A format to compute the capital gain is given below:
Computation of Short-term Capital Gains
| Full value of consideration | — | |
| Less: (a) Expenditure incurred wholly and exclusively in connection with such a transfer, | — | |
| (b) Cost of acquisition | — | |
| (c) Cost of improvement | — | — |
| Gross short-term capital gains | — | |
| Less: Exemption, if available, u/s 54B/54D/54G/54GA | — | |
| Taxable Short-term capital gains, | — |
Computation of Long-term Capital Gains
| Full value of consideration | — | |
| Less: (a) Expenditure incurred wholly and exclusively in connection with such a transfer | — | |
| (h) Indexed Cost of acquisition | — | |
| (c) Indexed Cost of improvement | — | — |
| Long-term capital gains | — | |
| Less: Exemption if available u/s 54/54B/54D/54EC/54EE/54F154G/54GA! 54GB | — | |
| Taxable long-term capital gains | — |
Indexation Formula for LTCG (Cost Inflation Index – CII)
Indexed Cost =
(Actual Cost × CII of Sale Year) / CII of Purchase Year
Example:
- Purchase Year (2018-19): CII = 280
- Sale Year (2023-24): CII = 348
- Purchase Price: ₹50 lakh
- Indexed COA: ₹50L × (348/280) = ₹62.14 lakh
Special Cases in Capital Gains Computation
| SCENARIO | TAX TREATMENT |
| Inherited Assets | COA = Previous owner’s purchase cost (indexed from their holding period) |
| Gifted Assets | COA = Market value on gift date (or donor’s cost if gifted before 2001) |
| Self-Generated Assets | COA = Nil (e.g., goodwill, patents) unless purchased |
| Bonus Shares | COA = Zero (holding period starts from allotment date) |
| Property Undervaluation | Higher of actual sale value or stamp duty value considered (Section 50C) |
Illustrative Example (Property Sale)
| PARTICULARS | AMOUNT (₹) |
| Sale Price (2023-24) | 1,20,00,000 |
| Purchase Price (2015-16) | 50,00,000 |
| Indexed COA (CII 348/254) | 68,50,393 |
| Improvement Cost (2018-19) | 10,00,000 |
| Indexed COI (CII 348/280) | 12,42,857 |
| Brokerage Paid | 1,00,000 |
| Taxable LTCG | 38,06,750 |
| Tax @ 20% | 7,61,350 |
TIPS :
- STCG: No indexation benefit; taxed at slab rates or 15% (for equity).
- LTCG: Indexation reduces tax liability (20% on gains).
- Documentation: Maintain purchase/sale deeds, improvement bills, and expense receipts.
- Exemptions: Reinvestment benefits under Sections 54, 54EC, 54Fcan reduce tax.
