UPSC Prelims 2012·GS1·economy·basic concepts

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:

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Last updated 23 May 2026, 3:31 pm IST
  1. A1 only
  2. B2 and 3 onlyCorrect
  3. C2 only
  4. D1, 2 and 3

Explanation

Capital gains arise from the sale of a capital asset (like property, shares, or valuable items) at a price higher than its purchase price. 1. When there is an increase in the sales of a product: This refers to increased business revenue or operational profit, not capital gains. Capital gains are from the sale of assets, not regular inventory or services. So, this is incorrect. 2. When there is a natural increase in the value of the property owned: If the value of a property increases, and you subsequently sell it for more than you bought it, the profit made is a capital gain. The increase in value creates the potential for capital gains. So, this is correct. 3. When you purchase a painting and there is a growth in its value due to increase in its popularity: A painting is a capital asset. If its value increases and you sell it for a profit, that profit would be a capital gain. So, this is correct. Therefore, capital gains may arise in circumstances described in statements 2 and 3. The final answer is B) 2 and 3 only.
economy: Under which of the following circumstances may 'capital gains' arise? 1. When there is an increase in the sales of a pro
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