What is the meaning of Capital Asset?

Capital asset Includes -

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

2. Any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the SEBI Act, 1992.

3. Following Items -

  • Jewellery
  • Archaeological collections
  • Drawings
  • Paintings
  • Sculptures
  • Any work of art

Following Items Are Excluded From The Definition of “Capital Asset”

1. Any stock-in-trade (other than securities referred to in (b) above), consumable stores or raw materials held for the purposes of his business or profession.

2. Personal effects, that is, movable property (including wearing apparel and furniture) held for personal use by the taxpayer or any member of his family dependent on him.

3. Agricultural Land in India, provided following Conditions are satisfied -

a. It should not be situated within jurisdiction of municipality, notified area committee, town area committee, cantonment board and which has a population of more than 10,000;

b. It should not be situated within range of following distance from the local limits of any municipality or cantonment board:

(i) 2 KMs   –  If,  1 Lakh > Population Of Such Area > 10,000 ; or

(ii) 6 KMs –  If,  10 Lakh > Population Of Such Area > 1Lakh ; or

(iii) 8 KMs –  If,  Population Of Such Area > 10 Lakh

4. 61/2 per cent Gold Bonds,1977 or 7 per cent Gold Bonds, 1980 or National Defence Gold Bonds, 1980 issued by the Central Government.

5. Special Bearer Bonds, 1991.

6. Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999.

Points To Be Noted

1. “Jewellery”  includes -

a. Ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stones, and whether or not worked or sewn into any wearing apparel;

b. Precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel;

 2. Population for the purpose of 3b above is to be considered according to the figures of last preceding census of which relevant figures have been published before the first day of the year.

Recommended Read – Long Term Capital Asset and Short Term Capital Asset

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