Capital gains are referred to the profit made on the sale of an asset when it is sold at a price higher than its purchasing cost. Capital assets include products and schemes like stocks, mutual funds, bonds, real estate etc. The term capital gain means the increased value at which the asset is sold. Similarly, the capital loss is the decrease in the value of the asset from its original cost.
There are two types of capital gains:
The calculation of tax on capital gains is influenced by the type of gain such as:
Get the Complete Understanding of Capital Gains Get Details
If the capital gains are invested in shares and stocks then the rate of tax excised on long-term capital gains and short-term capital gains as per the year 2017-18 are as follows:
The process of adjusting prices according to the standard index to calculate profits made from the sale of the asset while taking into account the current inflation rate is called indexation. Computing profits made of on an asset based on its original price does not give accurate results because inflation does not remain flat instead it keeps fluctuating with time. In indexation, inflation is also considered which is why it provides a more reliable figure in the case of long-term capital gains.
Cost Inflation Index is an index concerning inflation which is declared every year by the government. It is very helpful in calculating the long-term capital gains on the long-term capital assets.
Capital gain calculator is a tool which is used to calculate capital gains online. To calculate capital gains the following details must be filled in:
Capital Gains can be calculated by the following method:
Cost Inflation Index (CII)
Indexed cost of acquisition = Cost of Acquisition x (CII of the year of transfer/CII of the year of acquisition)
Indexed cost of improvement = Cost of Acquisition x (CII of the year of transfer/CII of the year of acquisition)
The CII is issued every year by Income Tax department. The CII for the year 2016-17 is 1125.
Let’s take an example to calculate long-term capital gains using indexation:
If Mrs. Roy sold her house in October 2015 for 50 Lakhs INR, which she bought for 20 Lakhs INR in June 2010, then
(Cost Inflation Index) CII = (CII for year 2015-16/CII for the year 2010-1011) = (1081/711) = 15.2
Purchase index cost = CII X Purchase Price = 1.52 X 20,00,000 = 30,40,787.6
Long-term Capital Gain = Sale Price – Indexed Cost = 50,00,000 – 30,40,000 = 19,59212 INR
Tax on Long-term Capital Gain = 20% of 19,60,000 = 3,91842.4 INR
Get the detail process of Tax Exemption on Income Tax in India Get Details
To claim this deduction, you need to compute the interest separately from the principal repayment, on the loan that you took from a bank or financial institution. You can get an exemption for the complete annual interest amount irrespective of whether the payments are made to the lender.
People Also Searched For
The Economic Times Wealth: Vikas Dahiya, founder and chief of tax compliance platform, All India ITR announced a free of cost tax returns solution for members of the Indian Armed Forces. Due to their disciplined schedules, annual tax returns become a hectic chore for servicemen. They need to repaid for their services to millions of citizens and this initiative will go a long way to alleviate the stresses in their service conditions.
For enquiries, call us on
Any Queries?
Request a Call from Us