Income under the head capital gains

Income under the Head Capital Gains

Income tax law

Capital gain is the gain which arises from the transfer of a capital asset. Any profit or gain, which arises during a previous year, is chargeable under the head "capital gains" under Section 45. For a gain to be charged under the head "capital gain," it should arise due to a transfer of a capital asset. Such a profit or gain should not be exempt from tax under sections 54, 54B, 54D, 54EC, 54ED, 54FD, and 54G of Income Tax Act.

Types of Capital Gains:

1. Long Term Capital Gain

2. Shirt Term Capital Gain

1. Long Term Capital Gains: When a capital asset is transferred by an assessee after having held it for at least 36 months, the capital gains arising from   this transfer is known as Long Term Capital Gains. In case of shares of a company or unit of UTI or a unit of a Mutual   Fund, the minimum period of holding for long term capital gains to arise is 12 months.

2. Short Term Capital Gain: If the period of holding of capital asset before transfer is less than 36 months, the capital gains arising from such transfer are known as Short Term Capital Gains.

Mode of Computation of Capital Gain [Sec. 48]

Note: No deduction shall be allowed on account of securities transaction tax. (Sec. 48)

Basis of Charge of Capital Gains

Any profits or gains arising from the transfer of a capital asset effected in the previous year, shall be chargeable to income-tax under the head 'Capital Gains' and shall be deemed to be the income of the previous year in which the transfer took place unless such capital gain is exempt u/s 54, 54B, 54D, 54EC, 54F, 54G or 54GA. The following are the essential conditions for taxing capital gains:

A) There must be a capital asset

B) The capital asset must have been transferred

C) There must be profits or gains on such transfer, which will be known as capital gain

D) Such capital gain should not be exempt u/s 54, 54B, 54D, 54EC, 54F, 54G or 54GA.

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