Capital Gains

 

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RMC - Services

Corporate Law

Capital asset

Capital asset means property of any kind except the Stock-in-trade, personal effects like wearing apparel, furniture and Rural Agriculture land.

Profits or gains arising from the transfer of capital asset made in a previous year are taxable as capital gains under the head “Capital Gains” .

The rates of tax applicable on salaries on monthly salaries:

Short term capital gain

‘Short term capital gains’ means capital gains arising from transfer of a short-term capital asset, that is held not more than 36 months or 12 months incase of shares and securities, immediately preceding the date of its transfer.

Long term capital gain

‘Long term capital gains’ means capital gains arising from transfer of a long-term capital asset that is held more than 36 months immediately preceding the date of its transfer.

Computation of Capital Gains

Short Term Capital Gains  

Amout

Full Value of Consideration

XXX

 

Less:

Exp incurred wholly and exclusively for such transfer

(XXX)

Net Consideration

XXX

 

Less:

Cost of Acquisition (C.O.A)

(XXX)

 

Less:

Cost of Improvement (C.O.I)

(XXX)

Short term capital gain

XXX

 

Less:

Exemption u/s 54B, 54D, 54G, 54GA

(XXX)

Taxable Short Term Capital Gains  

XXX

Tax as per the Income Tax Slab Rates shall be payable on the Short Term Capital Gain computed above

Long Term Capital Gains  

Amout

Full Value of Consideration

XXX

 

Less:

Exp incurred wholly and exclusively for such transfer

(XXX)

Net Consideration

XXX

 

Less:

Indexed Cost of Acquisition (C.O.A)

(XXX)

 

Less:

Indexed Cost of Improvement (C.O.I)

(XXX)

Long term capital gain

XXX

 

Less:

Exemption u/s 54, 54B, 54D, 54EC, 54F, 54G, 54GA

(XXX)

Taxable Long Term Capital Gains  

XXX

Tax @ 20% shall be payable on the Long Term Capital Gain computed above and Advance Tax shall also be liable to be paid on such Capital Gain.

Indexed Cost of Acquisition or Improvement = Cost of acquisition or improvement X A/B

A = Cost Inflation index of the year of transfer

B = Cost Inflation Index (CII) for the first year in which the asset was held by the assessee or for the year beginning on 1.4.1981, whichever is later, or the year in which improvement took place.

Full Value of Consideration

Full Value of Consideration means what the transferor receives or is entitled to receive as consideration for the Sale of Property /Asset. This Value may be in cash or in kind i.e. in the value of Asset. In case the full value for the computation of Capital Gains shall be the Fair Market Value of the Property (Asset). Fair Market Value means the price which the Property (Asset) would normally sold in the open market.

Transfer Expenses

Transfer Expenses include any expenditure incurred, whether directly or indirectly, for the purpose of transfer like Advertisement Expense, Brokerage Expense, Stamp Duty, Registration Fees, and Legal Expenses etc.

Cost of Acquisition

Cost of Acquisition is the price which the assessee has paid, or the amount which the assessee has incurred, for acquiring the Property /Asset. The Expenses incurred at the time of completing the title are a part of the cost of acquisition.

In cases where the Capital Asset became the property of the Assessee in any of the manners mentioned below, the cost of acquisition shall be deemed to be the cost for which the previous owner of the property acquired it:-

  • On the Distribution of Assets/ Total Partition of HUF
  • Under a Gift or Will
  • By Succession, Inheritance or Devolution
  • On Distribution of Assets on Liquidation of a Company

Cost of Improvement

All Capital Expenditures incurred in making any additions or alterations to the Capital Asset by the Assessee after it became his property or alterations to the capital asset by the assessee after it became his property shall be deductible as the Cost of Improvement. If the Asset was transferred to the assessee under the cases specified immediately above, the capital expenditure incurred by the previous owner shall also be treated as cost of improvement.

For the purpose of Computation of Long Term Capital Gain, Indexation using the Cost Inflation Index shall be done to the Cost of Acquisition & Cost of Improvement and the resultant figure shall be the Indexed Cost of Acquisition & Indexed Cost of Improvement for the purpose of computation of LTCG

Capital Gains arising on the sale of Shares

In case held of Shares Equity Oriented Mutual Fund Units of UTI or a Zero Coupon Bond – the period of such classification shall be 12 Months and not 36 Months. The Short Term Capital Gains Tax Rate in such a case shall be 15% under the Income Tax Act 1961.

In this case of Long Term Capital Gains shall be exempt from Income Tax provided that such transaction is subject to Securities Transaction Tax. The Security Transaction Tax (STT) leviable on the sale of shares shall not be allowed as deduction in computing the income chargeable under the head “Capital Gains”. In other words, the STT paid shall neither form a part of the cost in case of purchase nor be allowed as deduction as expense of transfer in case of sale of such equity shares.

Exemptions from Long Term Capital Gain.

LATEST NEWS

All LLPs registered upto 30-September-2011 have to mandatorily close their financial year as on 31-03-2012 and file Form-8 by 30th October-2012.

Please note that if LLP fails to file Form-8 within prescribed time, an additional fees of Rs. 100/- is payable per day till date of filing.

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