UPSC CSE Prelims
Question 2
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:
View correct answer and explanation
Correct answer: B
Correct Option: B
Explanation: The question distinguishes appreciation in capital-asset value from an increase in business sales; gains on capital assets arise upon qualifying transfer.
Statement/Item-wise Analysis:
1: Incorrect - Higher product sales produce business revenue, not capital gains.
2: Correct - Appreciation of an owned capital asset can give rise to a capital gain when realised on transfer.
3: Correct - A painting held as a capital asset may yield capital gains on sale after appreciation.
Option-wise Analysis:
A: Incorrect - includes incorrect item 1; omits correct items 2, 3.
B: Correct - includes exactly the valid statements/items and excludes the invalid ones.
C: Incorrect - omits correct item 3.
D: Incorrect - includes incorrect item 1.
Review Note: Unrealised appreciation is not ordinarily taxable capital gain; the question uses “may arise” in a broad sense.