Capital Gain means any profits or gains arising from the transfer of a capital asset. The term Capital Asset means assets held by an assesse like house Property, Shares, Jewellery , Plot of land etc. From assessment year 2008-09 it also includes any work of Art, Drawings, Paintings, Sculptors etc. even if these are personal effects.[Sec 2(14) (ii)]

SHORT TERM & LONG TERM CAPITAL ASSETS

1. Shares in any company or any other securities listed on any recognized stock exchange in India, units of UTI or units of a mutual fund
   
   

   Held for more than 12 months	: Long Term
   Held for not more than 12 months	: Short Term

2. For assets other than assets covered in above like House Property, Jewellery etc.
   
   

   Held for more than 36 months	: Long Term
   Held for not more than 36 months	: Short Term

AMOUNT OF CAPITAL GAIN

Amount of capital gain is calculated by deducting from the full value of consideration received or accruing as a result of transfer of capital asset, the following amounts

1. The cost of acquisition of the capital asset.
2. The cost of any improvement carried out to the capital asset.
3. Expenditure incurred for transfer of capital asset like stamp duty, registration charges, brokerage etc.

Cost Inflation Index :- Cost of acquisition & improvement of a long term capital asset is to be calculated by applying Cost Inflation Index as follows.

Cost of acquisition (improvement) x Cost Inflation Index for the year asset is transferred / Cost of inflation index for the year of acquisition (improvement) or 1-4-1981 whichever is later.

SPECIAL PROVISIONS TO SAVE CAPITAL GAIN ON HOUSE PROPERTY

An Individual or Hindu Undivided Family transfers Residential House, the long term capital gains arising out of such transfer will be fully exempt if the assessee.

1. Has purchased a residential house one year before or two years after the date of transfer / sale of his old property.
2. Or constructed a residential house within a period of three year of transfer/ sale of asset.
3. In case the individual does not want to acquire new asset before due date of filing return of income, the amount should be deposited into any specified bank in Capital Gains Account in the manner Specified.
4. The cost of new residential house should be equal to or more than the capital Gain Amount.

Investment in Capital Gain Exemption Bonds (Sec 54EC)

Long Term Capital Gain is fully exempt if invested in Certain Specified Bonds Notified for this Purpose. The amount should be invested within 6 months from the data of transfer / sale of asset. These bonds are offered by NHAI & REC. Limit of investment in these bonds is Rs.50 Lakhs.