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Unit 12: Income under the Head Capital Gains

Section 10(33) of Income Tax Act provides for exemption of income arising from transfer Notes
of units of the US 64 (Unit scheme 1964).
Section 10(36) of Income Tax Act provides that income arising from transfer of eligible
equity shares held for a period of 12 months or more shall be exempt.
The Finance Act 2004 has introduced section 10(38) of the Income Tax Act which provides
that no capital gains shall arise in case of transfer of equity shares held as a long term
capital asset by an individual or HUF w.e.f. 01.04.2005 provided such a transaction is
chargeable to ‘securities transaction tax’.

Self Assessment

State whether the following statements are true or false:
21. If cost of new asset is greater than the net consideration received, the entire capital gain is
exempt.
22. If any long term capital asset is transferred before 1.4.2000 and out of the consideration,
investment in specified bonds/debentures/shares is made within 6 months of the date of
transfer then exemption from capital gains is available as computed in Section 54F.
23. Section 54EC has been introduced from assessment year 2002–2003 onwards.
24. Loss under Long Term Capital Gains cannot be set off against any income under any other
head but can be carried forward for 8 assessment years and be set off against capital gains
in those assessments.

12.7 Computation of Capital Gains in Respect of Depreciable Assets

(Section 50)

Income Tax Act does not defines the term depreciation. However depreciation means a permanent
delivery in the original cost of the asset due to wear and tear, constant use, new technology etc.
In Income Tax Act depreciation is provided on only four types of assets:
1. Buildings
2. Furniture

3. Machinery and plant
4. Intangible Assets
For calculating depreciation different blocks are made based on the name of asset and then the
rate of depreciation, thus a block will contain only that asset which will have the same name and
same depreciation.
Depreciation = (WDV of the block as on 1 April of PY + Addition to the block – Selling price of
st
the assets sold) × Depreciation rate.
If an asset is used for less than 180 days during a P.Y. then only ½ of the depreciation will be
provided on that asset.

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