Which of the following shall not be regarded as 'capital assets'?

The correct answer is Rural Agricultural Land.

Key Points

• Rural Agricultural Land is excluded from the definition of "capital assets" under Section 2(14) of the Income Tax Act, 1961.
• Capital assets generally refer to property held by an individual, such as shares, bonds, jewelry, or real estate, but rural agricultural land is explicitly exempt.
• The exemption is provided to encourage agricultural activities and protect farmers from tax burdens related to land transactions.
• Rural agricultural land must be located in an area outside specified urban limits to qualify for this exemption.
• Other items such as jewelry, archaeological collections, or personal residential houses are considered capital assets and are subject to taxation under capital gains rules.

Additional Information

• Capital Assets: Defined under Section 2(14) of the Income Tax Act, 1961, as property held by an individual, excluding specific items such as rural agricultural land.
• Urban Limits: For tax purposes, land located within municipal limits or specified proximity to urban areas is considered non-rural and subject to capital gains tax.
• Capital Gains: Profit earned from the sale of capital assets is categorized as capital gains and taxed under the Income Tax Act.
• Exemptions: Specific exemptions, such as rural agricultural land, are designed to promote agricultural activities and reduce tax burdens on farmers.
• Taxation Rules: The sale of non-exempt capital assets like jewelry or residential houses may attract either short-term or long-term capital gains tax depending on the holding period.