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Unit 12: Income under the Head Capital Gains

Cost of Acquisition (COA) means any capital expense at the time of acquiring capital asset Notes
under transfer, i.e., to include the purchase price, expenses incurred up to acquiring date in
the form of registration, storage etc. expenses incurred on completing transfer.
Cost of improvement is the capital expenditure incurred by an assessee for making any
addition or improvement in the capital asset. It also includes any expenditure incurred in
protecting or curing the title. In other words, cost of improvement includes all those
expenditures, which are incurred to increase the value of the capital asset.

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.

12.9 Keywords

Assessing Officer: It means the Income-Tax Officer or Assistant Commissioner of Income-Tax or
Deputy Commissioner of Income-Tax or Joint Commissioner of Income-Tax or Additional
Commissioner of Income-Tax who is authorized by the Board to exercise or perform all or any
of the powers and functions conferred on, or assigned to an AO under the Income tax Act, 1961.
Capital Asset: It is an asset that has a useful life longer than one year and is not intended for sale
during the normal course of business.

Capital Gain: It means any profit or gains arising from transfer of a capital asset.
Cost of Acquisition (COA): It means any capital expense at the time of acquiring capital asset
under transfer, i.e., to include the purchase price, expenses incurred up to acquiring date in the
form of registration, storage etc. expenses incurred on completing transfer.
Cost of Improvement: It is the capital expenditure incurred by an assessee for making any
addition or improvement in the capital asset.

Depreciation: A method of allocating the cost of a tangible asset over its useful life.
Long Term Capital Assets (LTCA): An asset, which is held by an assessee for 36 months or more,
immediately before its transfer, is called Long Term Capital Assets.

LTCG: The profit on transfer of Long Term Capital Assets is treated as Long Term Capital Gains
(LTCG).
Short Term Capital Assets (STCA): An asset, which is held by an assessee for less than 36 months,
immediately before its transfer, is called Short Term Capital Assets.
STCG: The profit on transfer of Short Term Capital Assets is treated as Short Term Capital Gains
(STCG).

12.10 Review Questions

1. Explain how the word transfer occupies a very important place in capital gain.
2. Prepare a list of transactions which do not constitute transfer.
3. Write a short note on Zero Coupon Bonds.

4. What is Cost of Acquisition?
5. Define Cost of improvement.
6. Discuss in brief the Taxation on Long-term Capital Gains.

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