Capital Gain is not charged on All types of Assets

It is applicable only on Certain assets called Capital Assets

Lets understand definition of Capital Assets

 

Section 2(14)

Capital asset means

(a)Property of any kind held by assessee

     +

(b) Securities held by FII (Foreign Institutional Investors) as per rules and regulations of SEBI (New Amendment)

 

However it does not include

  1. Stock in Trade
  2. Items of Personal Effects which are Moveable
  3. Rural Agricultural Land in India
  4. Gold Bonds/Gold Deposit bonds/Special Bearer Bonds issued as per Scheme of Central Government .

 

Stock in Trade

Stock in Trade means Stock Used in Business like Raw Material,Consumable Stores and Finished Goods

If these are sold,these are taxable under PGBP

However it does not include Stock in Trade of FII as mentioned above.

However,Stock in Trade of FII is taxable under Capital Gains and not PGBP because of amendment

 

Items of Personal Effects

It means Items of personal nature like TV mobile phone etc.

They should be moveable items .

Items are not included in the definition of personal effects

  • Jewellery(Ornaments it made of gold silver, or precious stones) .
  • Archaeological Collection
  • Drawings, paintings, sculptures or any work of art.

 

Rural Agricultural Land in India

It means all land except urban land

Definition of Urban Land is

Area situated in some municipal Area

[Municipality/Cantonment Board etc.] of area having

   Atleast 10000 population .

                 +

      Any Nearby Area  within specified km as mentioned below

Population of Municipal Area having population

No of Km from area

10000-100000

2 km from such area

100,000-10,00,000

6 km from such area

>1000000

8 km from such area

   Note:-Area is to be measured aerially i.e. shortest possible distance to be taken


 

SUMMARY

Capital Assets include

All Assets

+

Securities of FII

Except

Items which are not Capital Asset

Exceptions

(These are not Taxable under Capital Gains)

(These are Taxable under Capital Gains)

Stock in Trade of Business

Stock in Trade of FII

Items of Personal Effects of Movable Nature

Immovable Items

Jewellery

Archaeological Drawings, paintings, sculptures or Any work of art .

Rural Agricultural Land

Urban Agricultural Land

Gold Deposit Bonds,Gold Bonds

Special Bearer Bonds,

-All other types of Bonds

 

EXAM QUESTION

Q1
Ms. Vasudha contends that sale of a work of art held by her is not Chargeable to capital gains tax.
Is she correct?

-a-

No,Work of Art is a Capital Asset as it is taxable to Capital Gains Tax

Explanation

As per Section 2(14),Capital Assets does not include Items of Personal Effect

But Work of Art is not covered in Items of Personal Effect

Since it is not covered in exception,it is a Capital Asset and chargeable to tax


 

  1. Income Tax
  2. Income from Capital Gains
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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides GST Training in Delhi. Register now.