Computation of capital gains

According to Income Tax Act 1961  any profits or gains arising from the transfer of a capital asset took place in the previous year shall be chargeable to income tax under the head Capital Gain and shall be deemed to be income othe previos year in which the transfer took palce unless such capital gain is exempt under capital gain provisions .

The following are the essential condition for taxing capital gains.

a. there must be a capital asset which is held by the assessee

b.the capital asset must have been transferred by the assessee during the previous year

c. there must be profits or gains as a result of such transfer, which will be know as capital gains

d. such capital gain should not be exempt under  capital gain provisions

Computation of capital gains ( Section 48)

According to Income Tax Act 1961 capital gain are two types

1.short term capital gain which arises on the transfer of a short- term capital assets and

2.Long-term capital gain which arises on the transfer of long term capital asset

The income chargeable under the head capital gains shall be computed by deducting from the full value of the consideration rceived or accruing as a result of the transfer of the capital asset the following amounts

i. expenditure incurred wholly and exclusively in connection with such a transfer,

ii. the cost of acquisition of the asset and the cost of any improvement therto.

Incase  long-term capital gain (subject to the exceptions whever applicable ) shall be the excessof the full value of consideration over the aggreate of the following

i. Expenses of transfer,

ii. Indexed cost of acquation of the assets

iii. Indexed cost of improvement.

 Computation of  short term capital gains

Full value of consideration                                                                                                                                 ——

Less: a. Expenditure incurred wholly and excusively in connection with such a tranfer —-

b. Cost of acquation                                                                                                                                                  —-

c. Cost of improvement                                                                                                                                         —–

Less: Exemption                                                                                                                                                        —–

Computation of long term capital gains

 

Full value of consideration                                                                                                                                 ——

Less: a. Expenditure incurred wholly and excusively in connection with such a tranfer —-

b.  Indexed   Cost of acquation                                                                                                                           —-

c.  Indexed Cost of improvement                                                                                                                     —–

Less: Exemption                                                                                                                                                        —–