gs1medium
Under which of the following circumstances may 'capital gains' arise?
- 1.when there is an increase in the sales of a product
- 2.when there is a natural increase in the value of the property owned.
- 3.when you purchase a painting and there is a growth in its value due to increase in its popularity.
Select the correct answer using the codes given below:
- A.1 only
- B.2 and 3 only
- C.2 only
- D.1, 2 and 3
▶ Answer & Explanation
Correct answer: B. 2 and 3 only
Capital gains tax is levied on the profit realized from the sale of a capital asset. This profit arises from an appreciation in the value of the asset. An increase in sales of a product (1) contributes to revenue and profit from business operations, not necessarily a capital gain. However, an increase in the value of an owned property (2) or an asset like a painting due to market demand or popularity (3) constitutes a capital asset appreciating in value, the sale of which would result in a capital gain.
Source: UPSC gs1 2012