Costing and Taxation · Class 12 Commerce
Ch 2Income from Capital Gains — Class 12 Costing and Taxation, concept-first.
Capital Gains is the fourth of the five Heads of Income you met in Introduction to Taxation (Section 14). This chapter studies what turns an ordinary profit into a 'Capital Gain' at all — the asset that changes hands, the event that counts as its transfer, and the basic charging rule that makes the resulting profit tax…
Key concepts
Hover a concept to preview it and jump to its most relevant Q&A.
Basis of Charge and Meaning of Capital Asset
Section 45(1) charges to tax any profit or gain arising from the transfer of a capital asset, treating it as income of the previous year in which the transfer took place.
Most relevant Q&A
- Define 'Capital Asset' under Section 2(14) of the Income Tax Act, 1961. Name any three items excluded from this definition.Free
- State the basis of charge of Capital Gains under Section 45(1) of the Income Tax Act, 1961. What two conditions must both be satisfied befor…Free
- Mr. Dutta owns a painting inherited from his grandfather, kept at home purely for personal enjoyment, and an old wooden dining table used by…Free
Chapter contents
The NCERT structure, section by section. Open a section to see its questions, then read the concept-first solution.
Basis of Charge of Capital Gains and Meaning of Capital Asset
Capital Gains is the fourth of the five Heads of Income you met in Introduction to Taxation (Section 14).
Short-term and Long-term Capital Assets
Once an item is confirmed to be a Capital Asset, the LENGTH OF TIME it was held before transfer decides which of two quite different tax treatments applies to the resulting gain.
Transfer of a Capital Asset
'Transfer', in relation to a capital asset, is defined very broadly under Section 2(47) — far more broadly than the everyday word 'sale' — precisely so that Section 45(1)'s charge cannot be avoided me…
Computation of Capital Gains — Simple Problems
With the Capital Asset identified, its holding period classified, and a Transfer confirmed to have taken place, the actual Capital Gain is computed by a short, fixed formula.
Terms Introduced in the Chapter
This section collects, in one place, every term introduced in this chapter, for quick reference and revision.
More questions
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- Q8Define 'Capital Asset' under Section 2(14) of the Income Tax Act, 1961. Name any three items excluded from this definition.Free
- Q9What is the practical significance of classifying a Capital Gain as Short-Term or Long-Term? Name the Sections that define each term.Preview
- Q10Mr. Ghosh purchased jewellery in June 2023 for ₹3,00,000 and sold it in November 2025 for ₹4,50,000, incurring valuation and brokerage charg…Preview
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- Q1State the basis of charge of Capital Gains under Section 45(1) of the Income Tax Act, 1961. What two conditions must both be satisfied befor…Free
- Q2Mr. Dutta owns a painting inherited from his grandfather, kept at home purely for personal enjoyment, and an old wooden dining table used by…Free
- Q3Classify each of the following as a Short-Term or Long-Term Capital Asset, given the stated holding period immediately before transfer: (a)…Free
- Q4State, with reference to Section 2(47), whether each of the following amounts to a 'Transfer' of a capital asset: (a) Mrs. Roy sells her fla…Preview
- Q5Mr. Kundu purchased a plot of land in May 2018 for ₹6,00,000. In June 2021, he spent ₹1,50,000 on levelling the plot and constructing a boun…Preview
- Q6Ms. Bose purchased 1,000 listed equity shares on 15 January 2025 for ₹90,000. She sold all the shares on 10 September 2025 for ₹1,35,000, pa…Preview
- Q7Mr. Ali purchased a residential house in March 2022 for ₹20,00,000. He incurred ₹2,00,000 on a capital improvement (adding an extra floor) i…Preview