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Capital Gains Tax

Capital Gains Tax
Highlights

Several budget proposals including the reintroduction of tax on long term capital gains (LTCG) exceeding Rs 1 lakh from sale of shares will kick in...

Several budget proposals including the reintroduction of tax on long term capital gains (LTCG) exceeding Rs 1 lakh from sale of shares will kick in from April 1, the beginning of 2018-19 financial year. Besides, other tax proposals like reduced corporate tax of 25 per cent on businesses on turnover of up to Rs 250 crore and a standard deduction of Rs 40,000 in lieu of transport allowance and medical reimbursement will come into effect from Sunday.

Any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain. This gain or profit is charged to tax in the year in which the transfer of the capital asset takes place. Capital gains are not applicable when an asset is inherited because there is no sale, only a transfer. However, if this asset is sold by the person who inherits it, capital gains tax will be applicable. The Income Tax Act has specifically exempted assets received as gifts by way of an inheritance or will.

Here are some examples of capital assets: land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, and jewellery. This includes having rights in or in relation to an Indian company. It also includes rights of management or control or any other legal right.

The following are not considered capital assets: Any stock, consumables or raw material held for the purpose of business or profession; Personal goods such as clothes and furniture held for personal use; Agricultural land in rural India; 6½% 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 bond issued under the gold deposit scheme (1999).

Short-term capital asset is an asset which is held for not more than 36 months or less is a short-term capital asset. Long-term capital asset is an asset that is held for more than 36 months is a long-term capital asset. From FY 2017-18 onwards, the criteria of 36 months has been reduced to 24 months in the case of immovable property being land, building, and house property.

(Courtesy: https://cleartax.in/s/capital-gains-income#gain)

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