Q.Define 'Capital Asset' under Section 2(14) of the Income Tax Act, 1961. Name any three items excluded from this definition.

This is a straightforward recall question testing the definition and the exclusion list.

Any three correctly named exclusions is a complete answer.

Section 2(14) defines 'Capital Asset' as property of ANY kind held by an assessee, whether or not connected with his business or profession, including rights in or relating to an Indian company. The definition then specifically excludes: (i) stock-in-trade, consumable stores, or raw materials held for a business/profession; (ii) personal effects (movable property including wearing apparel and furniture) held for personal use, EXCLUDING jewellery, archaeological collections, drawings, paintings, sculptures, or any work of art; (iii) rural agricultural land in India; (iv) specified Gold Bonds (6½% Gold Bonds 1977, 7% Gold Bonds 1980, National Defence Gold Bonds 1980); (v) Special Bearer Bonds, 1991; and (vi) Gold Deposit Bonds/Gold Monetisation Scheme deposit certificates. Any three of these six exclusions, correctly named, fully answers this question.

Naming 'jewellery' or 'paintings' as an EXCLUDED item is a direct reversal of the rule — these are the items the Act specifically keeps IN the definition of Capital Asset despite being personal-use property; only ordinary personal effects (excluding these named items) are excluded.