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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
- Stock in Trade
- Items of Personal Effects which are Moveable
- Rural Agricultural Land in India
- 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
