PL_CH_9_Income_from_ccapital_g pdf
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PL_CH_9_Income_from_ccapital_g pdf Flashcards - 50 Questions
What is covered in Chapter 9?
Capital gains.
What are the learning objectives related to capital gains?
Identify capital gain, compute taxable income under 'capital gain', identify allowable deductions, identify tax-exempted capital gains, understand the complexities of computing income from capital gains, identify special reduced tax rates for individuals, and compute tax liability in different situations.
Why is understanding 'capital gain' practically significant?
Transfer of capital assets is common in business, so it's important to understand when it results in capital gain, the implications of reinvesting the gain, and the powers of the DCT regarding sale proceeds.
How does the capital gains tax rate differ?
It's different from regular tax rates for individuals and other assesses.
What may candidates be required to do in the exam regarding capital gains?
Define capital gain, identify different scopes of income, compute taxable capital gain, illustrate non-taxable capital gains, identify allowable deductions, illustrate the DCT's power regarding declared value, and compute net tax liability.
Is there capital gain tax on transfer of personal effects?
No, it's taxed under 'income from other sources'.
Is there a limit for tax-free capital gain on the sale of shares of listed companies for individuals?
Yes, up to Tk. 50 lac.
Is there capital gain tax on the transfer of land and buildings to a new industrial company?
No.
What can the income tax authority consider if they believe the transfer value is lower than fair market value?
The fair market value.
Can capital loss be set off against other income?
No, only against other capital gains during the year.
What is the capital gain tax rate for companies?
15%.
What does 'transfer' of a capital asset include?
Sale, exchange, or relinquishment of the asset, or extinguishment of any right therein.
What does 'transfer' of a capital asset *not* include?
Transfer under gift, bequest, will, or irrevocable trust; distribution of assets on company liquidation; distribution of assets on dissolution of a firm, AOP, or HUF partition.
How is capital gain computed?
Difference between the sale/transfer price in the open market and the acquisition cost of the asset.
What power does the DCT have if the fair market value of an asset is more than 15% of the disclosed value?
With prior approval from the Additional Commissioner of Taxes, they can determine the fair market value.
What happens if the fair market value is more than 25% of the disclosed value?
The DCT may offer to purchase the asset at the disclosed value.
Is capital gain exempted from tax when transferring assets from a partnership to a new company?
Yes, if the consideration is invested in the new company's equity.
What are the steps involved in the government's potential purchase of an asset under section 61(2)?
Notice in the official Gazette and newspapers, objections from transferor/transferee, hearing of objections, order for acquisition, appeal to Appellate Joint Commissioner, possession taken by DCT, tender of consideration, dispute resolution in court.
Are there tax-exempted capital gains related to listed securities?
Yes, for individuals (excluding shareholder directors and placement shareholders), gains up to Tk. 50 lakh are exempt.
How is capital gain taxed for companies?
At a flat rate of 15% as a separate block of income.
How is capital gain taxed for individuals if the asset is transferred before five years?
At the regular slab rate applicable to their total income.
How is capital gain taxed for individuals if the asset is transferred after five years?
At 15%.
Why is apportionment of sale proceeds sometimes necessary?
Because capital gain tax rates may differ based on the holding period.
What does Chapter 10 cover?
Income from other sources.
What are the learning objectives for income from other sources?
Identify such income, compute taxable income, identify allowable deductions, identify tax-exempted income, understand the complexities of computation, explain TDS and grossing up, and compute tax liability in different situations.
Why is 'income from other sources' significant?
It's a residual head of income, capturing income not falling under other heads.
What are some examples of income classified under 'other sources'?
Royalty income, fees for technical services, income from letting factory building along with machinery.
What is the importance of grossing up income?
It's necessary to report the correct taxable income, especially when TDS is applied.
What are some examples of income considered 'income from other sources' as per section 66?
Royalty, license fee, technical know-how fee, income from intangible asset use, government cash incentives, and any income not classified elsewhere.
What happens if an assessee has unexplained credits in their books?
It's deemed as income from other sources.
What is the rule regarding asset purchases where the price paid is less than fair market value?
The difference is considered income from other sources.
How are goodwill money or compensation for contract cancellation treated?
As income from other sources.
How are salami or premium receipts from leases treated?
As income from other sources in the year received.
What happens if tax isn't deducted on payments for assets as per Part 7?
The payment is deemed income from other sources for the payer.
How is the benefit from debt cancellation treated?
The money value is considered income from other sources.
Are there exceptions to the debt cancellation rule?
Yes, for waivers by financial institutions to natural persons and certain margin loan benefits related to securities trading.
How is paid-up capital received by an unlisted company in a mode other than crossed check or bank transfer treated?
As income from other sources.
How are loans borrowed by a company outside banking channels treated?
As income from other sources in the year received, with repayments excluded in the subsequent year.
What happens if a company purchases motor cars exceeding a certain value?
Fifty percent of the excess amount (over 10% of paid-up capital, reserve, and accumulated profit) is deemed income from other sources.
How are large advances or deposits received by individuals outside banking channels treated?
As income from other sources.
Are there exceptions to the rule for individual advances/deposits?
Yes, for amounts received from family and deposits received by banks, financial institutions, and registered NGOs.
What happens if unpaid credit purchases for building materials remain unpaid after two years?
The unpaid amount is deemed income from other sources for the year following the two-year period.
What happens if an amended return shows increased tax-exempted or reduced-rate income?
The difference from the original return is treated as income from other sources.
What is the definition of 'royalty'?
Consideration (excluding capital gains) for transfer of rights, imparting information, use of intellectual property, or services related to these.
What is the TDS rate on royalty income?
10% (up to Tk. 25 lakh base amount) or 12%, considered final tax payment.
What does 'fees for technical services' mean?
Consideration for managerial, technical, or consultancy services, excluding construction projects and salaries.
What is the TDS rate on fees for technical services?
10%, or 15% without TIN.
How is income from letting of factory building with machinery treated?
As income from rent, not other sources.
What are allowable deductions under 'income from other sources'?
Expenditures solely for earning the income, excluding capital or personal expenditures, subject to reasonableness.
What are inadmissible deductions under 'income from other sources'?
Expenditures already allowed against any asset, and limitations similar to section 55.
Summary of PL_CH_9_Income_from_ccapital_g pdf Flashcards
Study these concepts:
- What is covered in Chapter 9? - Capital gains.
- What are the learning objectives related to capital gains? - Identify capital gain, compute taxable income under 'capital gain', identify allowable deductions, identify tax-exempted capital gains, understand the complexities of computing income from capital gains, identify special reduced tax rates for individuals, and compute tax liability in different situations.
- Why is understanding 'capital gain' practically significant? - Transfer of capital assets is common in business, so it's important to understand when it results in capital gain, the implications of reinvesting the gain, and the powers of the DCT regarding sale proceeds.
- How does the capital gains tax rate differ? - It's different from regular tax rates for individuals and other assesses.
- What may candidates be required to do in the exam regarding capital gains? - Define capital gain, identify different scopes of income, compute taxable capital gain, illustrate non-taxable capital gains, identify allowable deductions, illustrate the DCT's power regarding declared value, and compute net tax liability.
- Is there capital gain tax on transfer of personal effects? - No, it's taxed under 'income from other sources'.
- Is there a limit for tax-free capital gain on the sale of shares of listed companies for individuals? - Yes, up to Tk. 50 lac.
- Is there capital gain tax on the transfer of land and buildings to a new industrial company? - No.
- What can the income tax authority consider if they believe the transfer value is lower than fair market value? - The fair market value.
- Can capital loss be set off against other income? - No, only against other capital gains during the year.
- What is the capital gain tax rate for companies? - 15%.
- What does 'transfer' of a capital asset include? - Sale, exchange, or relinquishment of the asset, or extinguishment of any right therein.
- What does 'transfer' of a capital asset *not* include? - Transfer under gift, bequest, will, or irrevocable trust; distribution of assets on company liquidation; distribution of assets on dissolution of a firm, AOP, or HUF partition.
- How is capital gain computed? - Difference between the sale/transfer price in the open market and the acquisition cost of the asset.
- What power does the DCT have if the fair market value of an asset is more than 15% of the disclosed value? - With prior approval from the Additional Commissioner of Taxes, they can determine the fair market value.
- What happens if the fair market value is more than 25% of the disclosed value? - The DCT may offer to purchase the asset at the disclosed value.
- Is capital gain exempted from tax when transferring assets from a partnership to a new company? - Yes, if the consideration is invested in the new company's equity.
- What are the steps involved in the government's potential purchase of an asset under section 61(2)? - Notice in the official Gazette and newspapers, objections from transferor/transferee, hearing of objections, order for acquisition, appeal to Appellate Joint Commissioner, possession taken by DCT, tender of consideration, dispute resolution in court.
- Are there tax-exempted capital gains related to listed securities? - Yes, for individuals (excluding shareholder directors and placement shareholders), gains up to Tk. 50 lakh are exempt.
- How is capital gain taxed for companies? - At a flat rate of 15% as a separate block of income.
- How is capital gain taxed for individuals if the asset is transferred before five years? - At the regular slab rate applicable to their total income.
- How is capital gain taxed for individuals if the asset is transferred after five years? - At 15%.
- Why is apportionment of sale proceeds sometimes necessary? - Because capital gain tax rates may differ based on the holding period.
- What does Chapter 10 cover? - Income from other sources.
- What are the learning objectives for income from other sources? - Identify such income, compute taxable income, identify allowable deductions, identify tax-exempted income, understand the complexities of computation, explain TDS and grossing up, and compute tax liability in different situations.
- Why is 'income from other sources' significant? - It's a residual head of income, capturing income not falling under other heads.
- What are some examples of income classified under 'other sources'? - Royalty income, fees for technical services, income from letting factory building along with machinery.
- What is the importance of grossing up income? - It's necessary to report the correct taxable income, especially when TDS is applied.
- What are some examples of income considered 'income from other sources' as per section 66? - Royalty, license fee, technical know-how fee, income from intangible asset use, government cash incentives, and any income not classified elsewhere.
- What happens if an assessee has unexplained credits in their books? - It's deemed as income from other sources.
- What is the rule regarding asset purchases where the price paid is less than fair market value? - The difference is considered income from other sources.
- How are goodwill money or compensation for contract cancellation treated? - As income from other sources.
- How are salami or premium receipts from leases treated? - As income from other sources in the year received.
- What happens if tax isn't deducted on payments for assets as per Part 7? - The payment is deemed income from other sources for the payer.
- How is the benefit from debt cancellation treated? - The money value is considered income from other sources.
- Are there exceptions to the debt cancellation rule? - Yes, for waivers by financial institutions to natural persons and certain margin loan benefits related to securities trading.
- How is paid-up capital received by an unlisted company in a mode other than crossed check or bank transfer treated? - As income from other sources.
- How are loans borrowed by a company outside banking channels treated? - As income from other sources in the year received, with repayments excluded in the subsequent year.
- What happens if a company purchases motor cars exceeding a certain value? - Fifty percent of the excess amount (over 10% of paid-up capital, reserve, and accumulated profit) is deemed income from other sources.
- How are large advances or deposits received by individuals outside banking channels treated? - As income from other sources.
- Are there exceptions to the rule for individual advances/deposits? - Yes, for amounts received from family and deposits received by banks, financial institutions, and registered NGOs.
- What happens if unpaid credit purchases for building materials remain unpaid after two years? - The unpaid amount is deemed income from other sources for the year following the two-year period.
- What happens if an amended return shows increased tax-exempted or reduced-rate income? - The difference from the original return is treated as income from other sources.
- What is the definition of 'royalty'? - Consideration (excluding capital gains) for transfer of rights, imparting information, use of intellectual property, or services related to these.
- What is the TDS rate on royalty income? - 10% (up to Tk. 25 lakh base amount) or 12%, considered final tax payment.
- What does 'fees for technical services' mean? - Consideration for managerial, technical, or consultancy services, excluding construction projects and salaries.
- What is the TDS rate on fees for technical services? - 10%, or 15% without TIN.
- How is income from letting of factory building with machinery treated? - As income from rent, not other sources.
- What are allowable deductions under 'income from other sources'? - Expenditures solely for earning the income, excluding capital or personal expenditures, subject to reasonableness.
- What are inadmissible deductions under 'income from other sources'? - Expenditures already allowed against any asset, and limitations similar to section 55.
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