Sale of capital assets give rise to capital gains only !

Sri Rajiv Banerjee of Kolkata asks “I am doing business of bags,it is proprietorship business in year 1999 i invest in a agricultural land of amount 10 lakhs by my name(it was not registered by the name of company,registered by my name) which is in 8km of municipal limit.i had sold this land 2 months ago.so now i have to pay capital gain tax(ltcg).since i have proprietorship business i had shown car and land as investment in my company balance sheet,because this business is the only source of income for me.i had sold the land for Rs 20 lakhs.now the question is that how much tax i have to pay now 20% or 33%? “

As I understand, you have invested in agricultural land and the same is shown in the balance sheet of your “proprietorship business ” under the head investment . If that is so, the sale of land shall be charged under “capital gains ” and the rate of tax will be 20 % . Don’t forget to claim indexation !

Remember,that a capital asset only generate Capital gains . Even  if the sale of  business assets (investments ) on which depreciation is claimed  gives rise to capital gains only when sale consideration exceeds WDV of Block of asset and not business income. In that case , gains are treated as short term capital gains as provided in section 50 of the I T Act.

However , if the sale consideration is more than the difference between the actual cost and the wdv of the asset , but less than WDV of block of asset , the excess is business income u/s 41(2) of the I T Act

Therefore , there is no question of 33 % tax rate.

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