Definition capital Assets :

Under Section 2 (14) of the Income Tax Act, 1961, “Capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include the following

1. Stock-in-trade, raw materials or consumable stores held for the purposes of business or profession.
2. Agricultural land in India which is not situated in any specified area
3. Personal effects of movable nature, such as furniture, utensils and vehicles held for personal use by the assessee or any dependent member of his family.
1. “Personal effects of movable nature” do not include
1. Jewellery,
2. Archaelogical collections,
3. Drawings, Painting, Sculptures or any work of Art.


Taxable Year :Capital gain shall be payable in the year in which transfer of capital asset takes place.

Short Term Capital Asset

A capital asset held by an assessee for not more than 36 months before the date of its transfer is a “Short Term Capital Asset”. However,

1. a share held in a company, or
2. any other security listed in a recognised stock exchange in India,
3. units of UTI and a mutual fund or
4. a zero coupon bond

will be treated as short term capital asset if it is held for not more than 12 months before the date of its transfer.

Only debentures have to be necessarily listed in order to qualify for the 12 month period for determination of long term capital asset

Long Term Capital Asset

If the capital asset is not a short term capital asset as defined then it is a long term capital asset

Set Off
Short term capital loss can be set-off against short term or long term capital gains of that year & balance remaining can be set off against income from any other head except salary.

Long term capital loss can be set-off only against long term capital gain.

Carry Forward

Short term capital loss can be carried forward for 8 assessment years u/s 74 to be set off against short term or long term capital gains only.

Long term capital loss can be carried forward for 8 assessment years u/s 74 to be set-off only against long term capital gain

Deduction under Chapter VIA

Available for short term capital gain (other than stcg on securities taxable u/s 111A).
Not available against long term capital gains

Tax Rates


Particulars Long Term Capital Gains ShortTerm Capital Gains
Individual / HUF Domestic Company NRI Individual / HUF Domestic Company NRI
Listed Equity shares & Equity Oriented Schemes Nil 15% 15% 15%
Debt Schemes, zero coupon bonds, offshore funds, Off Market Buyback of equity shares 10% without indexation or 20% with indexation whichever is lower Normal slab rates
Listed Cumulative bond / NCD / debentures 10% without indexation Normal slab rates
Unlisted stocks 20% with indexation 10% without indexation Normal slab rates
Unlisted bonds /debentures 20% without indexation 10% without indexation Normal slab rates
Gold / Bullion / Jewellery 20% with indexation Normal slab rates
Real Estate 20% with indexation Normal slab rates


Note:
· Debentures have to be listed to qualify for the 12 month holding period criteria of Long Term Capital gains.
· Unlisted debentures require a holding period of 36 months for being a long term capital asset.

Notes
· Surcharge @ 5% is to be levied in the case of domestic companies, if their income exceeds Rs. 1 crore but less than Rs. 10 crore & @ 10% if income exceeds Rs. 1 crore
· Surcharge @ 10% is to be levied in the case of individual / HUF, if their income exceeds Rs. 1 crore
· Education cess @ 3% will be applied on tax + surcharge

Dividend Stripping:

The loss due to sale of units in equity mutual funds will not be available for set off to the extent of the taxfree dividend declared, if units are
· i) bought within 3 months prior to the record date fixed for dividend declaration; and
· ii) sold within 9 months after the record date fixed for dividend declaration


Bonus Stripping:

The loss due to sale of original units in mutual fund schemes, where bonus units are issued, will not be available for set off to, if original units are
· i) bought within 3 months prior to the record date fixed for allotment of bonus units; and
· ii) sold within 9 months after the record date fixed for allotment of bonus units.


However, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such unsold bonus units.

Deduction Summary

Long Term Capital Gain - Exemption u/s 54 u/s 54B u/s 54EC u/s 54F
a. Who can claim exemption Ind/HUF Individual /HUF added by Finance Bill 2012 wef fy 12-13 Any person Ind/HUF
b. Eligible assets sold A residential
House property
(minimum holding period 3 year)
Agriculture land which has been used by assessee himself or by his parents for agriculture purposes during last 2 yrs of transfer Any long-term capital assets (minimum holding period 3 years) Any long termasset (other than a residential house property ) provided on the date of transfer the taxpayer does not own more than one residential house property from the assessment year 2001-02 (except the new house)
c. Assets to be acquired for exemption Residential house property Another agriculture land
(urban or rural)
Bond of NHAI or
REC
Residential house property
d. Time limit for acquiring the new assets Purchase :1 year back or
2 year forward , Construction: 3 year forward
2 yrs forward 6 months forward Purchase :1 year back or 2 year forward, Construction:
3 year forward
e. Exemption Amount Investment in the new assets or capital gain, which ever is lower Investment in
the agriculture land or capital gain, which ever is lower
Investment in the new assets or capital gain, which ever is lower (Max. Rs. 50
Lacs in Fin. Yr.)
Investment in the new assets / Net
Sale consideration X capital gain
f. Whether "Capital gain deposit account scheme" applicable Yes Yes not applicable Yes

Capital Gain account Scheme

Under Sections 54, 54B and 54F, the capital gains is exempt if such gains are reinvested in new assets, within the time allowed for the purpose. If such reinvestment is not made before the date of furnishing the return of income then the amount of the capital gain or the net consideration, is required to be deposited in an account under Capital gains Accounts Scheme.

1. The deposit shall be made before furnishing the return of income or within the due date for furnishing the return of income u/s. 139 (1), whichever is earlier.
2. The deposit shall be made in a bank account or institution in a scheme notified by the Central government.
3. Amount deposited can be withdrawn for utilization in accordance with the scheme, for the specified purpose
4. If the amount deposited is not utilized for acquiring the new asset within the required period, the capital gain related to the unutilized amount shall be treated as capital gain of the year in which period specified in the above provisions expires.

Cost Inflation Index form 1981 to fy 2013-14 is given below
Financial Year Cost Inflation Index
1981-1982 100
1982-1983 109
1983-1984 116
1984-1985 125
1985-1986 133
1986-1987 140
1987-1988 150
1988-1989 161
1989-1990 172
1990-1991 182
1991-1992 199
1992-1993 223
1993-1994 244
1994-1995 259
1995-1996 281
1996-1997 305
1997-1998 331
1998-1999 351
1999-2000 389
2000-2001 406
2001-2002 426
2002-2003 447
2003-2004 463
2004-2005 480
2005-2006 497
2006-2007 519
2007-2008 551
2008-2009 582
2009-2010 632
2010-2011 711
2011-2012 785
2012-2013 852
2013-2014 939