Share & grow the world's knowledge!
We want to connect the people who have knowledge to the people who need it, to bring together people with different perspectives so they can understand each other better, and to empower everyone to share their knowledge.
What constitutes ‘transfer’ while calculating capital gain as per Income-tax Law?
“'Transfer' means—(a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset;(b) the gift of any such asset; and(c) any other mode of transferring such asset or any interest therein.” Explanation:This provision establishes a very broad definition of “transfer” for theRead more
“’Transfer’ means—
(a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset;
(b) the gift of any such asset; and
(c) any other mode of transferring such asset or any interest therein.”
Explanation:
This provision establishes a very broad definition of “transfer” for the purposes of computing capital gains. It is not limited to a simple sale for money. Instead, any transaction that results in a change of the beneficial ownership of an asset is considered a transfer. This includes:
-
-
-
-
See lessSale or Exchange: When you sell or exchange your asset for money or another asset.
Relinquishment/Extinguishment: When you give up or lose your rights in the asset.
Gift: When you transfer the asset without receiving any consideration, such as gifting it to a family member or through a will.
Other Modes: Any other method by which the ownership or the right to enjoy the benefits of the asset is passed on to someone else.
What are the provisions relating to computation of capital gain in case of transfer of asset by way of gift, will, etc.?
When an asset is transferred by way of gift, through a will, or by inheritance, the provisions for computing capital gains follow a “carry-forward” principle. This means: Cost of Acquisition:The cost that was originally incurred by the previous owner is carried forward. In other words, you will useRead more
When an asset is transferred by way of gift, through a will, or by inheritance, the provisions for computing capital gains follow a “carry-forward” principle. This means:
Cost of Acquisition:
The cost that was originally incurred by the previous owner is carried forward. In other words, you will use the original purchase cost (plus any improvement costs, if applicable) paid by the previous owner rather than a market value or zero-cost.
Holding Period:
The holding period of the asset is also inherited from the previous owner. This is important because if the asset had already been held for a long period (thus qualifying as a long-term asset), it will continue to be treated as such in your hands. This can have a significant impact on the applicable tax rate and the availability of indexation benefits.
Tax Implication:
When you eventually sell the asset, the capital gain is computed by subtracting the inherited cost (adjusted for inflation, if applicable) from the sale proceeds. Even though you did not pay anything for the asset at the time of receiving it, the earlier cost and holding period remain in effect for tax purposes.
This approach ensures that the tax benefits achieved by holding an asset over the long term (such as lower long-term capital gains tax rates) are not lost when the asset is transferred by gift or inheritance.
See lessI have sold a house which had been purchased by me 5 years ago. Am I required to pay any tax on the profit earned by me on account of such sale?
Since you held the house for 5 years, it qualifies as a long-term capital asset. This means any profit (capital gain) from the sale will be taxed as long-term capital gains. Under the current provisions effective from Budget 2025, the applicable tax rate for long-term capital gains on residential prRead more
Since you held the house for 5 years, it qualifies as a long-term capital asset. This means any profit (capital gain) from the sale will be taxed as long-term capital gains. Under the current provisions effective from Budget 2025, the applicable tax rate for long-term capital gains on residential property is 12.5%.
However, if you choose to reinvest the gains into another residential property within the prescribed period (typically one year before or two years after the sale, or within three years in case of construction), you may be eligible for an exemption under Section 54. If you don’t reinvest, then you will be liable to pay tax at 12.5% on the net gain—calculated as the sale proceeds minus the adjusted purchase cost and any allowable expenses.
See lessAre any capital gains exempt under section 10?
Hi, In the current framework of the Indian Income Tax Act, there isn’t a broad exemption for capital gains under Section 10. In the past, there was an exemption for certain long-term capital gains on the sale of listed equity shares (under what was formerly known as Section 10(38)), but that benefitRead more
Hi,
In the current framework of the Indian Income Tax Act, there isn’t a broad exemption for capital gains under Section 10. In the past, there was an exemption for certain long-term capital gains on the sale of listed equity shares (under what was formerly known as Section 10(38)), but that benefit was withdrawn a few years back with subsequent amendments.
Today, capital gains—whether short-term or long-term—are generally taxed according to the provisions specific to capital gains (such as under Sections 112A for equity and the rules applicable to real estate, debt funds, gold, etc.). However, there are specific reliefs available when you reinvest your gains in a new asset (like under Sections 54, 54EC, or 54F), but these are separate from any exemptions that might have been provided under Section 10.
In short, under the current law, you won’t find a provision in Section 10 that exempts capital gains outright.
See lessAt what rates capital gains are charged to tax?
In the Indian context—with the recent Budget 2025 changes in mind—capital gains tax is structured primarily by the asset type and the duration for which you hold the asset. Here's a handmade breakdown: For Listed Equity Shares & Equity Mutual Funds:• Short-Term Gains: If these are held for lessRead more
In the Indian context—with the recent Budget 2025 changes in mind—capital gains tax is structured primarily by the asset type and the duration for which you hold the asset. Here’s a handmade breakdown:
For Listed Equity Shares & Equity Mutual Funds:
• Short-Term Gains: If these are held for less than 12 months, the gains are now taxed at 20%.
• Long-Term Gains: When held for 12 months or more, gains attract a rate of 12.5%, with an exemption threshold that has been increased modestly (now around ₹1.25 lakh).
For Immovable Property (Real Estate):
• Short-Term Gains: If the property is sold within 24 months, the gains are taxed as per your applicable income tax slab rates.
• Long-Term Gains: For properties held longer than 24 months, the tax rate has been set at 12.5%. (Note that the traditional indexation benefit has been removed in recent changes, which simplifies the calculation.)
For Debt Mutual Funds & Gold:
See less• Short-Term Gains: When these assets are held for less than 36 months, the gains are added to your income and taxed according to your individual slab rates.
• Long-Term Gains: For holding periods of 36 months or more, the gains are generally taxed at 20%, but you still benefit from the indexation adjustment to account for inflation.
What is the benefit of re-investment of capital gain in any other capital asset?
Hi, Reinvesting your capital gains into another capital asset can be highly beneficial because it allows you to defer or even reduce your tax liability. Here’s how it works: Tax Exemption/Deferral: By reinvesting your gains into a qualifying asset (such as residential property under Section 54 or otRead more
Hi,
Reinvesting your capital gains into another capital asset can be highly beneficial because it allows you to defer or even reduce your tax liability. Here’s how it works:
-
-
-
-
See lessTax Exemption/Deferral: By reinvesting your gains into a qualifying asset (such as residential property under Section 54 or other assets under Section 54F of the Income Tax Act), you can claim an exemption on the tax that would otherwise be payable on your capital gains. This means you keep more of your money working for you rather than handing it over as tax.
Enhanced Investment Growth: Deferring the tax liability means that the full amount of your gains is available for reinvestment. This boosts your capital, allowing for potentially higher returns over time through compounding.
Improved Cash Flow: Since you’re not required to pay the tax immediately, you retain liquidity and can allocate funds strategically across different assets or opportunities.
Long-Term Financial Planning: Utilizing these exemptions effectively supports a more tax-efficient investment strategy, helping you build wealth over the long term without unnecessary tax erosion.
Whether profit earned from sale of land or building or both chargeable to capital gain tax?
Yes, profit earned from the sale of land, building, or both is chargeable to Capital Gains Tax under the Income Tax Act, 1961. However, the tax treatment depends on the holding period of the asset: 1️⃣ Type of Capital Gain: ✔ Short-Term Capital Gain (STCG): If the land/building is sold within 24 monRead more
Yes, profit earned from the sale of land, building, or both is chargeable to Capital Gains Tax under the Income Tax Act, 1961. However, the tax treatment depends on the holding period of the asset:
1️⃣ Type of Capital Gain:
✔ Short-Term Capital Gain (STCG):
If the land/building is sold within 24 months from the date of purchase, the profit is treated as short-term capital gain (STCG).
Taxable as per your income tax slab rate.
✔ Long-Term Capital Gain (LTCG):
-
-
See lessIf the land/building is held for more than 24 months, the profit is classified as long-term capital gain (LTCG).
Taxed at 20% with indexation benefit under Section 112.