UPSC Prelims 2012 · GS Paper I
Question 76: Economy and Social Development
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 :
AnswerUPSC’s answer is (b).
A capital gain is the profit from selling a capital asset such as land or a painting for more than its cost. It arises when the value of such an asset rises, whether naturally, as with property prices, or through growing popularity, as with a painting. A rise in sales of a product is business revenue, not an increase in the value of an asset owned.
- 1. More sales of a product is business income, not a gain in asset value.
- 2. A natural rise in the value of property owned is a capital gain.
- 3. A painting growing in value is a gain on a capital asset.
How you could have got this
- If you were sure statement 1 is not correct, (a) and (d) go: each of them includes 1.
What you needed to know: More sales of a product is business income, not a gain in asset value.
- Then, if you were sure statement 3 is correct, (c) goes: it leaves 3 out.
What you needed to know: A painting growing in value is a gain on a capital asset.
Only (b) is left. You didn’t need statement 2.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Wrong: higher sales of a product give business income, not capital gains.
- (b) Correct: a rise in the value of property or a painting.
- (c) Incomplete: a painting appreciating in value also gives a capital gain.
- (d) Wrong: statement 1 on increased sales is business income, not capital gain.
Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2012, General Studies Paper I, Series A. The paper on upsc.gov.in.