Under which of the following circumstances may ‘capital gains’ arise?

When there is an increase in the sales of a product
When there is a natural increase in the value of the property owned
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:

Question

Under which of the following circumstances may &lsquo;capital gains&rsquo; arise?

When there is an increase in the sales of a product
When there is a natural increase in the value of the property owned
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:

Accepted Answer

2 and 3 only

Explanation: ❌ Statement 1 – Incorrect: Increase in sales of a product generates revenue or business income, not capital gains. Capital gains arise only from the sale of a capital asset (property, shares, etc.), not from regular business operations.✅ Statement 2 – Correct: Natural appreciation in the value of property or land creates capital gains when the asset is sold at a price higher than its original purchase cost.✅ Statement 3 – Correct: Paintings, jewelry, and other movable assets are treated as capital assets under the Income Tax Act; increase in value due to popularity or demand results in capital gains upon sale.

Detailed Explanation:

Question 4 of 4 Direct and Indirect Taxes

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