19 August 2011
1. How is capital gains on bonus shares to be computed ?
Ans: The cost of bonus shares is to be taken as Nil and the net sale proceeds of the bonus shares is to be treated as the capital gains. The period of holding of the bonus shares will be counted from the date of the allotment of bonus issue.
2. How is tax on capital gains to be computed ?
Ans: Short term capital gains are taxed in the same manner as income under other heads. Barring certain exceptions, long term capital gains are taxed at the flat rate of 20%. For full details of computation of tax where the total income includes long term capital gains, Section 112 of the Income-tax Act may please be referred.
3. What are the exemptions available in respect of capital gains ?
Ans: Depending upon the nature of the capital asset and the manner of utilisation of the consideration received on transfer, various exemptions are available. For full details, Sections 54, 54B, 54D, 54EA, 54EB,54EC, 54F, 54G and 54H of the Income-tax Act may please be referred. The provision of 54EA and 54EB has been withdrawn with effect from 1.4.2000 and new section 54 EC has been inserted. Under Section 54EC investments should be made in:National Highways Authority of India & Rural Electrification Corporation Limited.
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