Capital Gains Taxation: Understanding the Principles of Income from Capital Assets, Assignments of Analytical Techniques

TOPIC: INCOME UNDER CAPITAL GAIN

SUBJECT: PRINCIPLES OF TAXATION

Any profits arising on the Transfer of any Capital Asset shall be chargeable to tax under the head

Capital Gains in the year of transfer. Any profit or gain arising from transfer of capital asset held

as investments are chargeable to tax under the head capital gains. The gain can be on account of

short- and long-term gains. A capital gain arises only when a capital asset is transferred. Which

means if the asset transferred is not a capital asset; it will not be covered under the head capital

gains. Profits or gains arising in the previous year in which the transfer took place shall be

considered as income of the previous year and chargeable to income tax under the head Capital

b. Personal Effects: It means any Article, Commodity or Property used in the day-to-day life of

the individual which is a movable property (i.e. Not capital asset). But personal effect excludes

Jewellery (i.e. Jewellery is a capital asset), Archaeological collections, Drawings, Paintings,

Sculptures, Any work of art. E.g.: Z purchases a computer for his personal use. It is treated as

“personal effects” therefore not a capital asset. Any surplus arising on transfer of it can’t be

taxed under the head “CG”.

c. Agricultural Land not situated in the “Specified Area” (i.e. agricultural land situated in

specified area is called capital asset). Specified area - any area located within the limits of a

Municipality which has a population of ≥ 10,000 according to the last census and includes any

area within the distance of 8 Kms. from the limits of such Municipality.