Capital Gains

CAPITAL GAINS

Problem 1

Computation of capital gain of Mr. Ashwin for the A.Y. 2011-12

Particulars	Working	Details	Amount
Full Value of Consideration			3000000
Less : Expenses on transfer			Nil
Net sale consideration			3000000
Less : i) Indexed cost of acquisition	Rs.500000 * (711/100)	3555000
ii) Indexed cost of improvement		Nil	3555000
Long Term Capital Gain			(555000)
Note: Cost of acquisition shall be taken as cost of acquisition in the hands of owner (Rs.200000) or fair market value as on 1/4/81 (Rs.500000), whichever is higher.

Problem 2

Computation of capital gain of X for the A.Y. 2011-12

Particulars	Amount
Full Value of Consideration	496000
Less : Expenditure on transfer	Nil
Net sale consideration	496000
Less : Indexed cost of acquisition	16000
Less : Indexed cost of improvement	Nil
Long term capital gain	480000
Less : Exemption u/s 54EC	124000
Taxable Long term capital gain	356000
Note: Deduction u/s 54 shall not be available as the flat sold is not a residential house property.

Problem 3

Computation of capital gain of Mr. Sudhir for the A.Y. 2011-12

Particulars	Working	Details	Amount
Full Value of Consideration			5000000
Less : Expenses on transfer			50000
Net sale consideration			4950000
Less : i) Indexed cost of acquisition	Rs.500000 * 711/223	1504036
ii) Indexed cost of improvement	Rs.600000 * 711/259	1647104	3151140
Long Term Capital Gain			1798860
Less: Exemption u/s 54			1500000
Taxable Long Term Capital Gain			298860

Problem 4

Computation of capital gain of Mrs.X for the A.Y. 2011-12

Particulars	Working	Details	Amount
Full Value of Consideration			4150000
Less : Expenses on transfer			41500
Net sale consideration			4108500
Less : i) Indexed cost of acquisition	Rs.460000 * (711/140) 1	2336143
ii) Indexed cost of improvement	Rs.80000(711/150)+Rs.26700(711/161)	497111	2833254
Long Term Capital Gain			1275246
Notes Cost of acquisition shall be taken as cost of acquisition in the hands of the previous owner (Rs.26000) or fair market value as on 1/4/81 (Rs.460000), whichever is higher. However, indexation benefit shall be available from the year when assessee first held the property (i.e. 1986-87). Improvement expenditure incurred before 1/4/1981 is not considered.

Problem 5

Computation of capital gain of Richie for the A.Y. 2011-12

Particulars	Working	Details	Amount
Full Value of Consideration			1253000
Less : Expenses on transfer			3000
Net sale consideration			1250000
Less : i) Indexed cost of acquisition	Rs.70000 * (711/172)	289360
ii) Indexed cost of improvement		Nil	289360
Long Term Capital Gain			960640
Less : Exemption u/s 54F (Note)			384256
Taxable Long term capital gain			576384
Note: In both cases, he satisfies the conditions to get exemption u/s 54F. As the assessee has invested only Rs.100000 out of the sale consideration of Rs.250000, he will get proportionate deduction u/s 54F i.e. Rs.384256 (i.e.960640*500000/1250000).

Problem 6

Computation of capital gain of Ms. Vaishali for the A.Y. 2011-12

Particulars	Working	Details	Amount
Full Value of Consideration			1500000
Less : Expenses on transfer			30000
Net sale consideration			1470000
Less : i) Indexed cost of acquisition	Rs.150000 * 711/351	303846
ii) Indexed cost of improvement		Nil	303846
Long Term Capital Gain			1166154
Less: Exemption
U/s 54 (purchase of residential house)			700000
Taxable Long Term Capital Gain			466154

W.e.f. A.Y. 2007-08, deduction u/s 54EC is not available on investment in NABARD Bond.

Problem 7

Assessee has two alternative methods to compute his capital gain -

Alternate 1) Assessee claims benefit u/s 54
Alternate 2) Assessee does not claim benefit u/s 54.

Alternate 1) Assessee claims benefit u/s 54 : Computation of capital gain of Rajan for the A.Y. 2007-08

Particulars	Details	Amount
Full Value of Consideration		800000
Less : Expenditure on transfer		Nil
Net sale consideration		800000
Less : Indexed cost of acquisition	Rs.100000 * 519/244	212705
Less : Indexed cost of improvement		Nil
Long term capital gain		587295
Less : Exemption u/s 54	Assuming that Rs.587295 was deposited in Capital Gain Account Scheme	587295
Taxable Long Term Capital Gain		Nil

Computation of capital gain of Rajan for the A.Y. 2011-12

Particulars	Amount
Full Value of Consideration	800000
Less : Expenditure on transfer	Nil
Net sale consideration	800000
Less : Cost of acquisition (Rs.600000 Rs.587295)	12705
Less : Cost of improvement	Nil
Short Term Capital Gain	787295

Alternate 2) Assessee does not claim benefit u/s 54: Computation of capital gain of Rajan for A.Y. 2007-08

Particulars	Details	Amount
Full Value of Consideration		800000
Less : Expenditure on transfer		Nil
Net sale consideration		800000
Less : Indexed cost of acquisition	Rs.100000 * 519/244	212705
Less : Indexed cost of improvement		Nil
Long Term Capital Gain		587295

Computation of capital gain of Rajan for the A.Y. 2011-12

Particulars	Amount
Full Value of Consideration	800000
Less : Expenditure on transfer	Nil
Net sale consideration	800000
Less : Cost of acquisition	600000
Less : Cost of improvement	Nil
Short Term Capital Gain	200000

Problem 8

Where debenture are converted into shares

Conversion of debenture into shares is not treated as transfer u/s 47(x), hence not subject to capital gain. Cost of acquisition of debenture shall be treated as cost of share. However, period of holding of share shall not include period of holding of debentures.

Where debenture are redeemed

Redemption of debenture constitutes transfer, hence liable to tax and Rs.200000 [being 1000 * (Rs.1200 Rs.1000) is taxable. It is to be noted that indexation benefit is not available on debenture.

Problem 9

Computation of capital gain of Mr. X for the A.Y. 2011-12

Particulars	Details	Amount
Full value of consideration		2000000
Less : Expenses on transfer		Nil
Net sale consideration		2000000
Less : i) Cost of acquisition	600000
ii) Cost of improvement	300000	900000
Short Term Capital Gain		1100000

Exemption u/s 54 is not available in case of short term capital gain.

Computation of capital gain of Mr. X for the A.Y. 2012-13

Particulars	Details	Amount
Full value of consideration		900000
Less : Expenses on transfer		Nil
Net sale consideration		900000
Less : i) Cost of acquisition	200000
ii) Cost of improvement	250000	450000
Short Term Capital Gain		450000

Problem 10

Computation of capital gain of Mr. X for the A.Y. 2011-12

Particulars	Details	Amount
Full value of consideration		2000000
Less : Expenses on transfer		Nil
Net sale consideration		2000000
Less : i) Indexed Cost of acquisition [Rs.600000 * 711/519]	821965
ii) Indexed Cost of improvement [Rs.300000 * 711/711]	300000	1121965
Long Term Capital Gain		878035
Less : Deduction u/s 54 [Being cost of new house and amount deposited in C.G. Deposit Scheme]		450000
Taxable Long Term Capital Gain		428035

Computation of capital gain of Mr. X for the A.Y. 2012-13

Particulars	Details	Amount
Full value of consideration		900000
Less : Expenses on transfer		Nil
Net sale consideration		900000
Less : i) Cost of acquisition	Nil
ii) Cost of improvement	Nil	Nil
Short Term Capital Gain		900000