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:

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 — UPSC Prelims 2012 Answer & Explanation

Economy2012

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

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

Explanation

The correct answer is 2 and 3 only because capital gains arise from the appreciation in the value of an asset over time. In option 2, the natural increase in property value reflects capital gains as the property appreciates due to market factors or improvements. In option 3, the increase in the value of the painting linked to its rising popularity exemplifies a capital gain from an asset's value appreciation. In contrast, option 1, concerning sales increases, pertains to revenue generation rather than capital gains, as it focuses on operational performance rather than asset valuation. This understanding aligns with concepts in investment and taxation, which are relevant in economic and financial discussions within the UPSC syllabus.

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