Capital Gains

[Adil Patuck]

I am from India and use Gnucash Version 2.2.9 for tracking my personal
finances and investments. I find the package very useful, but cannot view
the capital gains on the sale of assets. The Reports feature allows me to
view my 'advanced portfolio', but does not prepare a Capital Gains Report
for me.

In India, Capital gains can arise from sale of both immoveable and moveable
assets. 

1.  Immoveable assets include land, buildings, residential apartments, etc.
2.  Moveable assets include shares, stocks, Mutual Funds, Debentures, Bonds,
jewellery, art, etc.

Further, capital gains can be either long term or short term. Currently any
asset which has been held for 1 year and over, and is then sold, is
considered as a long term capital gain. This period may change at a later
date, as per the Finance Bill which is presented every year. Any asset which
has been held for less than 1 year before it is sold/redeemed, conversely,
is a short term capital gain.

Assets need not necessarily be sold in complete lots. They may be sold in
parts as per examples given hereunder:

1.  100 shares purchased on 1 January 2009, and 100 shares sold on 1 October
2009
2.  100 shares purchased on 1 January 2009, but only 50 sold on 1 October
2009
3.  100 shares purchased on 1 January 2009, 50 shares purchased on 1 July
2009, and 150 shares sold on 1 October 2009
4.  100 shares purchased on 1 January 2009, 50 shares purchased on 1 July
2009, and 70 shares sold on 1 October 2009
5.  100 shares purchased on 1 January 2009, 50 shares purchased on 1 July
2009, and 120 shares sold on 1 October 2009.
6.  100 shares purchased on 1 January 2009, 30 shares sold on 1 July 2009
and 70 shares sold on 1 October 2009
7.  100 shares purchased on 1 January 2009, 30 shares sold on 1 July 2009
and 40 shares sold on 1 October 2009

Each of the above situations may arise and need to be considered.


Capital gains can be calculated in six different ways. The four allowable
accounting methods are: 
1.  Actual cost basis using specific identification, 
2.  Actual cost basis using first-in, first-out identification, 
3.  Average cost basis, single-category method, and 
4.  Average cost basis, double-category method

The other two methods, which are rarely used are:
5.  last-in, last -out method
6.  Last-in, first out method

Generally, the First In First Out (FIFO) method is applied for tax purposes
in India, But the other options should also be available to the user. 

The attached link gives details of the methods for calculating capital gains
on mutual funds. The same principles would be valid for sale of shares and
other capital assets.  This may be of use to you.

http://taxes.about.com/od/capitalgains/a/CapitalGainsTax_5.htm

The Indian laws regarding calculation of capital gains and their tax
implications are in the attached website

http://www.labnol.org/india/law/earned-capital-gains-calculate-your-tax-liability/1461/

This will give you an overall view of how tax is calculated and the
principle of Indexation. I do not expect Gnucash to compute the tax
implications, I only want it to work out the capital gains, both long term
and short term.

The Capital Gains Statements should give the following basic information:

Name of Asset
Date of Purchase
Quantity
Rate
Cost

Date of sale
Quantity
Rate
Sale Value

Capital Gain/Loss

Ideally the user should be able to select the method of computation of Gain,
Viz. FIFO, etc. and should be able to select the items to be incorporated
into the report. Further he should be in a position to set the period to be
considered for Long Term capital Gains. There should be separate reports for
Long Term Capital Gains and Short Term Capital Gains.

I understand that the beta version of Gnucash, which is still not stable,
has plans to incorporate a module for capital gains, which will self
generate the Capital Gains Statement. I will appreciate your feedback and
guidance for installing the same into my version of Gnucash.

Thanks,

Adil Patuck
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