I have converted a capital asset into stock-in-trade on 1st March 2021. The capital asset was bought on 10th June, 2003 for Rs. 60,000/-. The value as on 1st March 2021 is Rs. 6,00,000. I sold this stock on 15th June, 2021 for Rs. 8,00,000. How do I compute my tax liability on this transaction?
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Ssk Advisory
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Greetings from Ssk Advisory. We are happy to resolve your query.
Please note that in this transaction, you need to pay tax under the head "Capital Gains" as well as under the head "Profit and Gains from Business and Profession"
Computation of Income under the head "Profit and Gains from Business and Profession"
Date of Sale of Stock : 15-06-2021.
Value of Stock on Date of Sale : Rs. 8,00,000.
Date of Transfer of Sold Stock : 01-03-2021
Value of Stock on Date of Transfer : Rs. 6,00,000.
Thus, the amount chargeable to tax under the head ""Profit and Gains from Business and Profession" is Rs. 8,00,000 - Rs. 6,00,000 = Rs. 2,00,000.
This income should be reported in your tax return relating to Assessment Year 2022-23 (Previous/Financial Year 2021-22).
Computation of Income under the head "Capital Gains"
Date of Transfer of Sold Stock : 01-03-2021
Value of Stock on Date of Transfer : Rs. 6,00,000.
Date of Purchase of Capital Asset : 10-06-2003
Purchase Price of Capital Asset : Rs. 60,000.
Indexed Cost of Acquisition of the Capital Asset : Rs. 60,000 x 301 / 109 = Rs. 165,688.
Thus, the amount chargeable to tax under the head ""Capital Gains" is Rs. 6,00,000 - Rs. 1,65,688 = Rs. 4,34,312.
This income should be reported in your tax return relating to Assessment Year 2022-23 (Previous/Financial Year 2021-22).
Hope we have been able to solve your query. Please comment below in case of any other queries or questions.