Any gain or profit arising from the sale or transfer of a capital asset during a previous year is
chargeable to tax under the head “Capital Gain” (may by short-term or long-term) in the follo
wing assessment year. It may be adjusted with exemption under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA. The following condition must be satisfied to tax on the capital gain.
There must be a capital asset.
Must be Transferred or sale by the assesee
Transferred takes place in the pre vious year.
Gains or profits must be there.
Profit or gain is not exempt from tax under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA.
Meaning of Capital Asset
Capital Assets mean property of any kind held by an assesee, whether or not connected with his business or profession. However, some of the assets are excluded from the definition of capital assets as per section 2(14).
Any Stock-in-trade, consumable stores or raw material held for the purposes of business or profession.
Personal effects of the assesee, that is to say, mobable peropery including wearing apparel and furniture held for his personal use or for the use of any member of his family dependent upon him.
Agricultural Land in India provided it is not situated-(a) In any area within the territorial jurisdiction of a municipality or a cantonment board, having a population of 10,000 or more; or (b) In any notified area,
See: Factor determine when an agricultural land is capital asset or not in details
6 ½ per cent Gold Bonds, 1977 or 7 % Gold Bonds, 1980 or National Defence Gold Bonds, 1980 issued by the central Government.
Special Bearer Bonds, 1991
Gold Deposit bonds issued under Gold Deposit Scheme, 1999.
So as above referred points, described in the definition that there must be capital assets to chargeability for capital gains. In the above referred there are not capital assets. Agricultural land has always been confusing points for chargeability of capital gain tax. We will cover all the points in next articles for agricultural land.
Types of capital assets
The followings are the two types of capital assets which determines short-term capital gains or long-term capital gains.
Short-Term Capital Assets
Long-Term Capital Assets
A Short-term capital assets means a capital asset held by an assessee for not more than 36 months, immediately prior to its date of transfer. In other words, if a capital asset is held by an assessee for more than 36 months, then it is known as “long-term capital asset”.
Some of the exception for short-term capital gains when 12-month periods are considered instead of 36 months are as follows.
Equity or preference shares in a company
Securities (debentures, Government securities)
Units of UTI
Units of mutual fund specified under section 10(23D)
Zero Coupon Bonds.
All above units, bonds and shares may or may not be quoted except Securities. Securities should be quoted in a recognized stock exchange in India.
So if above a referred assets is held for more than 12 months then it will be treated as long-term capital gain.