Meaning and Definitions

What is meant by Capital Gains ?

Capital Gains means, any profits arising from the transfer of Capital Asset affected in the previous year will be chargeable to income tax under the head ‘Capital Gains’. A capital gain may be short-term or long-term.

Defining Capital Assets:

As per section 2(14), a Capital Asset means –     

  1. Property of any kind held by an assessee, whether or not connected with his business or profession;
  2. Any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the SEBI regulations.

However, it does not include the following:

  1. Any stock, consumables or raw material, held for the purpose of business or profession
  2. Personal goods such as clothes and furniture held for personal use
  3. Agricultural land in rural India
  4. 6½% gold bonds (1977) or 7% gold bonds (1980) or national defence gold bonds (1980) issued by the central government
  5. Special bearer bonds (1991)
  6. Gold deposit bond issued under the gold deposit scheme (1999) or deposit certificates issued under the Gold Monetisation Scheme, 2015.

Note:

  1. However, jewellery, archaeological collections, drawings, paintings, sculptures, or any work of art are not treated as personal effects and, hence, are included in the definition of capital assets.
  2. ‘Property’ includes and shall be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.
  3. Rural Agriculture Land means not being land situate –
    • agricultural land situated in any area within the jurisdiction of a municipality or cantonment board having population of not less than 10,000 or
    • agricultural land situated in any area within such distance, measured aerially, in relation to the range of population as shown hereunder –
  Shortest aerial distance from the local limits of a municipality or cantonment board referred to in item Population according to the last preceding census of which the relevant figures have been published before the first day of the previous year.
(i) ≤ 2 kilometers > 10,000 ≤ 1,00,000
(ii) ≤ 6 kilometers > 1,00,000 ≤ 10,00,000
(iii) ≤ 8 kilometers > 10,00,000

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