In taxation, what is meant by capital gains tax on property?

Introduction / Context:
Capital gains tax is an important topic in personal and corporate taxation, especially when dealing with the sale of property, shares and other investments. When a property such as land or a building is sold, the seller may realise a gain or a loss compared to the original cost. This question tests whether you understand that capital gains tax applies to the gain component, not to the entire sale value or to rental income, and that it is normally triggered by a transfer or sale event rather than mere ownership.

Given Data / Assumptions:
- The context is taxation of property transactions. - Options differentiate between tax on profit, tax on gross sale value, tax on rental income and tax on inheritance alone. - We assume a typical income tax framework where capital gains are taxed separately from regular income or rent. - We must identify which option best describes capital gains tax on property.

Concept / Approach:
Capital gain is generally defined as the profit arising when a capital asset is sold for more than its cost of acquisition and related expenses. For property, the capital gain is usually computed as sale consideration minus indexed or adjusted cost of acquisition minus expenses on transfer such as brokerage and stamp duty. Capital gains tax is levied on this profit amount, not on the full sale price. Rental income from property is normally taxed as income from house property or business income under separate provisions, not as capital gains. Inherited property typically does not trigger capital gains tax at the time of inheritance; the tax arises when the heir later sells the property and realises a gain.

Step-by-Step Solution:
Step 1: Recall that the term capital asset includes land, buildings and certain investments held by the taxpayer. Step 2: Understand that capital gains tax arises when there is a transfer or sale of such an asset, resulting in a profit over the cost of acquisition. Step 3: Evaluate each option. Option A accurately states that the tax is charged on the profit from the sale of a capital asset like land or building. Step 4: Reject options that refer to tax on gross sale value, rental income or inheritance without sale, as these do not reflect the capital gains concept.

Verification / Alternative Check:
Tax law illustrations typically show formulas such as capital gain equals full value of consideration minus cost and expenses. They then apply a tax rate to this gain, not to the entire sale value. You will also see separate chapters dealing with income from house property, which apply to rent. Inheritance is often exempt from capital gains at the time of transfer, with the heir taking over the cost base for future sale. These patterns confirm that the essence of capital gains tax on property is taxation of the profit from sale of a capital asset.

Why Other Options Are Wrong:
Tax on gross sale value regardless of cost: This would ignore the cost of acquiring the property and is not how capital gains tax is computed. Tax on annual rental income: Rental income is usually taxed under a separate head, not as capital gains, unless very special conditions apply. Tax only on inherited property regardless of sale: Inheritance by itself does not usually trigger capital gains tax; the tax arises when the asset is sold.

Common Pitfalls:
Students often confuse capital gains tax with stamp duty or registration charges, which are based on transaction value, not profit. Another pitfall is treating rental income and sale profits as the same, when they are taxed under different heads. Always remember that capital gains tax focuses on the gain from sale or transfer of a capital asset and that cost of acquisition and related expenses play a key role in arriving at the taxable amount.

Final Answer:
The correct option is Tax charged on the profit arising from the sale of a capital asset such as land or building, because capital gains tax on property is levied on the gain component of a sale, not on the full sale price or on rental income.