Using a Capital Gains Calculator

• Tax on Long-term Capital Gains : For transfers on or after 23 July 2024, long-term capital gains on all assets are taxed at 12.5% (plus 4% health and education cess) without indexation. As a transition relief, resident individuals and HUFs selling land or a building acquired before 23 July 2024 can pay tax at the lower of 12.5% without indexation or 20% with indexation.

Capital Gain Shares

For listed shares and equity mutual funds, the rates applicable for FY 2025-26 (AY 2026-27) are as follows:

• Gains on listed equity shares or equity mutual funds sold within 12 months are short-term capital gains, taxed at 20% under Section 111A.
• Gains on listed equity shares or equity mutual funds held for more than 12 months are long-term capital gains, taxed under Section 112A at 12.5% on the amount exceeding the annual exemption of Rs. 1.25 lakh, without indexation.
• Gains on debt mutual fund units acquired on or after 1 April 2023 are treated as short-term regardless of holding period and taxed at the investor's income tax slab rate under Section 50AA.

Defining Indexation

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. Note that from 23 July 2024, indexation is relevant only for the optional 20% computation available to resident individuals and HUFs on land or buildings acquired before that date — all other long-term gains are taxed at 12.5% without indexation.

Cost Inflation Index (CII) and Capital Gains Calculator

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:

• Sale price and the purchase price of the asset.
• Details of purchase date and sale date.
• Investment details of capital gains like investment in bonds, house property etc.
• Type of investment.
• Type of capital gain, either short-term or long-term.
• Cost Inflation Index (CII) of the year of purchase and sale.
• The period between the purchase and sale of the asset.
• The differences in an amount of the purchasing cost and selling price.
• Indexed purchase value.
• Indexed long-term capital gain and long-term capital gains without indexation.

Computation of Capital Gains

Capital Gains can be calculated by the following method:

• Short-term capital gain = Total value of consideration – (Cost of Acquisition + Cost of Improvement + Cost of Transfer)
• Long-term capital gain = Total value of consideration – (Indexed Cost of Acquisition + Indexed Cost of Improvement + Cost of Transfer)
• Here,

  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 Improvement x (CII of the year of transfer/CII of the year of improvement)

  The CII is notified every year by the CBDT (base year 2001-02 = 100). The CII for FY 2025-26 is 376 (CBDT Notification No. 70/2025).

Let’s take an example of long-term capital gains on a property bought before 23 July 2024, where both options are compared:

If Mrs. Roy, a resident individual, sold her house in October 2025 (FY 2025-26) for INR 50 lakh, which she bought for INR 20 lakh in June 2010 (FY 2010-11), then:

Option 1 - 12.5% without indexation: LTCG = 50,00,000 - 20,00,000 = INR 30,00,000. Tax = 12.5% of 30,00,000 = INR 3,75,000 (plus 4% cess).

Option 2 - 20% with indexation (available because the property was acquired before 23 July 2024): Indexed cost = 20,00,000 x (CII of FY 2025-26 / CII of FY 2010-11) = 20,00,000 x (376/167) = INR 45,02,994.

Indexed Long-term Capital Gain = 50,00,000 - 45,02,994 = INR 4,97,006. Tax = 20% of 4,97,006 = INR 99,401 (plus 4% cess).

Mrs. Roy should opt for 20% with indexation, paying about INR 99,401 instead of INR 3,75,000.

Tax Exemptions on Capital Gains

• According to Section 54, the tax on the capital gains can be exempted if the capital is invested in buying another house property. This property can be bought either a year prior or within two years of the sale of the original property. The exemption can also be availed if the house is under construction and the construction will be completed within 3 years. The Section 54 exemption is capped at Rs. 10 crore.
• Long-term capital gains from land or buildings can be exempted by investing the gains, within six months of transfer, in notified bonds of REC, PFC or IRFC under Section 54EC. The maximum investment allowed is Rs. 50 lakh per financial year, with a five-year lock-in.
• Capital gains can also be invested in Capital Gains Account Scheme to claim exemption from the tax. The money invested in this scheme is locked away for a certain period as determined by the bank.
• Agriculture land is not considered as a capital asset and thus no tax is levied on its sale.
• If the entire capital profit is invested in setting up a small-scale industry, tax exemption can be obtained from it. However, the machinery and tools for manufacturing should be purchased within 6 months from the time the asset was sold.

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.