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How to deposit money in capital gain account scheme and what is the procedure of withdrawal?
How to Deposit Money in the CGAS Step A: Open a CGAS Account Designated Banks:The government has notified certain banks to operate as authorized CGAS account holders. To deposit funds, you must open a CGAS account with one of these designated banks. Documentation:You will typically need to provide:Read more
How to Deposit Money in the CGAS
Step A: Open a CGAS Account
Designated Banks:
The government has notified certain banks to operate as authorized CGAS account holders. To deposit funds, you must open a CGAS account with one of these designated banks.
Documentation:
You will typically need to provide:
Proof of sale of the capital asset (sale deed, transaction details)
PAN and identity proofs
A declaration regarding the purpose of deposit as per the reinvestment conditions stipulated under the applicable exemption (for example, under Section 54 or 54EC)
Step B: Deposit the Amount
Timing:
You must deposit the requisite amount in the CGAS account within the time limit specified for reinvestment (for example, within two years from the date of transfer for residential property purchase under Section 54, or within six months for Section 54EC bonds).
Mechanism:
The deposit is made as you would for any regular bank account transaction. The bank records the deposit, but note that funds in a CGAS account do not earn interest and are earmarked strictly for the purpose of reinvestment.
Notification:
Once the deposit is made, you receive an account statement or certificate confirming the deposit. This document is crucial when claiming the exemption later.
3. Procedure for Withdrawing Funds from the CGAS
Step A: Utilize Funds for Reinvestment
Reinvestment:
When you identify a new asset that qualifies for the exemption (e.g., a new residential property or eligible bonds), you must complete the purchase or construction within the prescribed time limit.
Step B: Request Withdrawal
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See lessDocumentation Required:
To withdraw funds from the CGAS, you need to submit:
Proof of purchase or construction (such as a sale or construction agreement, payment receipts, and completion certificate)
The CGAS deposit certificate as evidence of the funds available.
Bank Process:
The designated bank will verify the documents. Once validated, the bank will release the required amount from the CGAS to facilitate the payment for the reinvestment.
Excess Funds:
Any funds in excess of what is used for reinvestment typically revert to your account; however, failure to utilize the funds within the prescribed period means that the exemption ceases, and the capital gains become taxable.
Is there any exemption available on capital gain arise from sale of agricultural land?
Under the Income Tax Act, 1961, agricultural income is fully exempt from tax. Although the Act does not expressly provide a separate exemption for “capital gains” on agricultural land, the judicial interpretation of agricultural income has played a key role in this area. Section 10(1) of the IncomeRead more
Under the Income Tax Act, 1961, agricultural income is fully exempt from tax. Although the Act does not expressly provide a separate exemption for “capital gains” on agricultural land, the judicial interpretation of agricultural income has played a key role in this area.
Section 10(1) of the Income Tax Act, 1961:
This provision exempts agricultural income from tax. “Agricultural income” is defined broadly through judicial interpretation and includes income derived from agricultural operations. In many cases, the capital gain on the sale of land that qualifies as agricultural (i.e., land used solely for agriculture and situated in rural areas as defined by state law) has been treated as agricultural income and thereby exempt from tax.
Criteria for Agricultural Land Exemption:
For a land sale to be exempt:
Location: The land should be situated in a rural area (generally outside the limits of a municipality or a notified urban area).
Usage: The land must be used solely for agricultural purposes. If the land is used for non-agricultural purposes (or has been converted for commercial/industrial use), the exemption may not apply.
Tax Treatment Based on Land Qualification
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See lessQualifying as Agricultural Land:
If the land meets the statutory and judicially interpreted criteria of being “agricultural”—mainly being located in a rural area and used exclusively for agriculture—the gain arising on its sale is considered as part of agricultural income and is therefore exempt from tax.
Non-Qualifying Agricultural Land:
If the land does not meet the definition of agricultural land (for instance, if it is located within urban limits or has been converted to non-agricultural use), then the gain from its sale is treated as a capital gain under Sections 47–49 and is taxable.
How to get exemption of long term capital gain on capital assets other then house property?
Step-by-Step Computation Let’s assume you sell a capital asset (other than a residential house) and want to compute the exemption on the long-term capital gain under Section 54F. Step 1: Compute the Long-Term Capital Gain (LTCG) LTCG = Sale Consideration – (Indexed Cost of Acquisition + Direct ExpenRead more
Step-by-Step Computation
Let’s assume you sell a capital asset (other than a residential house) and want to compute the exemption on the long-term capital gain under Section 54F.
Step 1: Compute the Long-Term Capital Gain (LTCG)
LTCG = Sale Consideration – (Indexed Cost of Acquisition + Direct Expenses)
(Remember, for long-term assets, indexation is allowed under Section 55(2).)
Step 2: Determine the Net Sale Consideration
This is the total amount received from the sale after subtracting any expenses directly attributable to the sale (such as brokerage).
Step 3: Invest the Net Sale Consideration
Ensure that the entire net sale consideration is reinvested in a residential house property as per the prescribed timeline.
Step 4: Calculate the Exemption
Exemption Amount = (Investment in Residential House × LTCG) / Net Sale Consideration
If the entire net sale consideration is reinvested, the exemption equals the entire LTCG.
If only a part is reinvested, then only the proportionate share of the gain gets exempted.
Step 5: Tax on the Remaining Gain (if any)
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See lessThe remaining capital gain (if any) that is not covered by the exemption is subject to tax at the applicable long-term capital gains rate (20% plus applicable surcharge and cess).
How to compute tax on short term capital gain?
tep-by-Step Computation of STCG Step 1: Determine the Full Value of Consideration (FVC) This is the total sale price (or aggregate consideration) received from the transfer of the asset. Step 2: Determine the Cost of Acquisition & Directly Attributable Expenses Cost of Acquisition: The originalRead more
tep-by-Step Computation of STCG
Step 1: Determine the Full Value of Consideration (FVC)
This is the total sale price (or aggregate consideration) received from the transfer of the asset.
Step 2: Determine the Cost of Acquisition & Directly Attributable Expenses
Cost of Acquisition: The original purchase price (plus any incidental costs incurred at the time of purchase).
Direct Expenses: Expenses incurred exclusively for facilitating the sale (e.g., brokerage, commission, transfer fees).
Step 3: Calculate the Short-Term Capital Gain (STCG)
Use the formula:
STCG=Full Value of Consideration(Cost of Acquisition+Directly Attributable Expenses)
Note: No indexation is allowed for short-term assets.
Step 4: Determine the Tax Treatment Based on Asset Type
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See lessFor Equity Shares or Equity-Oriented Mutual Funds (with STT Paid):
Tax Rate: Under Section 111A, the resulting STCG is taxed at a flat rate of 15%.
Example:
If you sell shares with a gain of ₹50,000 and STT has been paid, the tax payable is 15% of ₹50,000 (i.e., ₹7,500), plus applicable surcharge and cess.
For Other Assets or in Cases Where STT is Not Applicable:
The computed STCG is added to the total income and taxed at the applicable individual or corporate slab rate (as per Section 48).
Example:
If you sell a non-equity asset with an STCG of ₹50,000, that amount is added to your income, and the tax rate applied will depend on your applicable income tax slab.
How to compute tax on long term capital gain?
Step-by-Step Computation of LTCG Step 1: Determine the Full Value of Consideration (FVC) This is the total amount received from the sale of the asset.Example: If you sell a property for ₹50,00,000, then FVC = ₹50,00,000. Step 2: Determine the Cost of Acquisition (CoA) and Cost of Improvement (if anyRead more
Step-by-Step Computation of LTCG
Step 1: Determine the Full Value of Consideration (FVC)
This is the total amount received from the sale of the asset.
Example: If you sell a property for ₹50,00,000, then FVC = ₹50,00,000.
Step 2: Determine the Cost of Acquisition (CoA) and Cost of Improvement (if any)
Cost of Acquisition: The purchase price (plus any incidental expenses) at the time the asset was bought.
Cost of Improvement: Any capital expenditure on improvement (not repair) made during the holding period.
Step 3: Indexation Benefit
Since the asset qualifies as long-term, you can adjust the original costs for inflation using the Cost Inflation Index (CII) as per Section 55(2).
Indexed Cost of Acquisition =
(Cost of Acquisition×CII in the year of acquisition)/CII in the year of sale
- Step 4: Deduct Directly Attributable Expenses
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See lessInclude expenses incurred wholly and exclusively in connection with the transfer (for example, brokerage fees, stamp duty on transfer, legal fees).
Step 5: Compute the Long-Term Capital Gain (LTCG)
LTCG = FVC – (Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses)
Step 6: Apply the Tax Rate and Compute Tax Liability
Tax Rates:
For most assets (other than equity shares where specific rates apply), LTCG is taxed at 20% on the computed gain (plus applicable surcharge and cess).
For equity shares or equity-oriented mutual funds (where STT is paid), the LTCG is taxed at 10% on the gains exceeding an exemption threshold (currently ₹1,00,000) under Section 112A.
How to compute tax on sale of unlisted share/securities?
The tax treatment for gains on the sale of unlisted shares depends primarily on the holding period: Short-Term Capital Gains (STCG):If the unlisted shares are held for less than 12 months, the gains are classified as short-term. Long-Term Capital Gains (LTCG):If the shares are held for 12 months orRead more
The tax treatment for gains on the sale of unlisted shares depends primarily on the holding period:
Short-Term Capital Gains (STCG):
If the unlisted shares are held for less than 12 months, the gains are classified as short-term.
Long-Term Capital Gains (LTCG):
If the shares are held for 12 months or more, they qualify as long-term capital assets.
Chargin sections
Section 47 and Section 48 (Income Tax Act, 1961)
Section 47: Defines how gains arising from a transfer of a capital asset are computed.
Section 48: States that the capital gain is the difference between the full value of consideration and the (indexed) cost of acquisition, cost of improvement, and expenses incurred on transfer.
Section 55(2)
This section prescribes the method for computing the Cost Inflation Index (CII), which is used to adjust the cost of acquisition of long-term assets, thereby reducing the taxable gain.
Computation of Capital Gains
A. Short-Term Capital Gains (STCG) on Unlisted Shares
Method:
Since no indexation benefit is available, the capital gain is computed as:
STCG=Sale Consideration−(Cost of Acquisition+Expense on Transfer+Cost of Improvement)
Tax Rate:
The resulting gain is added to your total income and taxed at the applicable slab rates (if the taxpayer is an individual) or at the normal corporate tax rates (if a company).
B. Long-Term Capital Gains (LTCG) on Unlisted Shares
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- LTCG=Sale Consideration−(Indexed Cost of Acquisition+Cost of Improvement+Expense on Transfer)
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See lessMethod:
For unlisted shares held for 12 months or more, the cost of acquisition (plus cost of improvement and transfer expenses) must be indexed using the Cost Inflation Index from Section 55(2). The computation is:
Indexed Cost of Acquisition=Cost of Acquisition×CII in the year of saleCII in the year of acquisition/CII in the year of acquisition. The LTCG is then calculated as:
Tax Rate:
The taxable LTCG is taxed at a flat rate of 20% (plus applicable surcharge and cess) as per the current provisions for long-term capital gains on unlisted shares.
How to compute Short term capital gain on sale of equity shares or mutual fund units?
Steps to Compute the Short-Term Capital Gain (STCG) Step 1: Determine the Full Value of Consideration This is the total sale price received on the transfer of the equity shares or mutual fund units. Step 2: Deduct the Cost of Acquisition Subtract the original cost at which the shares or units were pRead more
Steps to Compute the Short-Term Capital Gain (STCG)
Step 1: Determine the Full Value of Consideration
This is the total sale price received on the transfer of the equity shares or mutual fund units.
Step 2: Deduct the Cost of Acquisition
Subtract the original cost at which the shares or units were purchased.
Note: Since the holding period is less than 12 months, no indexation is allowed.
Formula: Cost of Acquisition = Purchase Price (as is)
Step 3: Deduct Any Directly Attributable Expenses
This includes expenses such as brokerage fees, transaction charges, and any other expenses incurred in connection with the sale.
These expenses are deducted from the sale value.
Step 4: Compute the Net Short-Term Capital Gain
Formula:
STCG = (Full Value of Consideration) – (Cost of Acquisition + Directly Attributable Expenses)
Step 5: Taxation of STCG
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See lessThe net gain computed in Step 4 is then taxed at the flat rate of 15% under Section 111A.
After computing the tax at 15%, add applicable surcharge and cess to arrive at the total tax liability.