Capital Gains

4.5 Sections 45 to 55A deal with the provisions relating to computation of income from capital gains. Gains arising from the transfer of a capital asset are either short-term or long-term depending upon the period for which the assets giving rise to capital gains were held by the tax payer. A gain is short term if the asset was held for a period upto 36 months. In the case of share of a company, listed security, unit of Unit Trust of India or of any other specified mutual fund, this period is 12 months. All other gains i.e. those arising from assets held for more than this period are called 'Long-term capital gains'.

4.5.1 Capital gain is computed by deducting from the full value of transfer consideration the following:-

1. the cost of acquisition (or the written down value) of and cost of improvement in the asset;
2. the amount of expenditure incurred in connection with such transfer.

The resultant amount in case of short term capital gains is taxable in full at the normal rate of taxation applicable to the tax payer.

4.5.2 In case of the following self-generated assets where there is no cost incurred by the assessee, the law provides for the cost of acquisition to be taken as 'NIL' :-

i. Goodwill or a right to manufacture produce or process any article or thing.

ii. Tenancy rights

iii. Stage carriage permit

iv. Loom hours

4.5.3 In case of slump sale of an undertaking or a division thereof, its net worth is to be taken as cost of acquisition. This cost of acquisition is not to be indexed as stated in para 4.5.4.

4.5.4 There are special provisions for computation of long term capital gains. In such cases, the actual cost of acquisition and the cost of improvement of the asset is adjusted to take account of inflation in terms of the Cost Inflation Index which is notified by the Central Government every year. For those assets which are
acquired prior to 1st April, 1981, the actual cost can be taken to be its fair market value as on 1st April, 1981 which is than adjusted for inflation in the same manner. The notified cost inflation index is as under:-

4.5.5 Long term capital gains computed after taking into consideration the indexed cost of acquisition and/or cost of Irnprovement is taxable for and from the assessment year 1988-89 at the flat rate of 20% irrespective of the residential status of the assessee. Exceptions are made in the case of certain categories of non-residents and NRIs (Refer para 7.3.4 and 11.3). In respect of gains arising from transfer of listed securities or unit tax so computed @.20% will be limited to 10% of capital gain worked out without indexation benefit.

No indexation benefit is available on bonds and deben­tures as also in respect of Global Depository Receipts purchased by a resident employee under ESOP in foreign currency.

4.5.6 In case of non-residents, protection against loss arising from fluctuation in rupee value is provided in computation of capital gains if the share or debenture of an Indian company was acquired by utilising foreign currency. This is done to ensure that the amount of capital gains chargeable to tax is not influenced by the exchange rate fluctuation and represents only the accretion in value. The manner of granting such protection is mentioned in para 7.3.1 of Chapter VII.

4.5.7 Transfer of a capital asset in a scheme of amalgamation or demerger is not regarded as a transfer for the purpose of capital gains when the amalgamated or the resulting company is an Indian company. Further, transfer of a capital asset being shares in Indian companies from one foreign company to another, in a scheme of amalgamation or demerger would not be regarded as a transfer if certain conditions are satisfied (para 7.3.2). Exemption from tax is also provided, subject to fulfillment of certain condition, when assets are transferred as a result of succession of a sole proprietory concern or a firm by a company.

4.5.8 In case the capital gain arising from transfer of an asset is used for acquiring similar assets within a specified period, the whole or the proportionate amount of capital gain is not included in the income depending upon whether the whole of the capital gains is so used or only part of it is used for acquiring a new asset. Such cases are gains from residential house, agricultural land and from transfer of industrial undertaking (For details sections 54, 54B and 54G may be referred to). Gains from any long term asset if used for purchase or construction of residential house where the person has only one residential house is also exempt (Sec. 54F). Similarly gain arising from transfer of any long-term capital asset is exempt-wholly or proportionately as the case may be-if the net consideration in respect of such transfer is wholly or partly invested, within a period of six months, in any of the bonds, debentures, shares of a public company or units of a mutual fund specified by the Board for the purpose of Section 54EA and notified in the official gazette. The assessee has the option to invest only the amount of capital gain in assets specified by the Board for the purpose of Section 54EB in which case the gain will be wholly or proportionately exempt depending upon whether whole or part of the gain is so invested. The new assets cannot be transferred or converted into money within three years (if the net consideration was invested) and within seven years (if the capital gain only was invested). In the event of such transfer or conversion, the gains exempted on investment are brought to tax in the year of transfer or conversion of new assets and Rural Development or by the National Highways Authority of Indian which are redeemable after five years. However gains arising from transfers after 31.3.2000 will be required to be invested only in bonds issues by National Bank for Agriculture.

For the assessment year 2009-2010 the basic calculation and tax plan to easy calculations of your income with all savings and save your labour work. This is calculator is easy to operation and it is excel base. For more information regarding Tax plan next calculator for Assessment year 2010-2011 are coming soon. Watch regularly for further updates.

Income Tax Calculator

Instructions for filling out FORM ITR-1
1. Legal status of instructions
These instructions though stated to be non-statutory, may be taken as guidelines for filling the particulars in this Form. In case of any doubt,
please refer to relevant provisions of the Income-tax Act, 1961 and the Income-tax Rules, 1962.
2. Assessment Year for which this Form is applicable
This Form is applicable for assessment year 2009-2010 only.
3. Who can use this Form
This Form can be used by an individual whose total income during the previous year i.e., financial year 2008-09 includes income chargeable to
income-tax under the head “salaries” or income in the nature of family pension as defined in the Explanation to clause (iia) of section 57 but does
not include any other income except income by way of interest chargeable to income-tax under the head “income from other sources”. There
should not be any exempt income other than agriculture income and interest income. It may please be noted that a person who is entitled to use
this form shall not use Form ITR-2. Further, a person in whose income the income of other person like his/ her spouse, minor child, etc. is to be
clubbed is also not entitled to use this form.
4. Annexure-less Form
No document (including TDS certificate) should be attached to this form. Official receiving the return has been instructed to detach all documents
enclosed with this form and return the same to the assessee.
5. Manner of filing this Form
This Form can be submitted to the Income Tax Department in any of the following manners, -
(i) by furnishing the return in a paper form;
(ii) by furnishing the return electronically under digital signature;
(iii) by transmitting the data in the return electronically and thereafter submitting the verification of the return in
Form ITR-V;
(iv) by furnishing a bar-coded paper return.
Where the form is furnished in the manner mentioned at 5(iii), you need to print out two copies of Form ITR-V. Both copies should be verified by
the assessee and submitted to the Income-tax Department. The receiving official shall return one copy after affixing the stamp and seal.
6. Filling out the acknowledgement
Where the form is furnished in the manner mentioned at 5(i) or 5(iv), acknowledgement slip attached with this Form should be duly filled out.
7. Form not to be filled in duplicate
This form is not required to be filed in duplicate.
8. Intimation of processing under section 143(1)
The acknowledgement of the return is deemed to be the intimation of processing under section 143(1). No separate intimation will be sent to the
taxpayer unless there is a demand or refund.
9. Codes for filling out this Form
Some of the details in this Form have to be filled out on the basis of the relevant codes. These are as under:-
(i) The code (to be filled in the section “Filing Status” on first page) for sections under which the return is filed are as under:-
Sl.No. How the return is filed Code
i. Voluntarily before the due date 11
ii. Voluntarily after the due date 12
iii. In response to notice under section 142(1) 13
iv. In response to notice under section 148 14
v. In response to notice under section 153A/153C 15
(ii) In item No.24, the details of following transactions, if any, entered by you during the financial year 2008-09 are to be entered. (If a
transaction is not entered, please leave blank the relevant column in this item).
Sl.No. Code Nature of transaction
1. 001 Cash deposits aggregating to ten lakh rupees or more in a year in any savings account by you
maintained in a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applied
(including any bank or banking institution referred to in section 51 of that Act)
2. 002 Payment made by you against bills raised in respect of a credit card aggregating to two lakh rupees or
more in a year.
3. 003 Payment made by you of an amount of two lakh rupees or more for purchase of units of Mutual Fund.
4. 004 Payment made by you of an amount of five lakh rupees or more for acquiring bonds or debentures
issued by a company or institution.
5. 005 Payment made by you of an amount of one lakh rupees or more for acquiring shares issued by a
company.
6. 006 Purchase by you of any immovable property valued at thirty lakh rupees or more.
7. 007 Sale by you of any immovable property valued at thirty lakh rupees or more.
8. 008 Payment made by you of an amount of five lakh rupees or more in a year for investment in bonds issued
by Reserve Bank of India.
10. Obligation to file return
Every individual has to furnish the return of his income if his total income before allowing deduction under Chapter VI-A (i.e., if his gross total
income referred to in item 3 of this Form) exceeds the maximum amount which is not chargeable to income tax [Rs. 1,50,000/- in case of
individuals below the age of 65 years (other than women), Rs. 1,80,000/- in case of women below the age of 65 years, and Rs. 2,25,000/- in case
of individuals who are of the age of 65 years or more at any time during the financial year 2008-09] .
11. Guidance for filling out the forms
Most of the details to be filled out in this form are self-explanatory. However, some of the details mentioned below are to be filled out as
explained hereunder:-
(a) e-mail address and phone number are optional;
(b) In “employer category”, Government category will include Central Government/ State Governments employees. PSU category will
include public sector companies of Central Government and State Government;
(c) In item 1, fill the details of salary/ pension as given in TDS certificate (Form 16) issued by the employer. However, if the
income has not been computed correctly in Form No. 16, please make the correct computation and fill the same in this item. Further,
in case there were more than one employer during the year, please furnish in this item the details in respect of total salaries from
various employers.
(d) In item 2(a), please fill the details of family pension, if any, received by you during the year. In item 2(b), please furnish the details
of income by way of interest which is chargeable to income-tax under the head “income from other sources”. Exempt interest
income shall not be filled in this item but be filled in item No.25.
(e) In item 4, fill the details of deductions allowable under following sections of Chapter VI-A as under:-
(i) Section 80C (Some of the major items for deduction under this section are- amount paid or deposited towards life
insurance, contribution to Provident Fund set up by the Government, recognised Provident Fund, contribution by the
assessee to an approved superannuation fund, subscription to National Savings Certificates, tuition fees, payment/
repayment for purposes of purchase or construction of a residential house and many other investments)(for full list, please
refer to section 80C of the Income-tax Act) (Please note that as provided in section 80CCE, aggregate amount of deduction
under section 80C, 80CCC and 80CCD shall not exceed one lakh rupees).
(ii) Section 80CCC (Deduction in respect of contributions to certain pension funds)
(iii) Section 80CCD (Deduction in respect of contributions to pension scheme of Central Government)
(iv) Section 80D (Deduction in respect of Medical Insurance Premium)
(v) Section 80DD (Deduction in respect of maintenance including medical treatment of dependent who is a person with
disability)
(vi) Section 80DDB (Deduction in respect of medical treatment, etc.)
(vii) Section 80E (Deduction in respect of interest on loan taken for higher education)
(viii) Section 80G (Deduction in respect of donations to certain funds, charitable institutions, etc.)
(ix) Section 80GG (Deduction in respect of rents paid)
(x) Section 80GGA (Deduction in respect of certain donations for scientific research or rural development)
(xi) Section 80GGC (Deduction in respect of contributions given by any person to political parties)
(xii) Section 80U (Deduction in case of a person with disability)
(f) In item No. 8a, calculate the tax liability on the income which includes the agricultural income (i.e., income as per item 7). In item
8b, compute the tax liability on the income which is aggregate of Rs. 1.50 lakh and net agriculture income. The tax liability has to be
computed for items 8a and 8b at the rates given as under:-
(i) In case of individuals (other than women and individuals who are of the age of 65 years or more at any time during the
financial year 2008-09) -
Income (In Rs.) Tax Liability (In Rs.)
Upto Rs. 1,50,000 Nil
Between Rs. 1,50,001 - Rs. 3,00,000 10% of income in excess of Rs. 1,50,000
Between Rs. 3,00,001 – Rs. 5,00,000 Rs. 15,000 + 20% of income in excess of Rs. 3,00,000
Above Rs.5,00,000 Rs. 55,000 + 30% of income in excess of Rs. 5,00,000
(ii) In case of women (other than women who are of the age of 65 years or more at any time during the financial year 2008-
09) -
Income (In Rs.) Tax Liability (In Rs.)
Upto Rs. 1,80,000 Nil
Between Rs. 1,80,001 - Rs. 3,00,000 10% of income in excess of Rs. 1,80,000
Between Rs. 3,00,001 – Rs. 5,00,000 Rs. 12,000 + 20% of income in excess of Rs. 3,00,000
Above Rs.5,00,000 Rs. 52,000 + 30% of income in excess of Rs. 5,00,000
(iii) In case of individuals who are of the age of 65 years or more at any time during the financial year 2008-09-
Income (In Rs.) Tax Liability (In Rs.)
Upto Rs. 2,25,000 Nil
Between Rs. 2,25,001 – Rs. 3,00,000 10% of income in excess of Rs. 2,25,000
Between Rs. 3,00,001 – Rs. 5,00,000 Rs. 7,500 + 20% of income in excess of Rs. 3,00,000
Above Rs.5,00,000 Rs. 47,500 + 30% of income in excess of Rs. 5,00,000
(g) In item 9b, fill the details of surcharge at the rate of ten per cent of item No.9a, if the total income as per item No.5 exceeds ten lakh
rupees. However, such surcharge shall not exceed the amount being the difference of total income and ten lakh rupees.
(h) In item No. 9c, calculate the education cess including secondary and higher education cess at the rate of three per cent of [item
No.9a + item No. 9b]
(i) In item No. 10, claim the relief, if any, allowable under section 89 in respect of arrears or advances of salary received during the
year.
(j) item 20- Please quote the MICR code of the bank if you desire to receive the refund through electronic clearing system (ECS).
However, it may not be possible to issue the refund in all cases through ECS since the ECS facility is not available across the
country.
(k) In items 21 and 22, please furnish the details in accordance with Form 16 issued by the employer(s) in respect of salary income and
Form 16A issued by a person in respect of interest income. Further in order to enable the Income Tax Department to provide
accurate, quicker and full credit for taxes deducted at source, the taxpayer must ensure to quote the Unique Transaction Number
(UTN) in respect of every TDS transaction. In general the UTN would be printed on the TDS certificate issued by the deductor.
However, in case it is not available on the certificate, the taxpayer should separately obtain the UTN either from the deductor or
from the website of National Securities Depository Limited (NSDL) at http://www.tin-nsdl.com .
(l) Items 27 and 28 - This return can be prepared by a Tax Return Preparer (TRP) also in accordance with the Tax Return Preparer
Scheme, 2006 dated 28th November, 2006. If the return has been prepared by him, the relevant details have to be filled by him in
item No.26 and the return has to be countersigned by him in the space provided in the said item. The Tax Return Preparer is entitled
to a maximum fees of Rs. 250/- from the taxpayer. TRP is also entitled to a reimbursement from the Government for following three
years as under:-
(i) 3 per cent of the tax paid on the income declared in the return for the first eligible assessment year (first eligible assessment
year means the assessment year if no return has been furnished for at least three assessment years preceding to that
assessment year);
(ii) 2 per cent of the tax paid on the income declared in the return for the second eligible assessment year (second eligible
assessment year means the assessment year immediately following the first eligible assessment year);
(iii) 1 per cent of the tax paid on the income declared in the return for the third eligible assessment year (third eligible assessment
year means the assessment year immediately following the second eligible assessment year);
For these three eligible assessment years, the TRP will be eligible for the fee from the taxpayer to the extent of the amount by which
Rs. 250/- exceeds the amount of reimbursement receivable by him from the Government.