Good Morning, Good Evening, Good Afternoon, I am your
friend, your elder brother, C.S.
Shreya Gupta.
Today we are starting a very amazing, very new Head of
Income, whose name is Capital Gains.
Till now, whatever discussion we had, everything was
happening above Head of Income.
How many Head of Incomes did I tell in the starting
lecture? Five, which we covered just now, Salary, House
Property, Profit and Gain from Business and Profession.
Then next, Other Source and Capital Gains.
So this is our today's lecture on Capital
Gains. In the next few lectures, we will discuss on Capital
Gains.
Then what is Capital Gains?
What is Capital Gains? Capital Gains, Gains, Gains means
that somewhere I am getting some benefit.
But what is Capital? Sir, let me tell you that this thing,
this Head of Income of yours, on this, Tax.
When is Tax imposed on this? How is it imposed? We will
discuss
this now.
In House Property, we had discussed that when you earn some
rent from the property,
Tax is imposed on it by going to the House Property Head.
Okay, no problem.
What was discussed in Salary Head? If you earn some income
from Salary, then which Head will be taxable? In Salary
Head.
Business and Profession, whatever profits you get from your
business, they go to your business.
Other Source, where nothing is left, that will go to Other
Source.
Even though there are small adjustments of your own, your
own income, but what you get is that it won't go anywhere,
it will go to Other Source.
So which income will go to
Capital Gains, Sir? Which income will go to Capital Gains?
Just think and tell.
Just look at this Headline once.
Just look at the Headline, what is this? Is the Headline
coming behind you? Here, take this.
What does it say? It says that Sonam Kapoor Ahuja sells
Bandra Kurla Complex flat for Rs.
32.5 crores.
She has sold her flat for Rs.
32.5 crores.
Just believe it.
Okay, what is her main business? What is her main work?
What is her main work? Her main work is to act in films.
How much acting is there? What quality is there? We will
not discuss that because once the mouth is open, then what
will come out? We all know from your mouth and my mouth.
So because of this, we are not going to discuss her acting.
But what is her main business? Acting.
Is buying property and selling property her main business?
It is not her main business.
Similarly, her main business is something else.
Similarly, she bought a property for investment purposes.
Let me buy a house for Rs.
25 crores.
When its value increases, we will sell the house and earn
profit.
Her main business is something else.
Her main business is acting.
Money is coming from there.
I just bought a property for investment purposes.
I bought it for Rs.
25 crores.
Later, when its value has increased to Rs.
32.5 crores, after 2, 3, 4, 5 years, I sold that property.
My main business is not buying a house, buying a property
or selling a property.
My main business is something else.
It is just that I am working part time as an investment
activity.
I am buying a house, buying a plot.
All of you must have seen.
For example, a person is in a job.
Slowly, he has collected so much money that he has bought a
house for investment purposes.
Later, he sold that house.
There is a shopkeeper.
There is a business.
There is a business income.
He has collected some money.
The profit that was coming, he started collecting
it. He saw a plot in front of him.
It was good.
He bought that plot.
After 4 years, when the value of that plot increased, he
sold that plot.
These are investment activities.
Buying a house, when its value increases, sell it.
Buying land, when its value increases, sell it.
These are investment activities which are not a part of
your main business.
These are not a part of your main source of income.
The income that you earn from there, which head will that
income go to? It will go to the head of capital gain.
Always keep in mind that your main business is not buying a
plot or selling a plot.
Your main business is not buying a house or selling a house.
Your main business is something else.
you have a business. Maybe you have some other work. Maybe
you take a rental from somewhere.
You take rent.
Your main business is something else.
But here you bought a house for investment purposes.
You sold the house.
So, the profit that you will get in between buying and
selling, this profit will remain taxable in the capital
gains.
In this whole topic, we will discuss
how much taxable it will be? What rates? At what rates will
it be taxable? How much
time? It also happens that if it is short term, then
different rate.
If it is long term, then different rate.
How much cost? Basically, what will be taxable? Sale price.
If you
talk normally, then sale price minus how much I have
acquired.
Now, how much value can we show up? How much value can we
show down? We are going to discuss these things in this
topic.
This topic of discussion will remain in some of our
lectures.
It is not a very big topic.
It is an interesting topic.
It has a lot of relevance from real life.
You must have understood that sometime or the other, you
will also buy a land somewhere.
In India, the best investment instrument is today's rate.
You must have ancestors.
Your ancestors must have bought land in their time.
They must have sold land.
What will they get in return? Capital gain tax.
So, we will discuss this in this whole topic.
Let us take this discussion forward with you.
Let us start for capital gains.
do we need capital gains? The most important thing for
capital gains is that you should have a capital asset.
You should have a capital asset.
Let us read it from the introduction.
We will read it slowly.
There is no hurry.
Just read it as I am saying.
First of all, we have to see what the charging section is.
Like I talk about every head of income, there is a charging
section.
What was there in PGPB? Section 28.
What will be there in this? Section 45.
Section 45 is the charging section of capital gains.
It tells us how taxes have to be imposed.
On which income, capital gain tax will be imposed.
What format will be there? What will be there? How will it
be there? Basically, Income Tax Act gives this power to
section 45 that you go and whatever capital gain income you
see, you catch it and impose tax on it.
This is the point.
Section 45 has got this authority to impose tax on capital
gain income.
This is the charging section.
Read section 45 once.
What does it say? It says, wait a minute.
Section 45 provides that any profit and gains arising from
transfer of capital asset effected in the previous year
will be chargeable to income tax under the head capital
gains.
If you had a capital asset, now read two lines of this.
We have understood two to three things.
What is the first thing that we have understood?
The first thing that we have understood is that there is a
word transfer.
We have understood some of these things.
Profit is being gained.
Because of what? Because of transfer.
Now what is this transfer? What comes in transfer? Is it
transfer to sell or some other transfer
comes in transfer? We will think about this.
There will be discussion.
Now only the envelope of capital gain has come.
Its stapler pin has been opened.
Now only the whole letter has to be read.
Profit gain arising from transfer of what? Capital asset.
Only when a capital asset will be transferred, capital gain
will be imposed.
Affected in the previous year will be chargeable to income
tax under the head capital gains.
Thank you.
Let's start with a new topic.
What is the meaning of Capital Asset?
We will study transfer later.
First let's see what is Capital Asset?
Why is it important to study Capital Asset?
It is important to study Capital Asset because Section 45
states that if Capital Asset is transferred, then Capital
Gains will be incurred.
If there is no fall in the definition of Capital Asset,
then should Capital Gain be incurred if I transfer it?
Capital Gain will not be incurred.
Who will be incurred?
Who will be incurred income tax?
Capital Asset will be incurred if it is transferred.
Let's see what is Capital Asset?
Property of any kind held by the SSE whether or not
connected with his business or profession.
If SSE has any kind of property, then its Capital Asset
will be considered.
If you have any kind of property which is related to
business or profession, even if it is a personal property,
it will be considered.
Even if it is a personal property, it will be considered.
For example, I have a phone.
Let's say I have a remote in my personal property.
For example, I have a mobile phone.
Will this also be considered as my personal property?
Personal property is my clothes.
Let's say I am wearing a suit worth 10 lakhs.
Will this also be considered as my personal property?
Are my glasses also my personal property?
If I sell this also, will I incur tax on it?
Sir, I have sold my phone many times.
I have sold my phone many times in my life.
When I go to the shop, they buy my phone.
If I sell my phone tomorrow, will this also be considered
as my Capital Asset?
Will I have to pay income tax on it?
Let's check whether it is a Capital Asset or not.
Till now, we have discussed that any person's property,
whether he uses it in business or not, will be considered
as his property.
However, it does not include stock in trade.
For example, you just said that you have a property,
whether it is related to business or not.
For example, you know that I have my own export house.
I have my own export house.
So, what will be my stock for us?
I will buy a cloth factory.
What will be my stock for the cloth factory?
Stock of raw materials.
I will process it and make finished goods, like I make
finished shirts.
So, when will I have stock of finished goods?
Now, let's assume that I sell this stock in the market.
Now, you have come to the chapter of profit and gain.
If I sell my finished goods in the market, then in which
head should I pay income tax?
In the business head or in the capital gains head?
At least tell me now.
Tax should be paid in the business head.
So, my question to the government is that when I have paid
my tax in the business head, then why are you taking tax
from me in the capital gains head?
I sell my stock in the business head.
I will pay my tax in the business head.
My net profit will be taxed.
So, why will I pay tax again in the capital gains head?
So, this is why the government said that we accept that
your personal property, whatever property you use for
business, whether you use it or not, we consider it as a
capital asset.
But, it is also true that the profit of selling stock is
the profit of business.
So, remove it from here.
So, the definition of stock is capital asset.
It will be removed once, my dear.
Come next.
Your question was that
I have sold my phone many times.
Sometimes, I sell my T-shirt to someone.
For example, what do these cricketers do?
In a cricket match, they have played well.
They have won the World Cup in a match by wearing that
T-shirt.
Later, that T-shirt becomes auctioned.
It becomes auctioned.
Do you understand this?
You must have heard about it.
So, the money that that cricketer got from that auction,
what did he sell?
He sold his personal belongings.
I said personal property.
So, the T-shirt also became a personal property.
He sold that personal property and took the money.
Should it be taxable in his hands or not?
This is the first question.
The second question is that
I go to the market and sell my phone.
I bought it for Rs. 50,000.
I will sell it for Rs. 20,000.
Should it be taxable in my hands for Rs.
20,000 or not?
Question number three.
I bought a fridge.
I used it for 10-15 years.
Later, that fridge stopped cooling the water.
As soon as it stopped cooling the water, my brain started
heating up.
And I sold that fridge.
You say that these are things of personal effect.
If it is a personal property, then it will become a capital
asset.
So, should this fridge also be taxed for the income that I
am selling?
These are three questions.
Let's see what the answer to this is.
The second point is that these are things of personal
effect.
Personal effects, that is to say,
movable property.
Movable means anything that I can move.
For example, this is my mobile.
I can move it from here to here.
I can give it to my director.
Everything is movable.
Car is movable.
Camera is movable.
Table, chair, furniture are movable.
So, he is saying that things of personal effect, like
movable property, including wearing april, t-shirt, the
cricketer's t-shirt is here, wearing april, and furniture
held for personal use by the SSE, or any family member who
is dependent on it, that does not become a part of your
capital asset.
Things of personal effect, including wearing april, movable
property,
held for personal use by the SSE, or any family member who
is dependent on it, that does not become a part of your
capital asset.
And no tax will be imposed on it.
A very big relief has been given by the government.
Otherwise, you can imagine how much tension normal people
face.
These are all normal things.
I want to sell my mobile in the market.
This phone has become old.
I want to sell it in the market.
And what will happen to it?
Income tax will be imposed on it.
Suppose I live below the exemption limit of 2.5 lakhs.
And if I sell my phone here, you will say, you have income.
If I sell my fridge, you will say, you have income.
If I sell the garbage of my house tomorrow, you will say,
you are earning money from the garbage.
The garbageman who gives you money is also your income.
You sold the scrap worth 30 rupees, that is also your
income.
So, this is why the government said, we will have to do one
thing, when you transfer the capital asset, then your
capital gain will be imposed.
Now, from the definition of this capital asset, if we
remove some things,
if we remove these things of personal effect,
then your capital gain will not be imposed on these things.
You enjoy your life, you want to sell your phone, you want
to sell your fridge, you go and enjoy your life,
sell it, any capital gain on you will not be imposed in
that case.
Why will it not be imposed?
Because it is not a part of the capital asset.
It is an asset, but it is not a part of the capital asset.
Sir, you are saying that these things are of personal
effect.
I said, yes, absolutely.
So, tell me one thing about personal effect.
When I got married, my mother-in-law gave me a jewellery
worth 50 lakh rupees.
Sir, you are a boy, she gave you a jewellery.
Yes, I respect
Bappi Lahiri a lot.
I have been a devotee of Bappi Lahiri.
My mother-in-law said, take this son, take this jewellery
worth 50 lakh rupees.
Now, I will go to the market to sell this jewellery worth
50 lakh rupees.
I will get 50 lakh rupees.
Income tax people are following me and when I am going home
with this money, they will stop me there.
They will say,
Mr. Gupta, this jewellery worth 50 lakh rupees that you
have sold, pay tax on it.
What will I say?
It is like this,
Income tax department people,
the thing is that
these are the things of my personal effects.
These are the things of my personal effects.
And your government says,
your government says,
that things of personal effects do not become a capital
asset.
Sir, when it does not become a capital asset, then what is
capital gain?
So, no capital gain tax should be imposed on this 50 lakh
rupees.
So, income tax department people are worried, shocked, sad.
They went to the finance minister madam and said,
Madam, may you be blessed, the next person insulted us in
front of 40 people.
Madam said, is it so?
Then they thought deeply and thought that if we remove all
the things of personal effects, then everything will become
jewellery.
ornaments, gold and silver, people will start saying that
these are things of personal effect.
For people, these will become things of their personal
effect.
And as soon as they make these things of their personal
effect, they will not get any capital gain.
There will be a possibility of fraud.
So the government said, okay, we do not consider things of
personal effect as capital assets.
But we will definitely consider these things as capital
assets.
What is that list? Come here.
That list is jewellery, archaeological collection, drawing,
paintings, sculpture or any other work of art.
Sir, I am telling you that there is a different market for
painting and drawing.
Have you heard of M. F. Hussain? His paintings are sold for
one crore rupees.
Their market is different for paintings and drawings.
People will consider these things of personal effect.
Today, M. F. Hussain bought a painting worth one crore
rupees.
Five years later, he sold it for two crore rupees.
People will say that these are paintings kept at home.
These are things of personal effect. And he quietly earned
one crore rupees.
In that case, what will the government say?
What do you think of us? Have you written anything on your
forehead?
We will also exclude these things of personal effect.
If you sell these things, then they will be considered as
your capital assets.
When they are considered as capital assets, then they will
be taxed.
Yes, they sell T-shirts, mobile phones, cars.
In this case, no capital tax will be imposed on them.
Sir, rural agricultural land is also excluded from the
definition of capital assets.
Let me tell you one thing.
Sir, even today, there are more villages than cities in
this country.
India has always been a country of villagers.
All the people who have progressed have come from villages.
A person from a village will sell himself. He will never
sell his land.
If a farmer from a village is forced to do something, he is
not getting the right crop, and his cow or buffalo dies,
imagine that his cow or buffalo dies, he is not getting the
right price for the crop, he has a daughter at home, he is
getting married, what will he do?
Will he sell his land?
Now he has gone to sell his land, and he has sold his land.
And he is just coming back with money, that here I will buy
a new buffalo, here I will manage my household expenses,
here I will get my daughter married.
As soon as he is coming back with money, he meets Nirmala
Sitaraman on the way, and she says, bring capital tax on
this.
Sir, imagine the condition of a person who needs that
money, and he will pay tax from that money.
As long as he pays tax, his daughter will get married.
Is this true?
Isn't this wrong?
Is it right to trouble an old farmer, according to the
government?
In that case, what will the government say?
They will say, we are sorry that we have kept such an evil
eye on your land.
So, Mr.
Farmer, we do not consider rural agricultural land as a
capital asset.
If you sell your village's land, and you get any profit
from it, then you will not have to pay any income tax on
that money.
Why not?
Because they are not considering it as a capital asset.
Who pays the capital gain tax?
On selling the capital asset.
When I am not considering it as a capital asset, then what
is the point of capital gain?
Did you understand the point?
Did you understand the point, friends?
Here, they have explained the definition of rural, although
I will not discuss it.
In the definition of rural, according to the population, if
the population is up to 10,000, then this much will be
considered.
If it is up to 1,00,000, then this much will be considered.
I do not think there is much need to discuss.
You can read it yourself.
I am just telling you what is included and what is not.
Right now, I am doing your base building.
Right? Right now, we were discussing what are capital
assets.
So, what are capital assets?
They are property of any kind held by the SSE, whether it
is related to business or not.
Property of any kind held by the SSE.
But what is not included in it?
Its stock is not included.
Remove things related to personal effect.
Remove things related to village land.
Remove things related to gold deposit bond.
B point.
Security held by FII.
Have you heard of FII?
FII is an organization that invests money in India's share
market.
For them, their shares, their securities, are considered as
capital assets.
When they sell their shares, they will be taxed with
capital gains.
ULIP is done.
What will you consider ULIP as?
You will consider it as a capital asset.
Come, sir.
Let's go ahead.
Look at this chart.
What is a capital asset and what is not.
Property of any kind.
Property of any kind held by the SSE.
Whether it is related to business or not.
What is not included in it?
What is not included in the definition of capital asset?
Stock is not included.
Why? Because when you sell stock, it will go into business.
It will become your business income.
Second, personal effects.
We have discussed it.
Rural agricultural land.
6.5% gold bond.
And gold deposit bond.
These are your capital gains.
What is a capital asset?
But these things will not come out of it.
Will jewellery come? Yes, sir.
Will archaeological collection, drawing, painting come?
Yes, sir.
These assets are capital assets.
When you sell them in the market, you will get that capital
gain.
My dear.
Okay, sir.
Let's go.