CH.

1 INTRODUCTION

A capital gains tax (CGT) is a tax charged on capital gains, the profit realized on the sale
of a non-inventory asset that was purchased at a lower price. The most common capital
gains are realized from the sale of stocks, bonds, precious metals and property. Not all
countries implement a capital gains tax and most have different rates of taxation for
individuals and corporations.

Profit that results when the price of a security held by a mutual fund rises above its
purchase price and the security is sold. If the security continues to be held, the gain is
unrealized. A capital loss would occur when the opposite takes place. Long-term capital
gains are usually taxed at a lower rate than regular income. This is done to encourage
entrepreneurship and investment in the economy. Tax conscious mutual fund investors
should determine a mutual fund's unrealized accumulated capital gains, which are
expressed as a percentage of its net assets, before investing in a fund with a significant
unrealized capital gain component. This circumstance is referred to as a fund's capital
gains exposure. When distributed by a fund, capital gains are a taxable obligation for the
fund's investors.1

Capital gains may refer to "investment income" that arises in relation to real assets, such
as property; financial assets, such as shares/stocks or bonds; and intangible assets, An
increase in the value of a capital asset that gives it a higher worth than the purchase price.
The gain is not realized until the asset is sold. A capital gain may be short term or long
term and must be claimed on income taxes. A capital loss is incurred when there is a
decrease in the capital asset value compared to an asset's purchase price.

For equities, an example of a popular and liquid asset, national and state legislation often
has a large array of fiscal obligations that must be respected regarding capital gains.
Taxes are charged by the state over the transactions, dividends and capital gains on the
stock market. However, these fiscal obligations may vary from jurisdiction to jurisdiction
because, among other reasons, it could be assumed that taxation is already incorporated

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into the stock price through the different taxes companies pay to the state, or that tax-free
stock market operations are useful to boost economic growth.

In C.I.T. Vs. H.H. Maharani Usha Devi2 case the Supreme Court has made it clear that
heirloom jewellery constitutes personal effects under section 2(14) and its sale would not
give rise to any taxable capital gains.

In C.I.T. Vs. D.P. Sandu Brothers3 case it was held that the value or income from
transfer of capital asset can be taxed only under the head “Capital Gain” and if it cannot
be taxed under this head, then it cannot be taxed at all. Such income cannot be taxed
under the head “Income from other sources”.

DEFINITION:

Capital gains are the profits that an investor realizes when he or she sells the capital asset
for a price that is higher than the purchase price. Capital gains taxes are only triggered
when an asset is realized, not while it is held by an investor. An investor can own shares
that appreciate every year, but the investor does not incur a capital gains tax on the shares
until they are sold.

The amount by which an asset's selling price exceeds its initial purchase price. A realized
capital gain is an investment that has been sold at a profit. An unrealized capital gain is
an investment that hasn't been sold yet but would result in a profit if sold. Capital gain is
often used to mean realized capital gain. For most investments sold at a profit, including
mutual funds, bonds, options, collectibles, homes, and businesses, the IRS is owed money
called capital gains tax.4

A capital gain is the difference between what you paid for an investment and what
received when you sold that investment. Investments include mutual funds, bonds,
stocks, options, precious metals, real estate, and collectibles. If we sold an investment for
more than what you paid for it, then we have a gain. If we sold an investment for less

2
A.I.R. 1998 S.C. 2309
3
A.I.R. 2005 S.C. 796
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http://www.vgmehtasitrr.com/14-15.pdf

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 than what we paid for it, then we have a loss. Our capital gains and losses are reported
on IRS Form 1040 Schedule D, with the result carried to Form 1040.

Capital gains are calculated as follows:

 Selling price

 Minus Selling fees & commissions

 Minus Buying fees & commissions

 Minus Purchase price

 Profit (or Loss if negative)

TYPES OF CAPITAL GAINS:

Capital gains can be classified into long-term (LTCG) and short-term (STCG) depending
on the period for which the capital asset has been held by the transferor before the date of
such transfer. It is important to remember the category in which the capital gain falls
because it will eventually impact the rate at which it is taxed and the tax benefits which
can be enjoyed on re-investment of such gains/consideration.5
(1) Short Term Capital Gains:

A capital gain realized by the sale or exchange of a capital asset that has been held for
exactly one year or less. Short-term gains are taxed at the taxpayer's top marginal tax rate.

A short-term gain can only be reduced by a short-term loss. A taxable capital loss is
limited to $3,000 for single taxpayers and $1,500 for married taxpayers filing separately.

Short-term gains and losses are netted against each other. For example, assume a
taxpayer purchased and sold two different securities during the tax year: Security A and
Security B. If he/she earned a gain on Security A of $5,000 and a loss on Security B of
$3,000, then the net short-term gain is $2,000.

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(2) Long Term Capital Gains:

Long term Capital gains, if the assets like shares and securities, are held by the assessee
for a period exceeding 12 months or 36 months in the case of other assets. Units of UTI
and specified mutual funds will now be eligible for treatment as long term capital assets
if they are held for a period exceeding 12 months.

Long term Capital gains are computed by deducting from the full value of consideration
for the transfer of a capital asset the following:

- Expenditure connected exclusively with the transfer;

- The indexed cost of acquisition of the asset, and

- The indexed cost of improvement, if any, of that asset. In the case of shares, expenditure
in connection with the transfer includes the stock broker’s commission but the salary of
an employee is not deducted in computing capital gains though the employee may have
helped in the transfer of the shares.

Cost of acquisition, in such cases includes the price-paid, cost of share transfer stamps,
cost of postage for sending the shares for transfer to the transfer-agents of the company,
legal expenses etc.

‘Indexed cost of acquisition’’ means an amount which bears to the cost of acquisition the
same proportion as Cost Inflation Index for the year in which the asset is transferred
bears to the Cost Inflation Index for the first year in which the asset was held by the
assessee.

A gain or loss from a qualifying investment owned for longer than 12 months and then
sold. The amount of an asset sale that counts toward a capital gain or loss is the
difference between the sale value and the purchase value. Long-term capital gains are
assigned a lower tax rate than short-term capital gains in the United States.

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CAPITAL GAINS HOLDING PERIODS:

Capital gains are taxed differently depending on whether your investment is considered
long-term or short-term. How long you have held an investment is called the holding
period.

The holding period is determined from the day after you bought your investment until the
date you sell your investment. The IRS states, "To determine how long you held the
investment property, begin counting on the date after the day you acquired the property.
The day you disposed of the property is part of your holding period."

The short-term holding period is one year or less. Short-term capital gains are taxed at
ordinary, which range from 10% to 39.6% for the year 2013.

The long-term holding period is more than one year. Long-term capital gains are taxed at
long-term capital gains rates, which is usually less than ordinary tax rates. The long-term
capital is zero percent, 15%, or 20%, depending on your marginal tax bracket.
In addition, high income taxpayers may have a 3.8% unearned income Medicare
contribution tax applied to their capital gains and other net investment income. Thus the
highest tax rate that could apply to capital gains income is 39.6+3.8= 43.4% on short
term gains taxed at ordinary rates or 23.8% (20% + 3.8%) on long-term gains.

Tax planning for investors focuses on deferring the sale of profitable investments until
you qualify for the discounted long-term capital gains tax rate.

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CH.2 COMPUTATION OF CAPITAL GAINS (SECTION 48)6

Transfer of a short term capital asset gives rise to "Short Term Capital Gains' (STCG) and
transfer of a long capital asset gives rise to 'Long Term Capital Gains' LTCG).
Identifying gains as STCG and LTCG is a very important step in computing the income
under the head Gains as method of computation of gains and tax on the gains is different
for STCG and LTCG.

SHORT TERM CAPITAL GAINS (STCG)

Computation of short - term Capital Gains:

1. Find out full value of consideration

2. Deduct the following:

a. expenditure incurred wholly and exclusively in connection with such transfer

b. cost of acquisition; and
c. cost of improvement

3. From the resulting sum deduct the exemption provided by sections 54B, 54D, 54G

4. The balancing amount is short-term capital gain

LONG TERM CAPITAL GAINS (LTCG)

Computation of long - term Capital Gains:

1. Find out full value of consideration

2. Deduct the following:

a. expenditure incurred wholly and exclusively in connection with such transfer

b. indexed cost of acquisition; and
c. indexed cost of improvement

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3. From the resulting sum deduct the exemption provided by sections 54, 54B, 54D,
54EC, 54ED, 54F and 54G

4. The balancing amount is long-term capital gain

FULL VALUE OF CONSIDERATION (SECTION 50-C)

This is the amount for which a capital asset is transferred. It may be in money or money's
worth or a combination of both.

Where the transfer is by way of exchange of one asset for another, fair market value of
the asset received is the full value of consideration. Where the consideration for the
transfer is partly in cash and partly in kind Fair market value of the kind portion and cash
consideration together constitute full value of consideration.

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CH.3 COST OF ACQUISITION

MEANING:
Cost of acquisition of an asset is the value for which the asset was acquired by the
assessee. Expenses of capital nature for completing or acquiring the title to the property
are part of the cost of acquisition.
Following are treated as cost of acquisition:
 Interest on moneys borrowed to purchase asset is part of actual cost of asset.
 Litigation expenses incurred for compelling the company to register the shares in
the name of the assessee would be of capital nature, forming a part of the cost of
acquisition of the shares.
Following are not treated as cost of acquisition:
 Ground rent cannot be said to be expenditure incurred by the assessee for the
acquisition of the capital asset.
 Estate duty paid in respect of inherited property can neither be treated as a part of
the cost of acquisition of property nor as cost of improvement.

Cost of Acquisition is the price which the assessee has paid, or the amount which the
assessee has incurred, for acquiring the Property /Asset. The Expenses incurred at the
time of completing the title are a part of the cost of acquisition.

In cases where the Capital Asset became the property of the assessee in any of the
manners mentioned below, the cost of acquisition shall be deemed to be the cost for
which the previous owner of the property acquired it:-
1. On the Distribution of Assets/ Total Partition of HUF
2. Under a Gift or Will
3. By Succession, Inheritance or Devolution
4. On Distribution of Assets on Liquidation of a Company

Where the cost for which the previous owner of the capital asset acquired the property
cannot be ascertained, the cost of acquisition to the previous owner shall be the fair

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market value of the asset on the date on which the asset became the property of the
previous owner. The money borrowed for acquiring the capital asset will also form a part
of the cost of Asset.

DEEMED COST OF ACQUISITIONS:

In some cases, the assessee might not have ‘acquired’ the property ‘himself’ but moght
have ‘become’ ‘owner’ of the property under certain circumstances.

1. Special rules apply when a capital asset becomes the property of the assessee-

 On distribution of assets on the total or partial partition of a Hindu Undivided

family;
 Under gift or will;
 By succession, inheritance or devolution;
 On distribution of assets on the dissolutions of a firm, body of individuals or other
associations of persons where such dissolution had taken place before 1-4-1987;
 On distribution of assets on the liquidation of a company;
 Under a transfer to a revocable or an irrevocable trust;
 Being a wholly-owned Indian Subsidiary company under a transfer from its
holding company;
 Being an Indian holding company under a transfer from this wholly-owned
subsidiary company;
 In a scheme of amalgamation, by the amalgamated company from the
amalgamating company which comes under section 47(vi)/(via);
 Being a Hindu undivided family where one of its members has converted his self-
acquired property into joint family property after 31-21-1969;

2. In the above cases, cost to the previous owner would be taken as cost of acquisition of
the assessee.

3. Where the previous owner has also acquired the property in the above manner, the
previous owner of the property means the last previous owner who acquired the property
by means other than those discussed above. For example, if X acquires a house property

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in 1990 from his father under a will, the cost of property to the father will be taken as the
cost of acquisition of X at the time of sale of property by X. If however, the father of X
has acquired the property from a partnership firm on its dissolution in 1985, cost to the
partnership firm will be taken as the cost of acquisition of X at the time of its sale by X.

4. Cost of any improvement of the asset incurred by the previous owner, or the assessee,
will be added to such cost.

5. In case the cost to the previous owner cannot be ascertained, the fair market value of
the asset as on the date it became the property of the previous owner is taken to be the
cost of acquisition to the previous owner.

6. On the sales of shares received on conversion of debentures of a company into shares

of that company, the cost of acquisition of such shares is to be taken as that part of the
cost of debentures which has been appropriated towards the shares.

7. Where the capital gain arises from the transfer of specified security on sweat equity
shares, u/s 17(2) (vi) the cost of acquisition of such security on shares shall be the fair
market value which has been taken into account for the purpose of that clause.

8. The cost of acquisition of the original shares held by the shareholder in the demerged
company are deemed to have been reduced by the amount as so arrived under section.49
(2C)

9. Where the capital gain arises from the transfer of property, subjected to tax u/s 56(2)
(vii) or 56(2)(viia), the cost of acquisition of such property or shares shall be the fair
market value under that clause.

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CH.4 COST OF IMPROVEMENT

MEANING:
All Capital Expenditures incurred in making any additions or alterations to the Capital
Asset by the Assessee after it became his property or alterations to the capital asset by the
assessee after it became his property shall be deductible as the Cost of Improvement. If
the Asset was transferred to the assessee under the cases specified immediately above, the
capital expenditure incurred by the previous owner shall also be treated as cost of
improvement.

However, the Cost of Improvement does not include any capital asset which is deductible
in computing the chargeable under head- “Income from House Property”, “Profits or
Gains of Business or Profession”, or “Income from Other Sources”. Only the Capital
Expenses are considered as a cost of Improvement and routine expenses on Repairs and
Maintenance do not form part of cost of improvement.

For the purpose of Computation of Long Term Capital Gain, Indexation using the Cost
Inflation Index shall be done to the Cost of Acquisition & Cost of Improvement and the
resultant figure shall be the Indexed Cost of Acquisition & Indexed Cost of improvement
for the purpose of computation of LTCG

Indexed Cost = Actual Cost * Cost Inflation Index of the Year of Sale
Cost Inflation Index of the Year of Purchase

The Assessee also has the option of not opting for Indexation and the Long Term Capital
Gain Tax Rate in this case shall be 10%

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DEFINITION:

Cost of improvement is defined as follows:

1. Cost of improvement in relation to goodwill of a business or a right to manufacture,

produce or process any article or thing is taken to be nil.

2. Cost of improvement in relation to any other capital asset means all expenses of capital
nature incurred in making any addition/alteration to the capital asset by the assessee.

EXCLUDES:

Cost of improvement does not, however, include the following:

1. Any expenditure which is deductible in computing the income chargeable under any
other heads; and

2.expenditue incurred prior to April 1,1981( where the capital asset became the property
of the assessee or the previous owner before Apirl1,1981 irrespective of whether the
assessee opts for treating the fair market value as on 1-4-1981 as his cost of acquisition.

EXAMPLES:

1. Cost of improvement includes any expenditure incurred to protect, cure or complete

the title to the capital asset. In other words, any expenditure incurred to increase the value
of the capital asset is treated as cost of improvement. In the case of investment in shares,
expenses incurred in getting title to the shares secured, perfected or completed indicate
the cost of improvement of the asset.

2. Expenditure incurred in legal proceedings in a civil court for enhancement of

compensation in the case of compulsorily acquisition is taken as cost of improvement.7

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CH.5 CAPITAL GAINS ACCOUNT SCHEME

INTRODUCTION:

Although as per Section 54, the assessee is given 2 years to purchase the house property
or 3 years for the construction of the house property, but the capital gains on the transfer
of the original house property is taxable in the year in which it was sold. The Income Tax
Return of that year is required to be submitted in the relevant assessment year on or
before the specified due date for filing the Income Tax Return. Hence, the assessee will
have to take a decision for the purchase/construction of the house property till the date of
furnishing of the income tax return otherwise; the capital gain would become taxable. To
avoid the above situation, the Income Tax Act specifies an alternative in the form of
deposit under the Capital Gains Account Scheme.

The Amount of Capital Gain which is not utilized by the Assessee for the purchase or
construction of the new house before the date of furnishing of the Income Tax Return
should be deposited by him under the Capital Gains Account Scheme, before the due date
of furnishing the return. The proof of such a deposit shall be attached with the Income
Tax Return. In this case, the amount already utilized by the assessee for the
purchase/construction of the new house shall be eligible for exemption

In case, the assessee deposits the amount in the Capital Gains Account Scheme but does
not utilize the amount deposited for the purchase or construction of a residential house
within the specified period, the amount not so utilized shall be charged as Capital Gains
of the year in which the period of 3 years from the date of sale of the Original Asset and
it will be long term capital gain of that financial year.
As per the Income Tax Act, the taxpayer is allowed some time (2/3 years) to invest the
capital gains in specified instruments. However, in many cases the due date for filing
income tax returns for the year in which the capital gains arises is before the expiry of the
specified period.

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To avoid such issues, the income tax act prescribes that the taxpayer should deposit the
amount of capital gains in the capital gains account scheme on or before the due date of
filing of income tax returns which can be easily withdrawn at the time of investment in
the specified instrument.

FEATURES & TAX BENEFITS

1. Only Individuals and HUF are allowed to open capital gains account.

2. The amount deposited in the Capital gains account cannot be offered as a Security for
any Loan/ Guarantee.

3. The Interest on such account is not tax-free and TDS is also liable to be deducted from
such account as per the provisions of the income tax act.

4. The profit that arises on the sale of any property is referred to as Capital Gains and is
chargeable to tax.

5. Government also provides for various schemes for saving tax on such capital gains
under Section 54, 54B, 54D, 54F etc.

6. However, as per the provisions of these sections, the amount is required to be

reinvested in specified investment types before the specified period.

7. However, if the due date of filing income tax returns falls before the expiry of the
specified period, the amount of capital gains is required to be invested temporarily in
the Capital Gains Account Scheme which can be easily withdrawn at the time of
investment in the specified instrument.

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OPENING OF CAPITAL GAINS ACCOUNT

The Capital Gains Account Scheme was introduced in the year 1988, and as per the
Capital Gains Account Scheme the amount of capital gains to be claimed as an exemption
should be either be re-invested or deposited in the Capital Gains Account before the due
date of filing of returns.

The Govt has notified 28 banks which can open the Capital Gains Account on behalf of
the Govt. All branches of these 28 banks except Rural Branches are authorised to open
the capital gains account.

CATEGORIES OF CAPITAL GAIN ACCOUNT SCHEME:

1. Capital Gains Account – Type A – Savings Account:

This is like a normal savings account and the interest payable on this account is the same
as the interest paid on normal savings account by that bank. In case of Type A Account,
the deposit office shall issue a pass book to the depositor wherein all amounts of deposits,
withdrawals, together with the interest due, shall be entered over the signature of the
authorised officer of the Bank.

2. Capital Gains Account -Type B – Term Deposit Account:

This is like a fixed deposit wherein the amount is deposited for a fixed period of time.
The interest rate on this account is equivalent to the interest paid on fixed deposits by the
bank. As Type B accounts are same as Fixed Deposits Account, any withdrawal from this
type of account attracts a penalty for pre-maturity withdrawal. In case of Type B
Account, the deposit office shall issue a deposit receipt wherein the principal amount of
deposit, date of deposit, date of maturity of deposit shall be entered over the signature of
the authorised officer of the Bank.

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Capital Gains Account Type A is advised when the amount of capital gains is to be used
for construction of a house as the amount would be required to be withdrawn in various
stages.

Capital Gains Account Type B Term Deposit Account is advised when the amount of
capital gains is to be utilize for purchase of a house.

Capital Gains Account Type B is also of 2 types

1. Cumulative:

Under the cumulative option – the interest is re-invested and the total amount is paid at
the time of the completion of the term period or at the time of withdrawal (whichever is
earlier).

2. Non-Cumulative:

Under the non-cumulative option, the interest is paid at regular intervals and is not
reinvested.

INTEREST ON CAPITAL GAINS ACCOUNT SCHEME:

1. The Interest at such rates as may be specified by the Reserve Bank of India (RBI) from
time to time shall be allowed for each calendar month on the lowest balance between the
close of the 10th day and the end of the month and shall be credit to the account at the
end of each half year.

2. In case of cumulative deposit in Account B, the amount of interest accrued will be

deemed to have been reinvested and in case of non-cumulative deposit in Account B, the
amount of interest due will become due and payable at quarterly intervals.

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3. In case of conversion of the account or premature withdrawal from the account or
closure of the account, the interest payable shall be the interest rate applicable for the
period for which the amount was deposited less 1% as penalty for premature withdrawal.

TRANSFER AND CONVERSION OF CAPITAL GAINS ACCOUNT:

1. A depositor, if he so desires, may apply for transfer of his capital gains account, from
one deposit office to another deposit office of the same bank.

2. A depositor, if he so desires, may also apply in Form B for transfer of a part of or all
the funds from Type A Account to Type B Account and vice-versa.

3. A depositor may also convert the whole of his Type A account into Type B Account
and vice-versa.

4. If a request has been received for transfer of amount from Type B to Type A and vice
versa before the expiry of the specified period for which the deposit was made, such
request shall be treated as premature withdrawal of amount.

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 CH.6 CAPITAL GAINS TAX RATES8

TAX RATE ON SHORT-TERM CAPITAL GAINS:

1. Tax Rate on Short-Term Capital Gains:

Capital gain income from assets held one year or less is taxed at the ordinary income tax
rates in effect for the year, ranging from 10% to 39.6% for the year 2014.

2. Tax Rate on Collectible Assets:

Long-term investments in collectibles are taxed at a flat 28%. Short-term investments in

collectibles are taxed as short-term capital gains at your ordinary income tax rates.
Collectibles include the following items:

 stamps,

 coins,

 precious metals,

 precious gems,

 rare rugs,

 antiques,

 alcoholic beverages, and

 fine art.
However, certain precious metal coins and bullion are considered regular investment
assets and are not considered collectibles for tax purposes under Internal Revenue Code
Section 408(m)(3).

3. Tax Rate on Recaptured Depreciation of Real Property

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Real property that has been depreciated is subject to a special depreciation recapture tax.
A special 25% tax rate applies to the amount of gain that is related to depreciation
deductions that were claimed or could have been claimed on a property. The remainder of
the gain will be taxed at ordinary rates or long-term gain rates, depending on how long
the property was held.

4. Business Assets

Fixed assets used in your business are taxed as ordinary gains. Business assets include all
furniture, equipment, and machinery used in a business venture. Examples include
computers, desks, chairs, and photocopiers. Ordinary gains are reported on IRS Form
4797.

5. Small Business Stock

Capital gains and losses on small business stock may qualify for preferential tax
treatment. Gains may be partially excluded under Section 1202, if the company had total
assets of $50 million or less when the stock was issued. Losses may be treated as
ordinary losses up to $50,000 per year under Section 1244, if the company had total paid-
in capital of $1 million or less.

Small business investors can request that companies certify their stock as qualifying
under Section 1202, Section 1244, or both, at the time they make an investment in the
company.

Gains on small business stock are taxed at 28% after any exclusion. Ordinary losses on
Section 1244 stocks can reduce other ordinary income, such as wages.

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 TAX RATE ON LONG-TERM CAPITAL GAINS AND QUALIFIED DIVIDEND
INCOME:

1. Tax rate on long-term capital gains:

Long term Capital gains, if the assets like shares and securities, are held by the assessee
for a period exceeding 12 months or 36 months in the case of other assets. Units of UTI
and specified mutual funds will now be eligible for treatment as long term capital assets
if they are held for a period exceeding 12 months.

Capital gain income from assets held longer than one year are generally taxed at special
long-term capital gains tax rates. The rate that applies depends on which ordinary income
tax bracket you fall under.

 0% applies to long-term gains and dividend income if a person is in the 10% and 15%
tax brackets,
 15% applies to long-term gains and dividend income if a person is in the 25%, 28%,
33%, or 35% tax brackets, and
 20% applies to long-term gains and dividend income if a person is in the 39.6% tax
bracket.

2. Tax Rates on Dividend Income

Dividends are classified either as ordinary dividends or as qualified dividends. Ordinary

dividends are taxed at ordinary tax rates for whatever tax bracket you are in. Qualified
dividends are taxed at the long-term capital gains tax rates of zero percent, 15% or 20%
rates. To be eligible as a qualified dividend, the dividends must be from a domestic
corporation or a qualifying foreign corporation and you must hold the stock "for more
than 60 days during the 121-day period that begins 60 days before the ex-dividend date"

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 CH.7 CONCLUSION

Any profit or gain arising from transfer of capital asset held as investments are
chargeable to tax under the head capital gains. The gain can be on account of short- and
long-term gains. A capital gain arises only when a capital asset is transferred. Which
means if the asset transferred is not a capital asset; it will not be covered under the head
capital gains. Profits or gains arising in the previous year in which the transfer took place
shall be considered as income of the previous year and chargeable to income tax under
the head Capital Gains and the concept of indexation shall apply, if applicable.

Capital gain should be taken to mean profit or gains arising to the assessee from the
transfer of a capital asset. Such capital gain is added to the total income of the previous
year in which the transfer of the asset took place. In other practical sense, when we buy
any kind of property for a lower price and then subsequently sell it at a higher price, we
make a gain. The gain on sale of a capital asset is called capital gain. This gain is not a
regular income like salary, or house rent. It is a one-time gain; in other words the capital
gain is not recurring, i.e., not occur again and again periodically. Opposite of gain is
called loss; therefore, there can be a loss under the head capital gain. We are not using the
term capital loss, as it is incorrect. Capital Loss means the loss on account of destruction
or damage of capital asset. Thus, whenever there is a loss on sale of any capital asset it
will be termed as loss under the head capital gain. Concluding, capital gain is also an
income and it is taxable too.

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 BIBLIOGRAPHY

Websites:
 http://articles.economictimes.indiatimes.com//news/45627802
 http://www.vgmehtasitrr.com/14-15.pdf
 http://en.wikipedia.org/wiki/Capital_gain
 http://www.scribd.com/doc/218444554/Capital-Gain
 https://taxguru.in/income-tax/capital-gains-under-income-tax-act-1961.html
 https://www.valueresearchonline.com/story/h2_storyView.asp?str=24301

Books:

 SINGHANIA VINOD- TAXMANN’S “STUDENTS GUIDE TO INCOME TAX”

2017
 DIRECT AND INDIRECT TAXES; Dr. M.A.VARSHA
 V.G.MEHTA’S ‘INCOME TAX READY RECKONER ASSESSMENT YEAR 2014-
15’

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