Rise of American Accounts. "Hollywood. "

Capital Gains

(2) Transfer of shares in or debentures of an Indian Company by a non-resident assessee [ Provision 2 to section 48 ]

(3) Transfer of an undertaking or division (assets etc.) in slump sale [ section 50 B ]

(4) Transfer of units purchased in foreign currency [ Section 115 B ]

(5) Global Depository Receipts (GDRs) or bonds purchased in foreign currency by a non-resident [ section 115 AC ]

(6) Global Depository Receipts ( GDRs) or bonds purchased in foreign currency by any resident individual [ section 115 ACA ]

(7) Securities ( other than units referred to in section 115AB) purchased by Foreign Institutional Investors (FIIs) [ Section 115AD ]

Important Points

(1) The benefit of Indexation of cost is available in respect of units of UTI or mutual funds.

(2) Indexation of cost is not to be done while calculating gain or loss on depreciable assets as such gain / loss in always short term capital gain or loss.

(3) No Indexation of cost on transfer of any short term capital asset.

TREATMENT OF CAPITAL LOSSES

(a) Short term capital loss can be set off from either Short term or from long term capital gain.

(b) Long term capital loss can be set off only from long-term capital gains and not from any other income.

If still unadjusted these can be carried forward in following manner :

(a) Short term capital loss can be carried forward for 8 succeeding previous years to be set off from either short term or from long term capital gain.

(b) Long term capital loss can be carried forward for 8 succeeding previous years to be set off only long term capital gains and not from any other income.

EXEMPTED CAPITAL GAINS

Income from sale of shares in certain cases [ Section 10(36) ]

Any income arising from the transfer of a long-term capital asset, being an eligible equity share in a company purchased on or after the 1st day of March, 2003 and before the 1st day of March 2004 and held for a period of twelve months or more.

For the purposes of this clause, " eligible equity share " means

(1) any equity share in a company being a constituent of BSE - 500 Index of the Stock Exchange, Mumbai as on the 1st of March, 2003 and the transactions of purchase and sale of such equity share are entered into on a recognised stock exchange in India.

(2) any equity share, in a company allotted through a public issue on or after the 1st day of March, 2003 and listed in a recognised stock exchange in India before the 1st day of March, 2004 and the transaction of sale of such share is entered into on a recognised stock exchange in India.

Any income from long-term capital asset being self cultivated urban agricultural land or compulsory acquisition [ Section 10(37) ]

In the case of an assessee, being an individual or a Hindu undivided family. Capital gain arising from the compulsory acquisition of self-cultivated urban agricultural land shall be fully exempted.

Long Term Capital Gain or transfer of securities covered under Securities Transaction Tax [ Section 10(38 ) ]

Any income arising from the transfer of a long - term capital asset, being shares and the transaction of sale of such securities is entered into in a recognised stock exchange in India or on after 1-10-2004 shall be fully exempted.

Income from transfer of asset of an undertaking engaged in the business of generation, transmission or distribution of power [ Section 10(40) ]

Income from transfer of capital assets of an undertaking engaged in the business of generation, transmission or distribution of power where such transfer takes place on or before 31.3.2006 and transfer is made to the Indian company as notified u/s 80IA.

Capital gain on transfer of long-term residential house property [ Section 54 ]

. Sale of residential house property.

. which is a long term capital asset.

. by an individual or HUF.

. gain from house is reinvested in.

. purchase of another residential house within one year before or 2 years after sale, or

. in the construction of another residential house within 3 years of the sale, amount of gain so invested is exempted. Excess if any, is taxable.

With effect from A.Y. 2015-2016, exemption u/s 54(1) shall be available if the investment is made to purchase or construction of one residential house situated in India subject to within prescribed time limits.

Transfer of newly acquired house property within 3 years :

. residential house property purchased or constructed by re-invested capital gain cannot be transferred within 3 years of its purchase or construction.

.new house cannot be sold for a period of 3 years from date of purchase/completion of construction. If sold earlier the, cost of new house shall be reduced by exemption claimed earlier.

With regard to re-investment of long term capital gain for the purchase or construction of a residential house, following points should be noted -

(1) Construction of a new house must be completed within 3 years from the date of transfer of the house. Construction may have started before the sale of the house but completion is required to be made within 3 years of sale.

(2) This exemption is allowed both for the cost of the plot and the cost of construction and making the house habitable. Exemption is allowed even if a part of the capital gain is invested to buy an old house and the remaining part is invested to renovate it or to expand it by constructed new rooms or adding another floor.

(3) This exemption is allowed even if assessee purchases or constructs one or more than one house or he may sell two houses and invests the amount of long term capital gain to buy or construct only one house.

(4) In case a residential house property is compulsarily acquired by government, the time limits prescribed for purchase or construction of a residential house shall apply from the date of receipt of compensation.

Amount deposited in capital gain deposit account scheme.

In case the amount of capital gain is not re-invested for the purchase or construction of the new house upto the last date of filing of Return of income u/s 139 then it should be deposited in the capital gain deposit account scheme with a specified bank authorised by the central government in accordance with the scheme. Any amount already utilized by the assessee for the purchase or construction of the new house together with the amount so deposited shall be deemed to be the cost of new house.

The amount deposited in the deposit account scheme must be utilized to acquire or purchase or construct the new residential house within 3 years from the date of transfer of the old house.

If the amount deposited in this scheme is not utilised wholly or partly for the purchase or construction of the new residential house within the specified period, then

(1) The amount not so utilised shall be charged u/s 45 as the income of the previous year in which period of 3 years from the date of the transfer of the original asset expires, and

(2) The assessee shall be entitled to withdraw such amount in accordance with the scheme.

Capital gain on transfer of Self-cultivated agricultural land in Urban Areas [ Section 54B ]

Sale of self cultivated agricultural land ( must be self cultivated for the last 24 months) and gain from such land is reinvested in purchase of another piece of land within 2 years after sale and capital gain so invested shall be exempted. New piece of land acquired by investing capital gain cannot be sold or given to tenants for 3 years. If sold earlier or given to tenants exemption claimed earlier shall be withdrawn. Agricultural land situated in rural areas is not treated as capital asset and so capital gain arising from sale of agricultural land in rural area is not chargeable to tax. Exemption u/s 54B is available only to Individuals and H. U. F.

Amount deposited in capital gain deposit account scheme

In case the amount of capital gain is not re-invested for the purchase of agricultural land upto the last date of filing of return of income u/s 139, the amount of capital gain should be deposited in the capital gain deposit account scheme with a specified bank upto the last date of filing of return. The proof of deposit is required to be attached with the return of income of that year.

If the amount deposited under this scheme must be utilised to purchase agricultural land within 2 years from the date of transfer of agricultural land. In case amount deposited is not utilized to purchase agricultural land within the stipulated period, then the amount which remains unutilized shall be treated as capital gain of the previous year in which the period of 2 years would expire.

Capital gains on compulsory acquisition of land and building being used in assessee's business is taken over by Govt. or any other authority authorised under the law ( must be owned for the last 24 months at least and gain from such takeover is re-invested in similar type of asset within 3years after takeover, Gain invested is exempted and excess is taxable. New asset cannot be sold for 3 years.

Under section 54D(2). In case assessee is unable to utilise the full amount of capital gain for the purpose given above before due date of filing of return, he can claim the exemption by depositing the requisite amount in capital gain deposit scheme of a nationalised bank before date of filing of return. The amount so deposited must be utilised for the purpose given above within the prescribed period. If any amount remains unutilised at the end of prescribed period it is deemed as LTCG of the year in which prescribed period expires.

Exemption for investment in specified assets [ Section 54EC ]

This exemption shall be available if capital gain from any long term capital asset is invested in Bonds issued by National Highway Authority of India or Rural Electrification Corporation Limited within six months from date of sale up to actual amount of gain so invested, The bonds so acquired cannot be converted into money earlier by sale or by mortgage for a period of 3 years.

The Finance Act 2007,w.e.f.(1-4-2007) has imposed a ceiling on investment by an assessee in such long term specified assets during the financial year in which the original asset or assets are transferred and in the subsequent financial years does not exceed Rs 50 lakhs. This means that exemption u/s 54EC shall be restricted upto Rs 50 lakhs only on investments made in the financial year in which original asset are transferred and in the subsequent years.

Transfer of any long term capital asset and investment made in the purchase or construction of a residential house - [ Sec. 54-F ]

In case an assessee owns long term capital assets like piece of land, jewellery, commercial building, etc. ( other than a residential building) and there is a long term capital gain on the transfer of these type of assets, exemption u/s 54-F shall be allowed if following conditions are fulfilled.

(1) The assessee is only an individual or a H. U. F.

(2) The assessee does not own more than one residential house on the date of transfer of the above mentioned assets.

(3) The assessee transfers above mentioned asset or assets ( other than a residential building) and there is a long term capital gain.

(4) The assessee invests the net sale consideration of above mentioned assets to construct a residential house within 3 year of the sale of the asset or purchases an already built house within one year before or two years after the sale of the above mentioned asset or assets.

(5) The assessee is required not to purchase another residential house within a period of one year after or constructs within a period of 3year after the date of transfer of the above mentioned asset/assets .

Amount of Exemption

In case assessee invests the full amount of net consideration in the purchase or construction of a residential house, then full amount of long term capital capital gain shall be exempted. But if the assessee invests only a part of the net consideration then only a proportionate part of Capital gains shall be exempted i.e. so much capital gain shall be exempted as it is in proportion of amount invested to net consideration.

Amount deposited in Capital gain deposit account Scheme

If the amount of net consideration is not re-invested to purchase or construct a residential house upto the last date of filing of return of income u/s.139, then the same amount should be deposited in the capital gain deposit account scheme with a specified bank upto the last date of filing of return. The proof of deposit is required to be attached with the return of income of that year.

The amount deposited under this Scheme must be utilized to purchase or construct a residential house within the specified period. If amount deposited is not utilized wholly or partly for the purchase or construction of a residential house within a stipulated period, then the amount which remains unutilized shall be treated as capital gain of the previous year in which the period of 3 years from the date of the transfer of the original asset expires.

The assessee shall be entitled to withdraw the unutilized amount in accordance with the scheme aforesaid.

Capital gain on shifting of industrial undertaking from urban areas to non-urban areas [ Section 54G ]

In case any industrial undertaking is shifted from an urban area and capital gain from sale of immovable assets like land, building or any right there in, plant, machinery etc. ( short or long term) is re-invested in setting up a new unit within a period of 1 year before or 3 years after sale, the amount of gain so invested is exempted. Excess is taxable. New assets cannot be further sold for 3 years.

Under Section 54G(2). In case assessee is unable to utilise the amount of capital gain for the purpose given above before date of filing of return, he can claim the exemption by depositing the requisite amount in capital gain deposit scheme of nationalised bank before date of filing of return. The amount so deposited must be utilised for the purpose given above within the prescribed period. If any amount remains unutilised at the end of prescribed period it is deemed is LTCG of the year in which period so expires.

Transfer of assets of an industrial undertaking shifting from an Urban Area to a Special Economic Zone (SEZ) [ Section 54GA]

In case an industrial undertaking transfers its assets with the intention of shifting from an urban area to a SEZ, capital gain to arising if invested within specified time frame, it shall be exempted.

Long term Capital gain on transfer of residential property if net consideration is invested in the equity shares of an Eligible Company [ Section 54GB ] [ w. e. f. A. Y. 2013-14 but upto A. Y. 2017-18 ]

(1) Eligible assessee. An individual or HUF.

(2) Conditions :

(a) The residential property must be a house or plot of land.

(b) Such residential property must be a long term capital asset.

(c) Such residential property must have been transferred on or after 1-4-2012 but on or before 31-3-2017.

(d) There must be long-term capital gain on such transfer.

(e) The assessee ( Individual or HUF) utilises the net consideration of residential property in the equity shares of an eligible company before the due date of furnishing of return of income u/s 139(1) .

(f) The eligible company is to utilise the amount for purchase of new asset within one year from the date of subscription in equity shares by the assessee.

(g) The amount of net consideration, which has been received by the company for issue of shares to the assessee, to the extent it is not utilised by the company for the purchase of the new asset before the due date of furnishing of the return of income by the assessee u/s 139(1), shall be deposited by the company, before the said due date in an account in any such bank or institution as may be specified shall be utilised in accordance with any scheme which the Central Government may, by notification in the official Gazette, frame in this behalf and the return furnished by the assessee shall be accompanied by proof of such deposit having been made.

(4) Forfeiture of exemption :

(a) if the assessee (Individual/ HUF) sells or otherwise transfers the equity shares of the eligible company within 5 years from the date of acquisition. In such a case, the old exempted capital gain u/s 54GB shall be deemed to be the long term capital gain of the previous year in which such shares are sold or otherwise transferred.

(b) If the eligible company sells or otherwise transfers within 5 years from the date of acquisition. In such a case, the old exempted capital gain u/s 54GB shall be deemed to be the long-term capital gain of the previous year in which such new asset is sold or otherwise transferred.

(c) If the amount deposited in specified bank/Institution is not utilised fully or partly by the eligible company for purchasing the new asset within one year from the date of subscription in shares by the assessee. In such a case, capital gain proportionate to unutilised amount shall be deemed to be the long-term capital gain of the previous year in which the period of one year from the date of subscription in shares by the assessee expires and the company shall be entitled to withdraw such amount in accordance with the scheme.

Investment of additional compensation received [ Section 54 H ]

In case any asset was taken over by the govt. and additional compensation received it will be deemed as income of the year in which it is received and period for reinvestment shall be counted from the date of receipt of such additional compensation.

In Finance Act 2014 has provided that the amount of compensation received in pursuance of an interim order of the Court, Tribunal or other authority shall be deemed to be the income of the previous year in which final order of such court, tribunal or other authority is made.

TAX ON CAPITAL GAINS

Short Term capital assets [ Section 111A ]

(a) Short term capital asset being equity shares in a company or units of equity oriented fund where transaction is covered under Securities Transaction Act

The tax on gain from such transaction shall be calculated on following manner :

(1) The rate of tax on gain from Short term capital asset being equity shares in a company or units of equity oriented fund where transaction is covered under Securities Transaction Act, shall be 15% of such gain.

(2) Such gain shall be reduced out of total income and balance income shall be deemed as total income on which the schedule of rates as applicable to an individual shall be applied.

(3) In case balance income which is deemed as total income is less than the exempted limit of Rs 2,50,000 in case of individuals both males and females, Rs 3,00,000 in case of a senior citizen and Rs 5,00,000 in case of super senior citizen, then an amount equal to the difference between exempted limit and balance deemed total income shall be reduced from gain on Short term capital asset being equity shares in a company or units of equity oriented fund where transaction is covered under Securities Transaction Act, and balance gain on Short term capital asset being equity shares in a company or units of equity oriented fund where transaction is covered under Securities Transaction Act, shall be assessed to tax at the rate of 15% .

(4) For allowing deductions u/s 80C to 80U the total of all deductions cannot exceed the amount of gross total income as reduced by Short Term capital gain refered to above.

(5) No deduction u/s 80C shall be allowed out of tax on gain from short term capital asset being equity shares in a company or units of equity oriented fund where transaction is covered under Securities Transaction Act.

(b) Short term capital assets other than those referred to in (a) above.

The gain on any other short term capital asset shall from part of total income and shall be subject to tax at the same rates which are applicable to an individual .

Long term capital gain [ Section 112 ]

(1) Long term capital asset being equity shares in a company or units of equity oriented fund where transaction is covered under Securities Transaction Act :

Any income from transfer of Long-term capital asset being equity shares in a company or units of equity oriented fund where transaction is covered under Securities Transaction Act is fully exempted u/s 10(38) .

(2) Long term capital asset being listed securities or units where securities transaction tax has not been paid on transfer.

Long term capital gain from such assets shall be subject to tax :

(1) @10% of such gain if such gain is computed without indexing the cost of acquisition or

(2) @20% of such gain if such gain is computed after indexing the cost of acquisition, whichever is less.

(3) Long term capital asset other than those mentioned at (a) and (b) above.

(1) The long term capital gain shall be assessed to tax @20% of such gain for all assessees.

(2) Such gain shall be reduced out of total income and balance income shall be deemed as total income on which the schedule of rates as applicable to an individual shall be applied.

(3) In case balance which is deemed as total income is less than the exempted limit of Rs 2,50,000 in case of individuals both males and females, Rs 3,00,000 in case of a senior citizen and Rs 5,00,000 in case of super senior citizen, then an amount equal to the difference between the exempted limit and balance deemed total income shall be reduced from gain on long term capital asset and balance gain on long term capital asset shall be assessed to tax at the rate of 20%.

(4) For allowing deductions u/s 80C to 80U the total of all deductions cannot exceed the amount of gross total income as reduced by long term capital gain referred to above.

Adjustment of loss on sale of securities or units [ Section 94(7) ]

(a) Any persons buys or acquires securities or any units within a period of three months prior to the record date.

(b) Such person sells or transfers :

(1) such securities within a period of three months after such date, or

(2) Such unit within a period of nine months after such date.

(c) The dividend or income on such securities or units received or receivable by such person is exempt.

(d) The loss, if any, arising to him on account of such purchase and sale of securities or units shall be ignored up to the amount of income exempted under (c) above. Such loss shall not be allowed to be set off or carried forward up to the amount of income exempted under (c) above.

From the above purposes :

(1) The record date means such date as may be fixed by a Company , Mutual Fund or UTI for the purposes of entitlement of the holder of such securities to receive dividend or interest.

(2) The term Securities shall include stock and shares.

(3) The term UNIT shall have the same meaning as is assigned to it u/s 115AB.

Deemed cost of units acquired within a period of three months prior to the record date [ Section 94(8) ]

(a) Any person buys or acquires any units within a period of three months prior to the record date.

(b) Such person is allotted additional units without any payment on the basis of holding of such units on such date.

(c) Such person sells or transfers all or any of the units referred to in clause (a) within a period of nine months after such date, while continuing to hold all or any of the additional units referred to in clause (b), then.

The loss, if any, arising to him on account of such purchase and sale of all or any of such units shall be ignored for the purpose of computing his income chargeable to tax and notwithstanding anything contained in any other provision of this Act, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such additional units referred to in clause (b) as are held by him on the date of such sale or transfer.

For the above purpose the record date means such date as may be fixed by a Company, Mutual Fund or UTI for the purposes of entitlement of the holder of such securities to receive dividend or interest.