision of only one entry. Then, how one can enter details of 20 shares in ITR?
What is short term capital gain rate for A.Y 2019-2020?
please confirm again whether 87A is applicable for Long term capital Gain on unlisted shares. (after deducting rebate of Rs. 2,500 as per section 87A as mentioned in article)
To Reshare the fresh Post on FB(:
ANYTHING new of added value in the republished Article ?
It appears – ‘NO’ ?!
The query raised (see 2 comments posted @vswami) in the matter of computation if çapital asset is one acquired pre FY 2001-2002 still remains unananswered.
If the capital asset is in the form of shares of a company consistently maling losses (i.e. with lost capital), the ratioinale behind claim for ‘índexation’ is highly questionable- for a discussion of this moot point, look up the Articles earlier published on this website @
Reduction of Equity Share Capital – Tax Implication (A Supplement)
Reduction of Equity Share Capital – Tax Implication
Mr. Sudhir booked and registered teh sale agreement of 1 under construction house property on 12 March 2016 and availed housing loan. Mr. Sudhir took possession on 13 March 2019. He paid interest of 10,00,000 during this period to the bank.
1. If he chose to sell house after taking possession, can the interest paid be counted along with cost of purchase.
2. If he chose to sell the house, say, in December 2020 after enjoying rentals for few months. Obviously he would be allowed one fifth of the pre construction rent, Whether the unclaimed interest of pre-construction period can be added to the cost of purchase while arriving at LTCG
I have query pertaining to LTCG. Can loss from the sale of shares of Listed company be adjusted against the profit earned by the sale of shares of unlisted company (Pvt and public Ltd.) for the same year i.e. for A.Y. 2019-20 as per the section 112A of the Income Tax Act
Sir,
I purchased house in oct 2012 for Rs 2100000 (As per agreement).
Took bank loan for Rs 1600000
sale deed value is Rs 840500. (in sale deed it is mentioned semi furnished house).
what is my purchase value?
I sold house in sep 2018 for Rs 3800000.
Registration charge for purchage Rs 84000
brokerage for selling Rs 70000 (given to agent through cheque no receipt)
how much i have to Pay as capital gain tax.
Thanks for the illustrations.
Thanks for the illustrations
i received in gift from my grand father colgate 100shares in 19.3.1993. tow bonus received now total400 share with me valu was 450PER SHARE . what is tax implication in folowing cases. shares are in physical form not in demate:
Q1. if i sale all 400 shares off line to any body phical delivery in june 2018
q2. if i gift all 400 shares to my sister phisical delivery in june 2018 and the she do demate of such 400share and sales in stock exchange in same year before march 2018 at 1260. grand father price is 1150 /-
q3 :if i gift all 400 shares to my sister physical delivery in june 2018 and the she do demate of such 400share and sales in stock exchange in after holding of one year at 1260. grand father price is 1150 /-
i received in gift from my grand father colgate 100shares in 19.3.1993. tow bonus received now total400 share with me valu was 450PER SHARE . what is tax implication in folowing cases. shares are in physical form not in demate:
Q1. if i sale all 400 shares off line to any body phical delivery in june 2018
q2. if i gift all 400 shares to my sister phisical delivery in june 2018 and the she do demate of such 400share and sales in stock exchange in same year before march 2018 at 1260. grand father price is 1150 /-
q3 :if i gift all 400 shares to my sister physical delivery in june 2018 and the she do demate of such 400share and sales in stock exchange in after holding of one year at 1260. grand father price is 1150 /-
Is Long Term Capital is available for Carry Forward.?
Thank you for an excellent article.
I had sold units in debt mutual fund where holding period was over 3 years and it was a dividend reinvestment scheme. Now, with indexed cost, I am getting a long-term capital loss. I do not have any other long-term capital gain this year. So, can I post this particular LTC loss in the IT return and carry it forward to the next year?
Dear Sir,
please help in below issue :-
1-Property is owned by Daughter & Father.
2-Property will be sold in 2018-19
Question is:-
1- What will be the Indexation of 2018-19
2- How the income bifurcated between the two as they received the Sales consideration equally in there bank account
Informative article. Thanks.
Please solve an issue I am facing
Gross total income-500000
Long term capital gain-400000
80GG-60000 claimed out of gross total income excluding capital gain
But CPC restricts 80GG to 25000. Disallowed Rs.35000. What is gross total income for 80GG purpose?
A husband and his wife jointly owned a residential flat with 50% ownership each. Husband gifts his share of 50% to wife out of love and affection without any monetary consideration after 2 years of holding ownership. Value of flat as per Registrar is Rs. 35 Lakhs and purchased at Rs. 35 Lakhs too. What would be tax implications for both husband and wife.
An excellent article.
I have LTCG in excess of Rs 2,50,000 from redemption of Mutual Funds from my HUF account in FY 2017-18 (AY 2018-19). There is no other income from HUF funds and, therefore, there is no income tax liability for AY 2018-19
Am I required to file an Income Tax Return this year for FY 2017-18 (AY 2018-19)?
An individual has purchased shares of listed company say in the year 1980 at that time there was no STT since purchase was made long ago it is difficult to keep track record of bill of purchase only record available is that this share is in demat mode holding as of today if he sell the shares in view of amendment of Budget 2018 where in viewed that on purchase side there is no STT paid will it qualify for long term in view of recent circular of april 2018 by CBDT which lay down exceptions
Very good article.
I need illustration to the following.
1.GPA-cum-Sale done in F.Y. 2011 for Rs.10,80,000/- stamp duty paid Rs.70,000/-
2. Sold the same in F.Y. 2013 for 30,20,000/-.
3. Purchased another property in F.Y. 2013 Rs.18,00,000/-
I need calculations of Capital Gain in this transaction.
#2 son buys shares of a listed co. on 1jan 15 and transfers these to his father ( without any consideration ) in Apr 16. The father sells these shares after two months at a profit. Is the profit a STG?
Answer: No, this is a long-term gain; original date of purchase by son is considered, but in bit cases STT must have been paid.
There have been some changes made in the Budget for FY 2017-18. For assets purchased before 1.4.2001, an assessee is permitted to take the value of the assets as obtaining on 1.4.2001 as the value of the asset for applying indexation, instead of the actual purchase value or the value as obtaining as on 1.4.1981, at his choice.
Further, a new series of index values has been notified by the Govt. for FY 2001-02 onward, which is essentially an extension of the series from FY 1981-82 onward.
It would have helped if these amendments from the Budget for FY 2017-18 been mentioned, with suitable illustrations, to enhance the value of this article.
Thanks.
A son buys shares of a listed co. on 1jan 15 and transfers these to his father ( without any consideration ) in Apr 16. The father sells these shares after two months at a profit. Is the profit a STG?
An Indl sold vacant land in a city for Rs. 1.cr. The tax deducted is Rs. 1 lakh and the expenses in connection with the sale is Rs. 2. lakhs. The amount available with him is only 97 lakhs as reduced by the TDS and the Exp.. He is required to deposit in C G a/c u/s 54F the net consideration being Rs. 98 lakhs to get the full exemption.The amount available is Rs. 97 lakhs. The law requires to do a thing which is not possible.?
To ADD: The point in mind, on which there has, to one’s best of information and knowledge; so far been no authoritative clarity made available, in spite of a representation individually sent, for the ‘public good ‘ is THIS:
Instead of , for illustration, taking the year of transfer, as done , to be FY 2016-17 (AY 2017-18), how should anyone compute (‘CGT’) had the transfer been made in FY 2017-18 (AY 2018–19), or any later year ?
OFFHAND
This refers the given Illustration- that has shown how to compute ‘CGT’ in respect of a capital asset , eligible for ‘Inflation Indexing’ ; and accordingly the indexed cost of acquisition has, rightly so, been taken into account for the said purpose. So far so good; no problem.
However, an illustration would have served a better purpose and been of useful guidance had a similar computation been provided by taking for the purpose an instance in which the year of acquisition is anterior, in point of time, to the financial year 2001-02; say, financial year 1989-90, transfer of which is made say, in the current financial year 2017-18.
CBDT, vide Notification 44/2017 dt 05 06 17 has notified Cost Inflation Index with Base Year 2001-02. This Notification may be included in the Article. Thanks.
sir, how to get the refund of TDS u/s 194IA if the deal get cancelled before the execution of sale deed
We had purchases shares in 1984-85 which are not listed and sold them in 2009-10. Is profit from sale of those share will be tax free?
Thanks for the informative article. Please let me know your reply on following illustration:
A person had made payment to the builder over the period of 6 years from 2010-16 and then sold the property in 2017 due to certain reason before taking possession from the builder. In this case, how the LTCG will be calculated ?
sir,
excellant articale and all the points under long term capital gains is covered.When there is only LTCG the AO was trying to tax on flat rate with out giving the basic exemption and when I refered to the above he has acceptted my contention and has given the basic exemption. thanks to tax guru and the author.
IF I DON’T WANT TO OPT THE INDEXATION, then what will be the Rate of tax under Long Term Capital Gain @ A Y 2016-17. and which rules I should Follow Under Income Tax Act…
It would have been more useful if another example was added where assessee is having income more than the basic exemption limit plus deductions under section 80C apart from long term capital gains from sale of residential property.
I SELL MUTUAL FUND UNITS OF A “DEBT MUTUAL FUND SCHEME””AFTER HOLDING THEM FOR MORE THAN 36 MONTHS”, AND THEY RESULT IN LONG TERM CAPITAL GAINS WIH OR WITHOUT INDEXATION.
CAN I INVEST THE LONG TERM GAIN AMOUNT IN “CAPITAL GAINS TAX SAVING BONDS”,TO GET EXEMPTION FROM PAYING TAX.
SUSHILKUMAR MAKHARIA
If a person had LTCG from the sale of 3 residential plots and simultaneously purchases one residential house investing more than the LTCG during the same financial year, can he avail full tax exemption u/s 54. If yes, how the computation is made.