Capital Gain Concept

  Capital Gain Concept

Capital Gain Calculation

Opening Investment xxx

+ Purchase of Investment xxx 

– Sales of Investment (xxx)

– Closing Investment (xxx)

Capital Gain xxx

Purchase of Investment Entry

Share of A Dr 100000

Share of B Dr 500000

Share of C Dr 50000

 To Bank 650000

Sale of Investment Entry

Bank a/c Dr 250000

To Asset Realization a/c 250000

(Sold 2000 units of Share B)

Transfer of Purchase Cost

Apportion of purchase cost based on No of Units Sold

For Example 5000 Shares B Cost is $ 500000 then what will be the cost of 2000 Shares

(500000/5000) X 2000 =$ 200000

Transfer to Asset Realization

Asset Realization a/c Dr 200000

To Share B 200000

(Apportion of 2000-unit share cost)

In the Above Example, it results in Profit

Asset Realization a/c Dr 50000

To Capital Gain 50000

If it Results in Loss then 

Capital Gain Dr XXXX

To Asset Realization XXXX

Income From Investment 

Bank a/c Dr XXXX

To Dividend Income XXXX

To Distribution Income XXXX

To Share of Trust XXXX

Compare the Entry Passed by Book Keeper with Actual Entry 

Then Pass Adjustment Entry

Note: Only Company Books will Maintain, No Books will maintain for individuals, so no need for Net Movement, directly start Doing Excel Work Sheet.

What is the Possible Mistake Book Keeper (BK) can make?

i. Sometimes for the entire Sales amount BK Pass Entry into Investment a/c so we need to reverse the entry and Transfer to the Asset Realization account 

ii. Sometime sale of Investment, received to another Bank account or to Trust Bank account Then Pass Entry as Loan Receivable 

Loan to X a/c Dr XXXX

To Asset Realization XXXX

Trial Balance	CY	PY	Net Movement
Investment	25000	5000	20000
It means there is additional Investment made
Investment	5000	25000	20000
It Means there is some Investment sold

Analysis of the Net Movement 

So, we need to analyze each Debit and Credit 

Closing Balance Summary needs to Match with Trail balance Investment a/c

1. Book Keeping Maintain, Then Follow the above procedures
2. Book Keeping Not Maintain, Straight Simple 🡺 Consider From ITR

From Investment 🡺 Book Keeping we get 

1. Investment
2. Sales of Investment 
3. Further Purchase of investment

Be Careful while making investment entries check single Ledger maintain or Multiple Ledger Maintain.

If already Ledger account available then pass entry to the old ledger account instead of creating a new ledger

If No Ledger is available then create New Ledger for the Investment

How to deal with Capital Loss

1. There is no difference between Long-Term Capital Loss & Short-Term Capital Loss
2. If there is Capital Loss first Adjust with Short Term Capital Gain Balance Loss adjust with LTCG 🡺 Balance LTCG Eligible For 50% Deduction

Notes: 

50% Discount on LTCG is only allowed for Individuals and Trust.

50% Discount on LTCG not allowed for Company,

For Example: 

Reliance Share STC Loss $ 5000

TCS Shares Sold LTC Loss $ 10000

SBI Shares Sold STC Gain $ 6000

TATA Shares Sold LTC Gain $ 16000

 Solution:

Description	Amount
Reliance Share STC Loss	($ 5000)
TCS Shares Sold LTC Loss	($ 10000)
Total Loss (STCL + LTCL)	($ 15000)
First Adjust with STCG	$ 6000
Balance Loss Adjust with LTCG	$ 9000
Remaining Balance in LTCG	$7000
Balance LTCG can Claim a 50% Discount (only for Individual 50% Discount allowed)	$3500

In Case if Portfolio Statement is Given for the Client, then go by Portfolio Statement 

From Portfolio Statement you can get

1. Purchase of Share
2. Sale of Share
3. Capital Gain for the year
4. Closing Share Value at Cost
5. Dividend Income Received etc

If Portfolio Statement is not available, No proper data’s available then how to find Capital Gain

1. First Identify the Share Name or Share Code From PY or From Prefill etc
2. Then go to the delisted website to identify in which website share has been registered https://www.delisted.com.au/
3. Now Type the Share Name or Share Code in Delisted website and select share Icon, Now the company name will display
4. Select the correct company in the list
5. Under Shareholders Link Section Select Registry Website Link
6. Now it will take you to the Registry website
7. Search for Single Holding Login Use HIN Number, Post Code Company Name, and Company code to log in 
8. To get Holder Identification Number (HIN) search in PY File or Portfolio Statement, or Share statement 

After Login what Details do you need to Retrieve from that website

1. Transaction History To Identify 

1. How many units still holding. 
2. How many units are purchased and Sold?
3. Date of Purchase and Sold

2. Payment History (Dividend Related Details, SPP)

1. Dividend Received
2. Amount of Dividend, Date of Dividend received
3. Dividend Reinvestment Plan (DRP) etc

SPP – Share Purchase Plan

A Share Purchase Plan (SPP) it’s a form of capital raising by the company that offers existing shareholders to buy a new additional share at a discounted price. 

To find SPP Buy Value 

1. Go to the ASX Announcements Website using the below Link
2. https://www.asx.com.au/asx/v2/statistics/announcements.do 
3. Type the Share code 
4. Select the year (The year when SPP is happening you can get these details on Transaction History)
5. Now select Search
6. Now Scroll and Go to the SPP Announcement Date (SPP date you can get from Transaction History)
7. Now Download the Pdf which Contains the Name SPP on the Particular Date
8. In that PDF you can able to get Buy Value for SPP Per Share 
9. Cost of Share = SPP Per Share X No of Units Purchase using SPP 
10. SPP Per Share (gets from ASX Announcement website)
11. No of Units Purchase using SPP (Get From Transaction history from Registry Website) 

Dividend Reinvestment Plan (DRP)

Dividend Reinvestment Plan means Dividend issued by a company directly Converted into Share that also consider as Dividend Income as well at the Time of Selling share DRP consider as purchase Cost

If Share Acquired using DRP Plan then Three Things need to be considered

Dividend Income For DRP	Get From DRP Statement which is available on Registry Website
Cost of Share
Date of Purchase

With the above information plus Bank Statement, you can Prepare Capital Gain Income and Dividend Received Income

Capital Gain for Sale of Rental Property

Cost of Sales
Particulars	Amount
Capital Proceed Calculation
Sales Consideration	xxx
Less:
Repairs to be completed for Sales	(xx)
Settlement Cost	(xx)
Advertisement Expenses	(xx)
Legal Expenses	(xx)
Other incidental Costs (Specify)	(xx)
Net Sales Value	xxx

Cost of Purchase
Particulars	Amount
Cost of Acquisition	xxx
Add:
Stamp Duty paid	xx
Other incidental Cost	xx
Cost of Improvements	xx
Closing WDV of Capital Assets added in software	xx
Other Capital Assets (Specify)	xx
Less:
Capital allowance deduction claimed till the date of sale	(xx)
Other (Specify)	(xx)
Total Purchase Cost	xxx

Long-Term Capital Gain		Short-Term Capital Gain
Net Sale Value	xxx	Net Sale Value	xxx
(-) Total Purchase Cost	(xx)	(-) Total Purchase Cost	(xx)
Capital Gain	xxx	Capital Gain	xxx
(-)50% Discount on Capital Gain	(xx)	No Discount allowed
Taxable Capital Gain	xxx	Taxable Capital Gain	xxx

Share of Taxable Capital Gain = Taxable Capital Gain X % of Ownership

Notes: 

1. You cannot deduct a capital loss from your assessable income
2. Sale of Immovable Property wants to consider contract date not settlement date.
3. Sale of Resident property is Exempted from Tax
4. 50% Discount on LTCG is only allowed for Individuals. 
5. 50% Discount on LTCG not allowed for Company, and Trust.