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Income From Capital Gains for CFP – 9

Posted by Prashant Shah on July 6, 2011

Deduction on Purchase of Certain Bonds Sec 54EC:

Deduction On Capital Asset Other Than Residential House Property Sec 54F (Important for Examination):

Illustration:

Sailesh sells shares in XYZ Ltd. for a net consideration of Rs. 20 lakh and earns a long-term capital gain of Rs. 15 lakh. Within 3 months, he purchases a new residential house for Rs. 10 lakh. He owns no other house other than the new house. The amount of exemption under sec. 54F that he would be entitled to would be _______.

a)Rs. 7.5 lakh
b)Rs. 10 lakh
c)Rs. 5 lakh
d)None of the above
 
Maya sells shares in PQR Ltd on 14th June, 2006 (off market), for a net consideration of Rs. 20,00,000 and earns a long-term capital gain of Rs. 15,00,000. Within 3 months, she purchases a new residential house for Rs. 10,00,000. She owns no other house other than the new house. Now if Maya were to sell the new house within one year of purchase for Rs. 15,00,000, the tax treatment in the year of sale would be ______.
 
a)Short-term capital gain of Rs. 5,00,000 and Long-term capital gain of Rs. 10,00,000
b)Short-term capital gain of Rs. 5,00,000 and Long-term capital gain of Rs.7,50,000
c)Short-term capital gain of Rs. 7,50,000 and Long-term capital gain of Rs. 5,00,000

Long-term capital gain of Rs. 12,50,000

3 Responses to “Income From Capital Gains for CFP – 9”

  1. Manish said

    Dear sir I have one query we generally know that if seller have a deal with any buyer and if buyer backs out then the earnest money(forfeited amt)will allowed to be deducted from purchase price and thn indexation will be done and capital gain received is chargeable to tax at 20% but wht if the forfeited amt is greater than cost of asset then how can we calculate tax treatment?

  2. Manish said

    Dear sir I have one query in capital gain we know that if seller has the deal with the buyer and if the buyer backs out then the earning amt(forfeited amt) will allowed to be deducted from cost of acqusition and then indextation will be done and whatever capital gain received will be chargeable to tax at the rate of 20% but wht if forfeited amt is greater than cost of acquisition then how can we calculate the tax treatment in this case?if possible I appreciate if u explain this with example.

    • Dear Manish,

      In the case stated by you, following can be concluded as per the Act:
      Cost of acquisition is considered as ‘Nil’
      And any amount received over and above the cost of acquisition is not taxable.

      example: COA = 1,00,000 (acquired in 2000)
      Forfeited amount is 2,00,000

      In this case COA is Nil and rest 1,00,000 is not taxable under any head.

      Regards,
      Prashant V Shah.

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