Capital Assets, Transfer of Capital Assets

“Capital asset” Means: 

Property of any kind, whether fixed or circulating, movable or immovable, tangible or intangible. Besides,

It includes the following:

1. Any rights in or in relation to an Indian company, including rights of management or control or any other rights whatsoever.
2. Property of any kind held by an assessee (whether or not connected with his business or profession).
3. Any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the SEBI Act.

Does Not Include:

1. any stock-in-trade [other than the securities referred to in sub-clause (b) above], consumable stores or raw materials held for the purposes of his business or profession,
2. Personal effects, that is to say, movable property (including wearing apparel and furniture), held for personal use by the assessee or any member of his family dependent on him. However, the following assets shall not be treated as personal effects though these assets are moveable and may be held for personal use:
   • Jewellery
   • Archaeological collections
   • Drawings
   • Paintings
   • Sculptures
   • Any work of art

• Agricultural land in India, which is not an urban agricultural land. In other words, it must be a rural agricultural land;

1. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 or deposit certificates issued under Gold Monetisation Scheme, 2015 notified by the Central Government.
2. Types of Capital Assets:

Capital assets are of two types:

1. Short-Term Capital Asset (STCA)
2. Long-Term Capital Asset (LTCA)

(1) Short-Term Capital Asset – STCA [Section 2(42A)]:

A capital asset held by an assessee for Not more than 36 months immediately preceding the date of its transfer is known as a short term capital asset.

Exceptions:

1. The following assets shall be treated as short-term capital assets if they are held for Not more than 12 months (instead of 36 months mentioned above) immediately preceding the date of its transfer:
   1. a security including shares (other than unit) listed in a recognised stock exchange in India
   2. a unit of an equity oriented fund
   3. a zero coupon bond
2. The following assets shall be treated as short-term capital assets if they are held for Not more than 24 months (instead of 36 months/12 months mentioned above)immediately preceding the date of its transfer:
   1. Share of a company (not being a share listed in a recognised stock exchange in India)
   2. An immovable property being land and building or both.

Hence, if unlisted share or immovable property is transferred after 24 months from the date of its acquisition, the gain arising from the transfer of share or immovable property shall be treated as long-term capital gain.

(2) Long-Term Capital Asset – LTCA [Section 2(29A)]:

It means a capital asset which is not a short-term capital asset.