What is capital gains tax?
Any profit or gain that arises from the sale of a ‘capital asset’ comes under the category ‘income from capital gains’, and hence you will need to pay tax for that amount in the year in which the transfer of the capital asset takes place. This is called capital gains tax. The two types of Capital Gains are short-term capital gains tax (STCG) and long-term capital gains tax (LTCG).
Meaning of Capital Asset [Sec 2(14)]
a) Any kind of property held by an Assesse, whether or not connected with business or profession of the Assessee.
b) Any securities held by a FII which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.
c) Jewelry, costly stones, and ornaments made of silver, gold, platinum or any other precious metal, archaeological collections, drawings, paintings, sculptures or any work of art shall be considered as capital asset even if used for personal purposes.
Types of Capital Assets?
Short term Capital Asset
STCA ( Short-term capital asset )Capital asset held for not more than 36 months immediately prior to the date of transfer shall be deemed as short-term capital asset. However, following assets held for not more than 12 months shall be treated as short-term capital assets:
1. Equity or preference shares in a company listed on a recognized stock exchange in India
2. Securities (like debentures, bonds, govt securities etc.) listed on a recognized stock exchange in India
3. Units of UTI, whether quoted or not
4. Units of equity oriented mutual fund, whether quoted or not
5. Zero coupon bonds, whether quoted or not.
Long term Capital Asset
| 1. Equity or preference shares in a company listed on a recognized stock exchange in India | ||
| 2. Securities (like debentures, bonds, govt securities etc.) listed on a recognized stock exchange in India | ||
| 3. Units of UTI, whether quoted or not | ||
| 4. Units of equity oriented mutual fund, whether quoted or not | ||
| 5. Zero coupon bonds, whether quoted or not | ||
| Particulars | Section 54 | Section 54B | Section 54D | Section 54EC | Section 54EE | Section 54F | Section 54G | Section 54GA | Section 54GB | ||||||||
| Eligible taxpayers | Individual and HUF | Individual and HUF | Any person | Any person | Any Person | Individual and HUF | Any person | Any person | Individual and HUF | ||||||||
| Capital gains eligible for exemption | Long-term | Short-term or Long-term | Short-term or Long-term | Long-term | Long-term | Long-term | Short-term or Long-term | Short-term or Long-term | Long-term | ||||||||
| Capital gains arising from transfer of | Residential House property | Agriculture land used by taxpayer or by his parents or HUF for agriculture purposes in last 2 years before its transfer | Compulsory acquisition of land or building forming part of industrial undertaking (which was used for industrial purposes for at least 2 years before its acquisition). | Any long-term capital asset being Land or Building or Both | Any long-term capital asset | Any long term asset (other than a residential house property) provided on date of transfer taxpayer does not own more than one residential house property (except the new house) | Land, building, plant or machinery, in order to shift industrial undertaking from urban area to rural area. | Land, building, plant or machinery, in order to shift industrial undertaking from urban area to SEZ. | Residential property (house or a plot of land)Â Â Note: Provisions of this section shall not apply to any transfer of residential property made after March 31, 2017. However, in case of an investment in eligible start-up, the residential property can be transferred up to March 31, 2019. |
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| Assets to be acquired for exemption | One Residential House property | Agricultural land (may be in urban area or rural area) | Land or building for shifting or reestablishing said industrial undertaking | Bond of NHAI or REC, etc. | Units of such fund as may be notified by Central Government to finance start-ups | One residential house property | Land, building, plant or machinery, in order to shift industrial undertaking to rural area. | Land, building, plant or machinery, in order to shift industrial undertaking to SEZ. | Subscription in equity shares of an eligible company.Note:1. W.e.f. April 1, 2017, eligible start-up is also included in definition of eligible company. | ||||||||
| 2. The eligible company should utilize the amount of subscription for purchase of new assets (i.e., plant and machinery except vehicle, office appliances, computer or computer software etc.). However, In the case of eligible startup, the new asset shall include computers or computer software. | |||||||||||||||||
| Time limit for acquiring the new assets | Purchase: within 1 year before or 2 years after date of transfer | Within 2 years after date of transfer | Within 3 years from date of receipt of compensation | Within 6 months from date of transfer | Within 6 months after the date of transfer of original asset | Purchase: within 1 year before or within 2 years after date of transfer | within 1 year before or 3 years after date of transfer | Within 1 year before or within 3 years after date of transfer | Investment by the assessee -Before due date for furnishing of return under Sec. 139(1). | ||||||||
| Construction: within 3 years after date of transfer | Construction: within 3 years after date of transfer | Investment by the company – within 1 year from date of subscription. | |||||||||||||||
| Exemption Amount | Investment in new assets or capital gain, whichever is lower | Investment in agricultural land or capital gain, whichever is lower | Investment in new assets or capital gain, whichever is lower | Investment in new assets or capital gains, whichever is lower, however, subject to Rs. 50 lakhs. | Investment in new assets or capital gains, whichever is lower, however, subject to Rs. 50 lakhs. | Investment in new assets X capital gain/net consideration | Investment in new assets or capital gain, whichever is lower | Investment in new assets or capital gain, whichever is lower | Investment in new assets X capital gain/net consideration | ||||||||
| Withdrawal of exemption | If new asset is transferred within 3 years of its acquisition | If new asset is transferred within 3 years of its acquisition | If new asset is transferred within 3 years of its acquisition | If new asset is transferred or it is converted into money or a loan is taken on its security within 5 years of its acquisition | If new asset is transferred within a period of 3 years from the date of its acquisition.Note:Where assessee takes loans or advance on security of such specified asset, he shall be deemed to have transferred such asset on the date on which such loan or advance is taken. | a) If new asset is transferred within 3 years of acquisition,                    b) if another residential house is purchased within 2 years of transfer of original asset;                     c) if another house is constructed within 3 years of transfer of original asset | If new asset is transferred within 3 years of acquisition | If new asset is transferred within 3 years of acquisition | If equity shares in company or new asset acquired by company is sold or transferred within a period of 5 years from date of acquisition. | ||||||||
| Deposit in Capital gains deposit scheme before due date under Sec. 139(1) | Yes | Yes | No | No | Yes | Yes | Yes | Yes | Yes | ||||||||
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