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CAPITAL GAINS |
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Profits arising from transfer of a capital asset is taxable. Capital asset means property of every kind but does not include personal effects like wearing apparel, furniture, motor vehicle etc. held for personal use. However, it may be noted that jewellery is not exempt and is included for capital gains even if it is meant for personal use. Transfer is normally by sale but even exchange constitutes a transfer. Usually flats in multistoried buildings, or in group housings are registered in the name of co-operative society or companies floated. Transfer is effected by transfer of shares of company or by changing membership of society, such transfers attract capital gains. The properties and other assets received on total or partial partition of Hindu Undivided Family is not regarded as transfer Profit on sale of a capital asset held for 36 months or less is called short term capital gains(STCG) and if the holding period exceeds 36 months the profit is called long term capital gains(LTCG). From F.Y.2017-18,(i.e. AY2018-19) the criteria of 36 months has been reduced to 24 months in respect of immovable property being land, building or house property. However in case of shares of a company, units of UTI, or other security the holding period is 12 months or less for STCG. Further rate of 20% has been provided for taxing LTCG but STCG is taxable as part of your total income at normal rates. LTCG When an asset is sold the money received is the full value of consideration. But where sale consideration is received partly in cash and partly in kind, the asset received is to be valued at its fair market value. Both together will constitute full value of consideration. The total amount paid for purchase of the asset is the cost of acquisition and will include the brokerage paid, registration charges and legal expenses paid for making such purchase. Where the capital asset is acquired by you or the previous owner before 1.4.81, then actual cost of acquisition or the fair market value as on 1.4.81 is to be taken as cost of acquisition and the option is yours. From F.Y. 2017-18, the base year will be 2001-02 instead of 1981-82. The cost of right shares is to be taken as the amount paid by you. The cost of bonus shares is taken at nil. If you sold your residential house you can buy another residential house and claim can be made for exemption. The new property should have been purchased within one year before the date of sale or within two years after the date of sale. If the property is being constructed it should be completed within three years of the date of sale. This period of three years is also available in case the building is under construction by any Authority, society or company. The deduction is available to the extent of the capital gains worked out above. In case investment is not before filing the return of income, the amount of capital gains has to be deposited in a specified account. If the cost or expenditure of new asset is less then the balance will be taxed but if it is equal or more, the entire capital gains is exempt. From AY 2020-21, if the amount of capital gains does not excced R. 2Crores, investment in two houses is permitted. LTCG on sale of shares was exempt totally, when sold through Sock Exchange where STT tax had been paid. But now from FY 2018-19 (i.e. AY 2019-20) LTCG on sale of shares is taxable @10% if the amount of capital gains exceeds Rs.1 lakh. |
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