Interview Questions.

Q1. What Is The Meaning Of Stamp Duty Value And What Is Its Relevance While Computing Capital Gain In Case Of Trfer Of Capital Asset, Being Land Or Building Or Both?

Stamp duty cost me the value followed or assessed or assessable by means of any authority of a State Government for the motive of price of stamp responsibility.

As per phase 50C, at the same time as computing capital gain bobbing up on trfer of land or constructing or each, if the real sale consideration of such land and/or building is less than the stamp duty fee, then the stamp obligation value can be taken as full value of consideration, i.E., as deemed selling rate and capital gain could be computed as a consequence.

Q2. What Is The Meaning Of Capital Asset?

Capital asset is defined to include:

a) Any kind of assets held with the aid of an assesse, whether or not or no longer linked with commercial enterprise or profession of the assesse.

B) Any securities held by means of a FII which has invested in such securities according with the policies made underneath the SEBI Act, 1992.

However, the subsequent gadgets are excluded from the definition of "capital asset":

Any stock-in-exchange, consumable stores, or uncooked materials held by means of someone for the reason of his business or profession. 

E.G., Motor car for a motor vehicle provider or gold for a jewellery service provider, are their stock-in-trade and, therefore, they're not capital property for them.

Personal results of a person, that is to mention, movable belongings including carrying apparels (*) and fixtures held for private use, with the aid of someone or for use with the aid of any member of his family dependent on him. 

(*) However, jewelry, archeological collections, drawings, art work, sculptures, or any work of artwork aren't treated as personal consequences and, subsequently, are included within the definition of capital assets.

Agricultural Land in India, no longer being a land situated:

Within jurisdiction of municipality, notified vicinity committee, town location committee, cantonment board and which has a population of not less than 10,000;

Within range of following distance measured aerially from the local limits of any municipality or cantonment board:

now not being more than 2 KMs, if populace of such vicinity is greater than 10,000 however no longer exceeding 1 lakh;

no longer being more than 6 KMs , if population of such region is more than 1 lakh but not exceeding 10 lakhs; or

no longer being extra than 8 KMs , if population of such place is extra than 10 lakhs.

Population is to be taken into consideration in keeping with the figures of ultimate preceding census of which relevant figures were published before the primary day of the year.

6½% Gold Bonds, 1977 or 7% Gold Bonds, 1980 or National Defence Gold Bonds, 1980 issued with the aid of the Central Government.

Special Bearer Bonds, 1991, issued via the Central Government Gold Deposit Bonds issued beneath Gold Deposit Scheme, 199@

Deposit certificates issued beneath the Gold Monetisation Scheme, 20@

Following points should be saved in thoughts :

The assets being capital asset can also or won't be connected with the business or career of the taxpayer. E.G. Bus used to carry passenger by means of a person engaged within the business of passenger trport will be his  Capital asset.

Any securities held by means of a Foreign Institutional Investor which has invested in such securities in accordance with the policies made under the Securities and Exchange Board of India Act, 1992 will constantly be dealt with as capital asset, subsequently, such securities can not be treated as stock-in-trade. 

Q3. At What Rates Capital Gains Are Charged To Tax?

For provisions in this regard test tutorials on “Tax on Short-Term Capital Gains and Tax on Long-Term Capital Gains”.

Q4. In Respect Of Capital Asset Acquired Before 1st April, 2001 Is There Any Special Method To Compute Cost Of Acquisition?

Generally, cost of acquisition of a capital asset is the cost incurred in acquiring the capital asset. It includes the acquisition consideration plus any expenditure incurred completely for obtaining the capital asset. However, in appreciate of capital asset obtained earlier than 1st April, 2001, the price of acquisition may be better of the real value of acquisition of the asset or honest market value of the asset as on 1st April, 20@This choice isn't to be had in the case of a depreciable asset.

Q5. Is The Benefit Of Indexation Available While Computing Capital Gain Arising On Trfer Of Short-term Capital Asset?

Indexation is a method through which the fee of acquisition/development of a capital asset is adjusted against inflationary upward thrust within the fee of asset . The gain of indexation is available handiest in case of lengthy-time period capital property and isn't to be had in case of brief-term capital belongings.

Q6. What Are The Provisions Relating To Computation Of Capital Gain In Case Of Trfer Of Asset By Way Of Gift, Will, Etc.?

Capital benefit arises if a person trfers a capital asset. Section 47 excludes various tractions from the definition of 'trfer'. Thus, tractions protected below section 47 aren't deemed as 'trfer' and, subsequently, these tractions will not give upward thrust to any capital benefit.  Trfer of capital asset via way of present, will, and so forth., are few important tractions protected in section 4@Thus, if someone items his capital asset to any other man or woman, then no capital advantage will arise within the palms of the man or woman making the gift (*).

If the individual receiving the capital asset by way of manner of present, will, and so on. Subsequently trfers such asset, capital gain will arise in his hands. Special provisions are designed to compute capital profits in the hands of the man or woman receiving the asset through manner of present, will, and so forth. In one of these case, the cost of acquisition of the capital asset could be the fee of acquisition to the preceding owner and the period of maintaining of the capital asset can be computed from the date of acquisition of the capital asset with the aid of the previous owner.

(*) As regards the taxability of gift in the fingers of character receiving the gift, separate provisions are designed below segment fifty six.

Q7. What Is Long-term Capital Gain And Short-time period Capital Gain?

Gain arising on trfer of long-term capital asset is called as lengthy-term capital gain and benefit arising on trfer of brief-time period capital asset is named as brief-time period capital advantage. However, there are a few exceptions to this rule, like advantage on depreciable asset is continually taxed as brief-time period capital gain.

Q8. Why Capital Gains Are Classified As Short-term And Long-time period?

The taxability of capital gain depends on the character of gain, i.E. Whether or not quick-term or lengthy-time period. Hence to determine the taxability, capital gains are categorised into brief-term capital advantage and lengthy-term capital benefit. In different words, the tax quotes for long-term capital benefit and brief-term capital advantage are exclusive. Similarly, computation provisions are exclusive for lengthy-term capital gains and short-term capital gains.

Q9. Are Any Capital Gains Exempt Under Section 10?

Section 10 provides list of earning which might be exempt from tax Amongst those the fundamental exemptions regarding capital profits are indexed below:

Section 10(33) : Long-term or brief-time period capital benefit arising on trfer of devices of Unit Scheme, 1964 (US 64) (trferred on or after 1-4-2002).

Section 10(37) : An character or Hindu Undivided Family (HUF) can claim exemption in respect of capital gain bobbing up on trfer of agricultural land located in an city  area by using way of compulsory acquisition. This exemption is to be had if the land changed into utilized by the taxpayer (or by way of his dad and mom inside the case of an character) for agricultural motive for a length of two years immediately preceding the date of its trfer .

Section 10(37A) : An character or Hindu Undivided Family (HUF) can claim exemption in recognize of capital gain springing up on trfer of land or constructing or both underneath Land Pooling Scheme underneath the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 20@This exemption is to be had if man or woman or HUF became owner of such land as on 02-06-20@[Inserted by the Finance Act 2017 w.E.F. 01-04-2015].

Section 10(38) : Long-time period capital advantage arising on trfer of fairness shares or units of fairness orientated mutual fund (*) or a unit of a business agree with aside from a unit allotted by way of the believe in trade of shares of a special reason vehicle as referred to in segment forty seven(xvii), could be exempt from tax,

if the following situations are satisfied:

The asset trferred must be equity stocks of a organization or gadgets of an fairness oriented mutual fund or a unit of a business trust other than a unit allotted by means of the trust in exchange of stocks of a special purpose car as mentioned in segment four@

The traction have to be prone to securities traction tax (STT) on the time of trfer.

Such asset ought to be a long-term capital asset.

Trfer have to take area on or after October 1, 20@

Note: Any long-time period capital advantage springing up from a traction undertaken in identified stock exchange placed in an International Financial Service Center will be exempt from tax. Such exemption is to be had if such traction is undertaken in overseas present day and even if no STT is paid on such traction.

Long term capital gain exemption on trfer of fairness proportion received or on after 01-10-2004 shall be available only if the purchase of proportion is chargeable to STT. However, the exemption shall preserve in real cases wherein the STT could not had been paid like acquisition of proportion in IPO, FPO, bonus or right problem with the aid of a indexed enterprise, acquisition with the aid of non-resident in accordance with FDI policy, and many others. [Inserted by Finance Act 2017]

(*) Equity oriented mutual fund me a mutual fund specified below segment 10(23D) and 65% of its investible price range, out of overall proceeds of such fund are invested in fairness stocks of domestic groups.

Q10. Are There Any Bonds In Which I Can Invest My Capital Gains To Claim Tax Relief?

Yes, as consistent with phase 54EC you may claim tax remedy by means of making an investment the lengthy-time period capital profits within the bonds issued by way of the National Highway Authority of India or by means of the Rural Electrification Corporation Limited. The investment need to be made inside a duration of 6 months from the date of trfer of capital asset and bonds have to no longer be redeemed before 3 years. This benefit can not be availed in respect of quick-term capital advantage. Maximum quantity which qualifies for funding might be Rs. 50,00,zero@Thus, deduction underneath phase 54EC cannot be claimed for extra than Rs. 50,00,000. 

Q11. I Have Sold A House Which Had Been Purchased By Me five Years Ago. Am I Required To Pay Any Tax On The Profit Earned By Me On Account Of Such Sale?

House bought by you is a protracted-term capital asset. Any gain arising on trfer of capital asset is charged to tax beneath the top “Capital Gains”. Income-tax Law has prescribed the method of computing capital advantage springing up resulting from sale of capital assets. Thus, to check the taxability for your case, you need to compute capital advantage through following the policies laid down in this regard, and if the result is advantage, then the equal could be liable to tax.

Q12. If Any Undisclosed Income [in The Form Of Investment In Capital Asset] Is Declared Under Income Declaration Scheme, 2016, Then What Should Be The Cost Of Acquisition Of Such Capital Asset?

The honest marketplace fee of the asset as on 1st June, 2016 [which has been taken into account for the purpose of said declaration Scheme, 2016] shall be deemed as price of acquisition of the asset. [This provision is applicable w.E.F. 1-4-2017]