1. Ramu purchased gold on 1/1/2009 for `7 lakhs and sells this gold for ` 10 lakhs on
1/1/2011. Selling expenses have been 1% of the sale price. In addition, Ramu had
purchased a house for `20 lakhs on 1/1/2009. On 1/1/2011 he had constructed one
additional floor at the cost of ` 5 lakhs. On 1/1/2011 this house has been sold off for ` 51
lakhs and selling expenses have been ` 1 lakhs.Also, Ramuhad purchased 100 shares
of WIPRO industries limited for `300 each on 15/4/2010. On 15/3/2011 he had sold all
the shares for `410 each and brokerage paid has been 1%.
Ramu has purchased a land on 1/4/1981 for ` 50,000 and constructed one floor on this land at
the cost of `3,00,000 on 1/1/91. He constructed one additional floor on this on 1/1/2001 at the
cost of ` 7,00,000. The full house has been sold on 1/1/2011 for ` 45,00,000 and selling
expenses have been `75,000. Calculate capital gains.
Ramu has purchased a land on 1/4/1979 for ` 1,00,000 this has been sold for ` 8,00,000 on
1/1/2011 and selling expenses have been `10,000. FMV of land as on 1/4/1981 is `1,20,000.
Calculate the capital gains
Ramu has purchased a land on 1/4/1975 for ` 75,000 and constructed one floor on this land at
the cost of `2,00,000 on 1/1/79. On 1/4/1981 the FMV of the house has been `4,11,000. He
constructed one additional floor on this on 15/7/1998 at the cost of ` 11,00,000. On 15/3/2011
the house has been sold for ` 75,00,000. Calculate the capital gains.
2. Ramuhas purchased a land on 1/4/1979 for ` 1,00,000 and constructed one floor on this
land at the cost of `1,25,000 on 1/1/80. On 1/4/1981 the FMV of the house has been
`2,25,000. He constructed one additional floor on this on 15/7/1990 at the cost of `
4,00,000. On 15/3/1998 the house has been gifted to his son on his birthday. Son
constructed one more floor on this at the cost of `7,50,000 on 31/3/2000 and sold the
house for ` 87,00,000 on 1/1/2011. Calculate the capital gains.
Solution:
Calculation of capital gains for the AY 2011-2012 ie PY 2010-2011
Sale consideration
87,00,000
Less: Selling expenses
NIL
Net sale consideration
87,00,000
Less: Indexed cost of acquisition
2,25,000/331
X
4,83,308
711
Less:
Indexed
cost
of (before
Ignore
improvement
Less:
1/4/1981)
Indexed
cost
of 4,00,000/182
improvement
Less:
X
15,62,637
X
13,70,823
711
Indexed
cost
of 7,50,000/389
improvement
711
LTCG
52,83,232
3. Mrs. J had purchased gold worth `5 lakhs in the FY 1993-1994. This gold has been
sold in the AY 2011-2012 ie PY 2010-2011 for ` 37 lakhs and selling expenses have
been ` 1 lakhs. Within 3 months from the date of sale she has purchased a
residential house for ` 30 lakhs. Calculate the amount of capital gains and her tax
liability assuming that she has earned ` 15,000 as interest on debentures and she
has deposited ` 21,000 in the PMNRF for availing deduction under section 80G.
Solutions:
Calculations of Capital gains for the AY 2011-2012 ie PY 2010-2011
Sale consideration
37,00,000
Less: Selling expenses
1,00,000
Net sale consideration
36,00,000
Less: Indexed cost of acquisition
5,00,000/244 X 711
LTCG
14,56,967
21,43,033
4. Ramu has 2 houses in the city of Delhi and furnishes you the following particulars for
assets sold and investments done:
Particulars
1st residential house at Gold
Silver
Delhi
Sale consideration
Indexed
cost
10 lakhs
of 4 lakhs
8 lakhs
6 lakhs
7 lakhs
2.5 lakhs
acquisition
Ramuhas purchased the following new assets
Particulars
Date
of Amount
purchase
Residential
house
invested
at 11/1/2011
7 lakhs
Mumbai
Bonds of NHAI
10/1/2011
2.5 lakhs
Ascertain the amount of capital gains chargeable to tax for the AY 2011-2012 ie PY 2010-2011
Solution:
Calculation of taxable capital gains
Particulars
Residential
Gold
Silver
8
6 lakhs
house
Sale consideration
10 lakhs
lakhs
Less: selling expenses
Nil
Nil
Nil
Net sale consideration
10 lakhs
8
6 lakhs
lakhs
Less:
Indexed
cost
of 4 lakhs
acquisition
Capital gains
7
2.5 lakhs
lakhs
6 lakhs
1
3.5 lakhs
lakhs
Capital gains in terms of %
60%
12.5%
58.33%
Order of preference
NA
2
1
Less: exempt u/s 54
6 lakhs
Nil
Nil
Less: exempt u/s 54EC
Nil
1 lakh
1.5 lakhs
Less: exempt u/s 54F
Nil
Nil
1/6
of the net sale consideration
X
3.5
=
58,333
Taxable LTCG
Nil
Nil
1,41,667
CAPITAL GAINS ON TRANSFER OF AGRICULTURE LAND
As per section 2(14) Agriculture Land in rural area is not considered as a capital asset. Rural
agriculture land means land in any area:
(a) Which is 8 kms away from the limits municipality or the cantonment board.
(b) Of the municipality or the cantonment having the population of less than 10,000.
Agriculture Land
Land situated in urban area
Land situated outside urban area ie.
in rural area.
It is treated as a capital asset
It is not treated as capital asset
On transfer of land capital gain is attracted On transfer no capital gain is attracted
but exemption can be availed under
section 54B.
Income from land is agriculture income. Income from land is agriculture income.
Income from the farmhouse, which is Income from farmhouse is treated as
constructed
on
such
immediate
vicinity,
land
is
or
is
regarded
in agricultural income only if land is assessed
as to land revenue.
agriculture income.
Ramuhas an agriculture land which is situated 10 Kms. away from the city of Patiala. This land
was purchased by him in 1979 and for `75,000 but has a FMV of ` 1,25,000 on 1/4/1981. This
land was sold in the AY 2011-2012 ie PY 2008-2009 for ` 12,50,000. On the date of sale he has
invested ` 2,00,000 in the bonds of RECI. Calculate the amount of capital gains.
Solution: Agriculture land situated in rural area is not a capital asset under section 2(14).
Therefore there shall be no capital gains on sale of such agriculture land.
Assume in the above example land was situated in the city of Patiala. Calculate the amount of
capital gains.
Calculations of Capital gains for the AY 2011-2012 ie PY 2010-2011
Sale consideration
Less: Indexed cost of acquisition
12,50,000
1,25,000/100
X
8,88,750
711
LTCG
3,61,250
Less: exemption under section
2,00,000
54EC
Taxable LTCG
1,61,250
Section 10(37): Compulsory Acquisition of Agricultural Land
1) This section provides the exemption from capital gains if agricultural land is compulsorily
acquired by government.
2) Exemption is available to individual and HUF. Further such land should have been used for
2 years or more by HUF or individual or parents of such individual before such acquisition.
3) This exemption is for both LTCG and STCG.
4) Exemption is available for the compensation or enhanced compensation received on or after
1/4/2004. The date of transfer is not at all relevant.
5) Land should be compulsorily acquired by the government and for which compensation is
approved by central government or RBI.
Section 54B: Exemption On Transfer Of Agricultural Land
1) There shall be no capital gains on sale of rural agricultural land as it is not regarded as a
capital asset under section 2(14). Thus this section is applicable only on the capital gain
arising on sale of an urban agricultural land.
2) Exemption is available to Individual only from capital gains, which can be LTCG or STCG.
3) Exemption is available if Individual or his parent uses land for agricultural purposes for 2
years immediately preceding the date of transfer. Thus if land is not used for agricultural
purposes or is used for less than 2 years than exemption shall not be available.
4) Exemption shall be given for the amount of capital gain invested in new agricultural land
within 2 years from date of transfer, which can be in rural area or in urban area.
5) If new agriculture land is also sold within a period of 3 years from date of purchase then
capital gains exempt shall be reduced from its cost of purchase and then capital gains shall
be calculated. On sale of such new asset there shall be STCG. But if new agriculture land is
situated in rural area then there shall be no capital gains.
6) If capital gains is more than the amount invested in new asset then difference can be
deposited in Capital Gains A/c Scheme (in any bank or financial institution) on or before due
date of furnishing the income tax return .
7) Proof of such amount deposited has to be furnished along with income tax return.
If such amount which is deposited with capital gain account scheme is not utilized within
time period specified above for purchase of new asset then such unutilized amount shall
be liable to capital gains tax in the previous year in which period of 2 years from date of
transfer, expires