Under which of the following circumstances may ‘capital gains’ arise? 1. When there is an increase in sales of product 2. When there is a natural increase in the value of the property owned. 3. When you purchase a painting, there is a growth in its value due to an increase in its popularity. Select the correct answer using the codes given below:

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YESPYQ · Accepted Answer

Correct answer: 2 and 3 only. Statement 1 is incorrect : An increase in sales of a product typically results in revenue or business profits, not capital gains. Capital gains arise from the sale of an asset at a price higher than its purchase price, not from the regular sale of products. Statement 2 is correct : Capital gains can arise when the value of an asset, such as property, appreciates over time. If the prop- erty is sold at a higher price than the original purchase price, the difference is considered a capital gain. Statement 3 is correct : If the value of an asset, such as a paint- ing, increases due to factors like popularity, and you sell it for a higher price than what you paid, the difference is considered a capital gain. : A capital gain is an increase in the asset’s value or investment resulting from the asset or invest- ment’s price appreciation. The following are not included under capital assets :  Any stock, consumables or raw materials that are held for the purpose of business or profession.  Goods such as clothes or furniture or paintings which are held for pers

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