Computation of Capital Gains [Section 48]

Types of Capital Gains  and a format for Computation of Capital Gains [Section 48] are described below:

Capital gains are of two types:

(i)         Short-term capital gain which arises on the transfer of a short-term capital asset; and

(ii)        Long-term capital gain which arises on the transfer of a long-term capital asset.

Short-term capital gain is the excess of the full value of consideration over the aggregate of the following three:

(i)         expenses of transfer;

(ii)        cost of acquisition of the asset and cost of improvement thereto;

(iii)       in case of value of any money or capital asset received by a specified person from a specified entity referred to in section 45(4), the amount chargeable to income-tax as income of such specified entity under that sub-section which is attributable to the capital asset being transferred by the specified entity, calculated in the prescribed manner.

Whereas in the case of long-term capital gain, the capital gain shall be the excess of the full value of consideration over the aggregate of the following three amounts:

(i)         Expenses of transfer;

(ii)        Indexed cost of acquisition of the asset (see also exceptions below);

(iii)       Indexed cost of improvement (see also exceptions below).

From capital gain, computed as above, certain exemptions are available under sections 54/54B/54D/54EC/54F/54G/54GA/54GB. The capital gain after claiming the said exemption(s) is known as taxable long-term or short-term capital gain. A format to compute the capital gain is given below:

Computation of Short-term Capital Gains

Computation of Long-term Capital Gains