What is Capital Asset in Income Tax?

Hey buddy. I can tell you, what is capital asset in income tax. Section 2(14) of the Income-tax Act defines the \"capital asset.\" Significant real estate holdings, including homes, vehicles, investment properties, stocks, bonds, and even collectibles, come under capital assets. Let me share more details on it below.

What are Capital Assets In Income Tax?

The term \"Capital Asset\" refers to any property, whether movable or immovable, tangible or intangible, held by an individual or entity. Capital assets include:

1. Land and Building: This can be residential, commercial, or agricultural property.

2. Shares and Securities: Investments in stock markets or financial instruments like bonds, mutual funds, etc.

3. Gold and Jewelry: Personal assets like gold, silver, and other precious metals.

4. Intellectual Property: Rights like patents, copyrights, trademarks, etc.

The key feature of a capital asset is that it is held for investment or personal use for a longer duration, rather than for resale or short-term gains.

When a capital asset is sold or transferred, it may result in capital gains, i.e. the difference between the selling price and the cost of acquisition. Certain capital assets are exempt from tax under specific conditions, such as:

1. Agricultural land

2. Residential property under the Section 54 exemption for reinvestment in housing

I hope you found this helpful.

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Who Pays Capital Gains Tax?

Hi, Dear

You must be thinking about what is capital assets in income tax? I can help you with your query by clarifying it and making it easy for you to decipher. "Capital Gains" is Section 45(1) of the Income Tax Act of 1961. 

According to this section, the following four conditions must be met in order for "Capital Gains" to be taxed. These are the following: -

• There should be a capital asset, i.e. the transferred asset should be a capital asset on the date of the transfer

• Such a capital asset should have been transferred

• The transfer should have been made the year before

• Profits or gains should be realised as a result of the transfer

As a result, it's critical to comprehend what is capital asset in Income Tax Act of 1961. The term 'Capital Asset' is defined under Section 2(14) of the Income Tax Act as 

• Property of any type possessed by an assessee, whether or not associated with his business or profession.

Explanation:- "Property" includes and is presumed to have always included any rights in or in respect to an Indian Company, including management and control rights, as well as any other rights.

• Any securities held by a foreign institutional investor (FII) that has made an investment in such securities which is in compliance with SEBI regulations

The following are not considered "Capital Assets" for the purposes of taxability under "Capital Gains" according to Section 2(14): -

• Any stock in trade, consumable stores, and raw materials held for business purposes 

• Personal effects are the moveable property (including clothing and furniture) held for personal use by the assessee or any member of his family reliant on him, but they do not include jewellery, archaeological collections, drawings, paintings, sculptures, or any other work of art

• Gold Deposit Bonds issued under the Gold Deposit Scheme of 1999; or Gold Monetisation Scheme Deposit Certificates released in 2015

• Agriculture land in India's rural areas

I conclude my answer on capital assets in income tax. Hope you get a clear idea from this.

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