Frequently Asked Questions - Capital Gains
- What is a capital asset, which attracts capital gains?
- What are the capital asset exempt from capital gain taxes?
- What is a short term and long term capital asset?
- What does transfer mean?
- Why is indexation done in case of long term capital gain?
- I have sold a property and made profits. If the sale amount is reinvested in purchase of a site, is my profit exempt from tax?
- If I sell my land will I be taxed?
- I have sold a house for Rs.25 lakh, which had been purchased by me 10 years ago for Rs.8 lakh. Am I required to pay any tax on the profit of Rs.17 lakh earned by me?
“Capital asset” is defined to include property of any kind, whether fixed or circulating, movable or immovable, tangible or intangible.
The following assets are, however, excluded from the definition of “capital assets”:
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"Short-term capital asset” means a capital asset held by an assessee for not more than 36 months immediately prior to its date of transfer. However, in the following cases, an asset, held for not more than 12 months, is treated as short-term capital asset—
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Transfer, in relation to a capital asset, includes sale, exchange or relinquishment of the asset or the extinguishment of any rights therein or the compulsory acquisition thereof under any law [sec. 2(47)].
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In respect of long term capital asset,to neutralize the erosion of value of money over the years the cost index for the year of sale is factored in while calculating the cost of investment so that the impact of inflation is neutralized and only the actual gain to the seller is brought to tax.
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No. For getting exemption the nature of property sold is relevant. If you have sold a residential property, the gain received on sale should be reinvested in another residential property [which may include land and building] to qualify for exemption [section 54].
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Gain from sale of non-agriculture land is taxable as capital gain. Gain from sale of agriculture land is taxable only if it is located within 8 kilometers from the urban limits.
Yes. This profit, which is called capital gain, is taxable subject to certain conditions.
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