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Capital Gains Tax Interview Questions & Answers - Learning Mode
COOLINTERVIEW.COM TAX INTERVIEW QUESTIONS CAPITAL GAINS TAX INTERVIEW QUESTIONS QUESTIONS & ANSWERS - LEARNING MODE

Capital Gains Tax Interview Questions & Answers - Learning Mode

Capital Gain tax as name suggests it is tax on gain in capital. If you sale property, shares, bonds & precious material etc. and earn profit on it within predefined time frame you are supposed to pay capital gain tax. The capital gain is the difference between the money received from selling the asset and the price paid for it. Capital gain tax is categorized into short-term gains and long-term gains. The Long-term Capital Gains Tax is charged if the capital assets are kept for more than certain period 1 year in case of share and 3 years in case of property. Short-term Capital Gains Tax is applicable if these assets are held for less than the above-mentioned period. Rate at which this tax is applied varies based on investment class.

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Capital Gains Tax Interview Questions & Answers - Learning Mode
Try Capital Gains Tax Interview Questions & Answers - Exam Mode
Question: ​What incomes are charged to tax under the head "Capital Gains"?

Answer: Any profit or gain arising from transfer of a capital asset during the year is charged to tax under the head ?Capital Gains?.​ Source: CoolInterview.com
Question: ​Are there any bonds in which I can invest my capital gains to claim tax relief?

Answer: ​​​Yes, as per section 54EC​ you can claim tax relief by investing the long-term capital gains earned by you in the bonds issued by the National Highway Authority of India or by the Rural Electrification Corporation Limited. The investment should be done within a period of 6 months and bonds should not be redeemed before 3 years.
This benefit cannot be availed in respect of short-term capital gain. Source: CoolInterview.com
Question: ​What is the meaning of the term "Short-term Capital Asset"?

Answer: Any capital asset held by a person for a period of not more than 36 months immediately preceding the date of its transfer will be a short-term capital asset.

However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India, units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 mo Source: CoolInterview.com
Question: ​What is the meaning of Capital Asset?

Answer: Capital Asset is defined to include:

a) Any kind of property held by an assesse, whether or not connected with business or profession of the assesse.

b) Any securities held by a FII which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.

However, the following items are excluded from the definition of "capital asset":

Any stock-in-trade, consumable stores, or raw materials held by a person for the purpose of his busi Source: CoolInterview.com
Question: What is the difference between Long-term Capital Gain and Short-term Capital Gain?

Answer: Gain arising on transfer of long-term capital asset is termed as long-term capital gain and gain arising on transfer of short-term capital asset is termed as short-term capital gain. However, there are a few exceptions to this rule, like gain on depreciable asset is always taxed as short-term capital gain.​​​ Source: CoolInterview.com
Question: ​What are the provisions relating to computation of Capital Gain?

Answer: Capital Gain arises if a person transfers a capital asset. section 47 excludes various transactions from the definition of 'transfer'. Thus, transactions covered under section 47 are not deemed as 'transfer' and, hence, these transactions will not give rise to any capital gain. Transfer of capital asset by way of gift, will, etc., are few major transactions covered in section 47. Thus, if a person gifts his capital asset to any other person, then no capital gain will arise in th Source: CoolInterview.com
Question: ​What is the meaning of stamp duty value and what is its relevance while computing capital gain in case of transfer of capital asset, being land or building or both?​

Answer: Stamp duty value means the value adopted or assessed or assessable by any authority of a State Government for the purpose of payment of stamp duty.

As per section 50C​ , while computing capital gain arising on transfer of land or building or both, if the actual sale consideration of such land and/or building is less than the stamp duty value, then the stamp duty value will be taken as full value of consideration, i.e.,as deemed selling price and capital gain will be computed accordi Source: CoolInterview.com
Question: What is the meaning of the term "long-term capital asset"

Answer: Any capital asset held by a person for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.

However, in respect of certain assets like shares, units of specified mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months. Source: CoolInterview.com
Question: ​Why Capital Gains are classified as short-term and long-term?

Answer: The taxability of capital gain depends on the nature of gain, i.e. whether short-term or long-term. Hence to determine the taxability, capital gains are classified into short-term capital gain and long-term capital gain. In other words, the tax rates for long-term capital gain and short-term capital gain are different. Similarly, computation provisions are different for long-term capital gains and short-term capital gains.​ Source: CoolInterview.com
Question: As per the Income-tax Law, gain arising on transfer of capital asset is charged to tax under the head "Capital gains". What constitutes "transfer" as per Income-tax Law?

Answer: Generally, transfer means sale, however, for the purpose of Income-tax Law transfer means the act of giving up your right on an asset. Thus, under Income-tax Law transfer includes sale, exchange or relinquishment of the asset or extinguishment of any rights therein or compulsory acquisition of asset under any law, etc.​ Source: CoolInterview.com
Question: I have sold a house which had been purchased by me 5 years ago. Am I required to pay any tax on the profit earned by me on account of such sale?

Answer: House sold by you is a capital asset. Any gain arising on transfer of capital asset is charged to tax under the head "Capital Gains". Income-tax Law has prescribed the method of computing capital gain arising on account of sale of capital assets. Thus, to check the taxability in your case, you have to compute capital gain by following the rules laid down in this regard, and if the result is gain, then the same will be liable to tax.​ Source: CoolInterview.com
Question: ​Is there any benefit available in respect of re-investment of capital gain in any other capital asset?

Answer: A taxpayer can claim exemption from certain capital gains by re-investing the capital gain into specified asset. The following table highlights the assets in respect of which the benefit of re-investment is available:

Section under which benefit is available
Gain eligible for claiming exemption
Asset in which the capital gain is to be re-invested to claim exemption:-

Section 54
Long-term capital gain arising on transfer of residential house property.
Gain to be re-inv Source: CoolInterview.com
Question: ​Are there any bonds in which I can invest my capital gains to claim tax relief?

Answer: ​​​Yes, as per section 54EC​ you can claim tax relief by investing the long-term capital gains in the bonds issued by the National Highway Authority of India or by the Rural Electrification Corporation Limited. The investment should be made within a period of 6 months from the date of transfer of capital asset and bonds should not be redeemed before 3 years. This benefit cannot be availed in respect of short-term capital gain. Maximum amount which qualifies for investment Source: CoolInterview.com
Question: ​What is the meaning of the term "Long-term Capital Asset"?

Answer: Any capital asset held by a person for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.

However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India, units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 3 Source: CoolInterview.com
Question: ​What is the meaning of the term "short-term capital asset"?

Answer: Any capital asset held by a person for a period of not more than 36 months immediately preceding the date of its transfer will be a short-term capital asset.

However, in respect of certain assets like shares, units of specified mutual fund, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds the period of holding to be considered is 12 months instead of 36 months. Source: CoolInterview.com
Question: What is long-term capital gain and short-term capital gain?

Answer: Gain arising on transfer of long-term capital asset is termed as long-term capital gain and gain arising on transfer of short-term capital asset is termed as short-term capital gain. However, there are a few exceptions to this rule, like gain on depreciable asset is always taxed as short-term capital gain. Source: CoolInterview.com
Question: ​As per the Income-tax Law, gain arising on transfer of capital asset is charged to tax under the head ?Capital gains?. What constitutes ?transfer? as per Income-tax Law?

Answer: Generally, transfer means sale, however, for the purpose of Income-tax Law "Transfer?, in relation to a capital asset, includes:-

i. Sale, exchange or relinquishment of the asset;

ii. Extinguishment of any rights in relation to a capital asset;

iii. Compulsory acquisition of an asset;

iv. Conversion of capital asset into stock-in-trade;

v. Maturity or redemption of a zero coupon bond;

vi. Allowing possession of immovable properties to the buyer in part p Source: CoolInterview.com
Question: At what rates capital gains are charged to tax?

Answer: ​For provisions in this regard check tutorials on ?Tax on Short-Term Capital Gains and Tax on Long-Term Capital Gains?.​ Source: CoolInterview.com
Question: ​Are any capital gains exempt under section 10?​

Answer: Section 10 provides list of incomes which are exempt from tax. Amongst these, the major exemptions relating to capital gains are listed below:

Section 10(33) : Long-term or short-term capital gain arising on transfer of units of Unit Scheme, 1964 (US 64) (transferred on or after 1-4-2002).

Section 10(37) : An individual or Hindu Undivided Family (HUF) can claim exemption in respect of capital gain arising on transfer of agricultural land situated in an urban area by way of compulso Source: CoolInterview.com
Question: ​Are any Capital Gains Exempt under section 10?

Answer: Section 10 provides list of incomes which are exempt from tax Amongst these the major exemptions relating to capital gains are listed below:-

Section 10(33) : Long-term or short-term capital gain arising on transfer of units of Unit Scheme, 1964 (US 64) (transferred on or after 1-4-2002).

Section 10(37) : An individual or Hindu Undivided Family (HUF) can claim exemption in respect of capital gain arising on transfer of agricultural land situated in an urban area by way of compulso Source: CoolInterview.com

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