Assets excluded from the definition of a capital asset (as set, 1961 Act, AY 2019-20)

The definition

A capital asset is any kind of property an assessee holds, connected with his business or profession or not, and includes securities held by a Foreign Institutional Investor under the SEBI regulations (section 2(14)(a) and (b)). Property includes any rights in or relating to an Indian company (Explanation to section 2(14)). Section 2(14) then leaves out the items below; their transfer gives no capital gain.

The exclusions

1. Stock-in-trade, consumable stores and raw materials held for the assessee's business or profession (section 2(14)(i)). Their sale gives business income. Securities held by a Foreign Institutional Investor under the SEBI regulations stay capital assets even so.
2. Personal effects (section 2(14)(ii)): movable property, such as clothes and furniture, held for personal use by the assessee or a dependent member of his family. The following are not personal effects, and so remain capital assets: jewellery (ornaments of gold, silver, platinum or other precious metals, and precious or semi-precious stones, even if set in or sewn into something), archaeological collections, drawings, paintings, sculptures and any work of art.
3. Rural agricultural land in India (section 2(14)(iii)): agricultural land that is not within a municipality or cantonment board with a population of 10,000 or more, and not within these aerial distances from the local limits of such a town: 2 km where its population is above 10,000 but not above 1 lakh; 6 km where it is above 1 lakh but not above 10 lakh; 8 km where it is above 10 lakh (section 2(14)(iii)(b)). Population is taken from the last census whose figures were published before the previous year began.
4. Certain gold bonds of the Central Government (section 2(14)(iv)): the 6½% Gold Bonds, 1977, the 7% Gold Bonds, 1980 and the National Defence Gold Bonds, 1980.
5. Special Bearer Bonds, 1991 issued by the Central Government (section 2(14)(v)).
6. Gold Deposit Bonds under the Gold Deposit Scheme, 1999, and deposit certificates under the Gold Monetisation Scheme, 2015 (section 2(14)(vi)).

Example (our own)

A shopkeeper's stock of television sets, a teacher's own car and her sofa, and a farm 20 km from any town of 10,000 people are not capital assets; but the teacher's gold bangles and a painting she bought are, and so is an urban plot or a house.