According to Section 48 of the Income Tax Act, 1961, the income chargeable under the head “Capital Gains” is determined as follows: Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration receivedRead more
According to Section 48 of the Income Tax Act, 1961, the income chargeable under the head “Capital Gains” is determined as follows:
Section 48 – Computation of Capital Gains: “The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a capital asset and the cost of acquisition of the asset and the cost of any improvement to the asset, as reduced by the expenditure incurred in connection with the transfer.”
How Is This Gain Computed? The gain is calculated by taking the full value of the consideration (i.e., the sale price or the value received) and subtracting:
Cost of Acquisition: The amount you originally paid for the asset.
Cost of Improvement: Any additional costs incurred to enhance or upgrade the asset.
Expenditure on Transfer: Any expenses directly related to the sale (such as brokerage fees or legal charges).
As per Section 2(14) of the Income Tax Act, 1961): "Capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include—(a) Stock-in-trade, consumable stores, or raw materials held for the purpose of business;(b) Personal effeRead more
As per Section 2(14) of the Income Tax Act, 1961):
“Capital asset” means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include— (a) Stock-in-trade, consumable stores, or raw materials held for the purpose of business; (b) Personal effects, that is, movable property held for personal use, other than jewelry.”
as per above difinartion below is the summary:
Not Included as Capital Assets:
Business-Related Items: Items like inventory, raw materials, or consumable stores that are used in the course of business.
Personal Effects: Generally, personal belongings (like furniture, clothes, etc.) are not considered capital assets—except for jewelry, which is treated as a capital asset.
What Is Included as Capital Assets:
Investment Properties: Land, houses, or commercial properties.
Financial Assets: Shares, mutual funds, bonds, and other securities.
Other Valuable Assets: Items like valuable artworks or collectibles can also qualify, provided they are not held as stock-in-trade.
Section 48 of the Income Tax Act, 1961 provides the basic formula for computing capital gains: Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a cRead more
Section 48 of the Income Tax Act, 1961 provides the basic formula for computing capital gains:
Section 48 – Computation of Capital Gains: “The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a capital asset and the cost of acquisition of the asset and the cost of any improvement to the asset, as reduced by the expenditure incurred in connection with the transfer.”
Holding Period Criteria:
Listed Equity Shares/Equity Mutual Funds: Assets held for 12 months or less are classified as short-term.
Immovable Property (land, buildings): Assets held for 24 months or less are considered short-term.
Other Assets (e.g., jewelry, debt funds): Generally, assets held for 36 months or less fall into the short-term category.
Note: Although Section 48 does not explicitly define “short-term” or “long-term” capital gains, the classification depends on the holding period prescribed for various asset types under the Act and subsequent notifications.
The computation of Long-Term Capital Gain (LTCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is long-term is the holding period of the asset. Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital GRead more
The computation of Long-Term Capital Gain (LTCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is long-term is the holding period of the asset.
Section 48 – Computation of Capital Gains: “The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a capital asset and the cost of acquisition of the asset and the cost of any improvement to the asset, as reduced by the expenditure incurred in connection with the transfer.”
Explanation in Simple Terms:
Long-Term Capital Asset (LTCA):
A capital asset held for more than 36 months qualifies as a long-term asset for most assets like land, buildings, or unlisted shares.
For listed securities, equity mutual funds, and debt funds, the holding period is more than 12 months.
Jewelry, bonds, and similar assets generally have a 36-month holding period.
Computation of Long-Term Capital Gain (LTCG): The capital gain is computed similarly to short-term gains, with the special benefit of indexation for long-term assets. Indexation helps account for inflation, increasing the cost of acquisition and improvement, and thus lowering the capital gain on which tax is computed.
Sale Consideration: This is the price you sold the asset for.
Cost of Acquisition: This is the original price you paid for the asset, including any additional costs incurred like brokerage fees, registration charges, etc.
Cost of Improvement: If you have made any improvements to the asset (like renovation, upgrades, etc.), these costs can also be included.
Expenditure on Transfer: This includes any expenses directly related to the sale, like brokerage fees, legal charges, etc.
Indexed Cost of Acquisition: The original cost is adjusted for inflation using the Cost Inflation Index (CII).
Formula for LTCG (with Indexation):
LTCG=Sale Consideration−(Indexed Cost of Acquisition+Indexed Cost of Improvement+Expenditure on Transfer)
Tax Rate:
LTCG on listed equity shares and equity mutual funds is taxed at 10% (without indexation), provided the gain exceeds ₹1 lakh in a financial year.
LTCG on other assets (e.g., land, property, unlisted shares) is generally taxed at 20% (with indexation).
The computation of Short-Term Capital Gain (STCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is short-term is the holding period of the asset. Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘CapitalRead more
The computation of Short-Term Capital Gain (STCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is short-term is the holding period of the asset.
Section 48 – Computation of Capital Gains: “The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a capital asset and the cost of acquisition of the asset and the cost of any improvement to the asset, as reduced by the expenditure incurred in connection with the transfer.”
Explanation:
Short-Term Capital Asset (STCA):
A capital asset held for 3 years or less is classified as a short-term asset.
For assets like immovable property (land or buildings), the holding period is 36 months.
For listed securities, shares, mutual funds, etc., the holding period is 12 months.
Other assets (e.g., jewelry, bonds, etc.) typically have a holding period of 36 months.
Computation of Short-Term Capital Gain (STCG): The capital gain is calculated as the difference between the sale consideration and the cost of acquisition of the asset. Unlike long-term capital gains, indexation is not applicable to short-term capital assets. However, the following factors must be considered:
Sale Consideration: This is the price you sold the asset for.
Cost of Acquisition: This is the original price you paid for the asset, including any additional costs incurred like brokerage fees, registration charges, etc.
Cost of Improvement: If you have made any improvements to the asset (like renovation, upgrades, etc.), these costs can also be included.
Expenditure on Transfer: This includes any expenses directly related to the sale, like brokerage fees, legal charges, etc.
Formula for STCG:
STCG=Sale Consideration – (Cost of Acquisition+Cost of Improvement+Expenditure on Transfer)
Tax Rate:
The tax on Short-Term Capital Gains (STCG) depends on the type of asset. For listed securities or equity mutual funds, the tax rate is 15% (as per Budget 2025 changes).
For other assets (e.g., land, buildings), STCG is taxed at the applicable tax slab rates.
The benefit of indexation while computing capital gains is provided under Section 48 of the Income Tax Act, 1961. This provision allows for the adjustment of the cost of acquisition and improvement of a long-term capital asset to account for inflation, using the Cost Inflation Index (CII). Section 4Read more
The benefit of indexation while computing capital gains is provided under Section 48 of the Income Tax Act, 1961. This provision allows for the adjustment of the cost of acquisition and improvement of a long-term capital asset to account for inflation, using the Cost Inflation Index (CII).
Section 48 – Computation of Capital Gains:
“The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a capital asset and the cost of acquisition of the asset and the cost of any improvement to the asset, as increased by the Cost Inflation Index (CII), in the case of a long-term capital asset.”
Benefit of Indexation:
Reduces Taxable Capital Gains: By inflating the cost of your asset, indexation reduces the overall gain on which tax is calculated.
More Beneficial for Long-term Assets: Since assets held for a longer time usually appreciate significantly, indexation can lead to a lower tax liability when you eventually sell the asset.
When is Indexation Allowed?
Only for Long-Term Capital Assets: Indexation is applicable only to long-term assets (held for more than 36 months).
For Both Purchase Cost and Improvement Costs: You can adjust both the purchase cost and any improvement costs using the CII.
If Indexation is Opted, It Must Be Applied to Both Purchase and Improvement Costs: Once you choose to apply indexation, you must apply it to both the original purchase price and any improvement made to the asset.
As per Section 55(2)(b) of the Income Tax Act, 1961, for a capital asset acquired before 1st April 2001, the taxpayer has a special option to calculate the cost of acquisition. Section 55(2)(b) – Cost of Acquisition for Assets Acquired Before 1st April 2001: “Where the capital asset became the propeRead more
As per Section 55(2)(b) of the Income Tax Act, 1961, for a capital asset acquired before 1st April 2001, the taxpayer has a special option to calculate the cost of acquisition.
Section 55(2)(b) – Cost of Acquisition for Assets Acquired Before 1st April 2001:
“Where the capital asset became the property of the assessee before the 1st day of April, 2001, the cost of acquisition shall be deemed to be— (i) the actual cost of acquisition of the asset; or (ii) the fair market value (FMV) of the asset as on 1st April, 2001, whichever is higher.”
Explanation in Simple Terms:
If you acquired a capital asset (such as land, a building, or unlisted shares) before 1st April 2001, you don’t have to stick to the original purchase price. Instead, you can choose to take the Fair Market Value (FMV) as on 1st April 2001, which could help reduce your capital gains tax liability.
How to Determine FMV (Fair Market Value) as on 1st April 2001?
For Land or Property: FMV can be determined through a registered valuer who assesses the asset’s value as of 1st April 2001.
For Listed Shares: FMV is generally taken as the highest price quoted on a recognized stock exchange on 1st April 2001.
For Other Assets: FMV can be determined based on market trends, valuation reports, or any government-approved reference rates.
The cost of acquisition of a capital asset is determined as per Section 55 of the Income Tax Act, 1961. It varies depending on whether the asset was purchased, inherited, gifted, or acquired before a specific date. Section 55(2) – Cost of Acquisition of a Capital Asset:“For the purposes of sectionsRead more
The cost of acquisition of a capital asset is determined as per Section 55 of the Income Tax Act, 1961. It varies depending on whether the asset was purchased, inherited, gifted, or acquired before a specific date.
Section 55(2) – Cost of Acquisition of a Capital Asset: “For the purposes of sections 48 and 49,— (a) in relation to any capital asset,— (i) where the capital asset became the property of the assessee before 1st day of April, 2001, the cost of acquisition shall be either— (A) the actual cost of acquisition of the asset; or (B) the fair market value (FMV) of the asset as on 1st April, 2001, whichever is higher.”
Explanation in Simple Terms:
If You Purchased the Asset:
The cost of acquisition is the actual purchase price paid, including any registration fees, brokerage, or legal expenses.
If the Asset was Inherited or Gifted:
The original cost of acquisition of the previous owner is considered.
The holding period of the previous owner is also taken into account to determine whether the gain is short-term or long-term.
If the Asset was Acquired before 1st April 2001:
The taxpayer has an option to take either the actual purchase price or the Fair Market Value (FMV) as of 1st April 2001, whichever is higher.
For Assets Declared under the Income Declaration Scheme, 2016:
The cost of acquisition is deemed to be the FMV as of 1st June 2016 (as per Section 49(5)).
Indexed Cost of Acquisition (Applicable to Long-Term Capital Assets):
If the asset qualifies for indexation benefit (available for immovable property, unlisted shares, debt funds, etc.), the cost is adjusted for inflation using the Cost Inflation Index (CII).
Formula:
Indexed Cost of Acquisition=Original Cost×CII of Year of SaleCII of Year of Purchase\text{Indexed Cost of Acquisition} = \frac{\text{Original Cost} \times \text{CII of Year of Sale}}{\text{CII of Year of Purchase}}Indexed Cost of Acquisition=CII of Year of PurchaseOriginal Cost×CII of Year of Sale
Practical Example:
Suppose you bought a house in 1995 for ₹10 lakhs, and you are selling it in 2025.
Instead of ₹10 lakhs, you can take the FMV as of 1st April 2001 (say ₹25 lakhs).
If the CII for 2001-02 was 100 and the CII for 2025-26 is 400, then:
According to Section 49(5) of the Income Tax Act, 1961, as inserted through the Income Declaration Scheme, 2016, the cost of acquisition of a capital asset declared under the scheme shall be deemed to be the fair market value (FMV) as on 1st June 2016. Section 49(5) – Cost of Acquisition in case ofRead more
According to Section 49(5) of the Income Tax Act, 1961, as inserted through the Income Declaration Scheme, 2016, the cost of acquisition of a capital asset declared under the scheme shall be deemed to be the fair market value (FMV) as on 1st June 2016.
Section 49(5) – Cost of Acquisition in case of Declaration under IDS, 2016: “Where any capital asset has been declared under the Income Declaration Scheme, 2016, and the fair market value of such asset as on 1st June 2016 has been taken into account for the purposes of that Scheme, then, notwithstanding anything contained in this Act, the cost of acquisition of the asset shall be deemed to be such fair market value.”
If a person had any undisclosed income and used it to acquire a capital asset (such as land, property, or shares), they had an option to disclose it under the Income Declaration Scheme (IDS), 2016. This scheme allowed people to pay tax on undisclosed income and make their assets legally recognized.
Cost of Acquisition: The purchase price of the asset is ignored, and instead, the FMV as on 1st June 2016 is considered as its cost for capital gains purposes.
Impact on Capital Gains Calculation:
When the declared asset is later sold, capital gains will be calculated using FMV as of 1st June 2016 as the acquisition cost.
If the sale price is higher than this FMV, capital gains tax applies.
If the sale price is lower than the FMV, a capital loss may be claimed.
Benefit to Taxpayers: This provision ensures that individuals who declared their undisclosed assets under IDS, 2016, do not face double taxation when they sell the asset.
“'Transfer' means—(a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset;(b) the gift of any such asset; and(c) any other mode of transferring such asset or any interest therein.” Explanation:This provision establishes a very broad definition of “transfer” for theRead more
“’Transfer’ means— (a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset; (b) the gift of any such asset; and (c) any other mode of transferring such asset or any interest therein.”
Explanation: This provision establishes a very broad definition of “transfer” for the purposes of computing capital gains. It is not limited to a simple sale for money. Instead, any transaction that results in a change of the beneficial ownership of an asset is considered a transfer. This includes:
Sale or Exchange: When you sell or exchange your asset for money or another asset.
Relinquishment/Extinguishment: When you give up or lose your rights in the asset.
Gift: When you transfer the asset without receiving any consideration, such as gifting it to a family member or through a will.
Other Modes: Any other method by which the ownership or the right to enjoy the benefits of the asset is passed on to someone else.
Which income is charged to tax under the head “Capital Gains”?
According to Section 48 of the Income Tax Act, 1961, the income chargeable under the head “Capital Gains” is determined as follows: Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration receivedRead more
According to Section 48 of the Income Tax Act, 1961, the income chargeable under the head “Capital Gains” is determined as follows:
See lessWhat is a capital assets?
As per Section 2(14) of the Income Tax Act, 1961): "Capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include—(a) Stock-in-trade, consumable stores, or raw materials held for the purpose of business;(b) Personal effeRead more
As per Section 2(14) of the Income Tax Act, 1961):
See lessWhat is long-term capital gain and short-term capital gain?
Section 48 of the Income Tax Act, 1961 provides the basic formula for computing capital gains: Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital Gains’ shall be the difference between the full value of consideration received or accruing from the transfer of a cRead more
Section 48 of the Income Tax Act, 1961 provides the basic formula for computing capital gains:
Note: Although Section 48 does not explicitly define “short-term” or “long-term” capital gains, the classification depends on the holding period prescribed for various asset types under the Act and subsequent notifications.
See lessHow to compute long-term capital gain?
The computation of Long-Term Capital Gain (LTCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is long-term is the holding period of the asset. Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘Capital GRead more
The computation of Long-Term Capital Gain (LTCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is long-term is the holding period of the asset.
Explanation in Simple Terms:
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See lessLong-Term Capital Asset (LTCA):
A capital asset held for more than 36 months qualifies as a long-term asset for most assets like land, buildings, or unlisted shares.
For listed securities, equity mutual funds, and debt funds, the holding period is more than 12 months.
Jewelry, bonds, and similar assets generally have a 36-month holding period.
Computation of Long-Term Capital Gain (LTCG):
The capital gain is computed similarly to short-term gains, with the special benefit of indexation for long-term assets. Indexation helps account for inflation, increasing the cost of acquisition and improvement, and thus lowering the capital gain on which tax is computed.
Sale Consideration: This is the price you sold the asset for.
Cost of Acquisition: This is the original price you paid for the asset, including any additional costs incurred like brokerage fees, registration charges, etc.
Cost of Improvement: If you have made any improvements to the asset (like renovation, upgrades, etc.), these costs can also be included.
Expenditure on Transfer: This includes any expenses directly related to the sale, like brokerage fees, legal charges, etc.
Indexed Cost of Acquisition: The original cost is adjusted for inflation using the Cost Inflation Index (CII).
Formula for LTCG (with Indexation):
LTCG=Sale Consideration−(Indexed Cost of Acquisition+Indexed Cost of Improvement+Expenditure on Transfer)
Tax Rate:
LTCG on listed equity shares and equity mutual funds is taxed at 10% (without indexation), provided the gain exceeds ₹1 lakh in a financial year.
LTCG on other assets (e.g., land, property, unlisted shares) is generally taxed at 20% (with indexation).
How to compute short-term capital gain?
The computation of Short-Term Capital Gain (STCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is short-term is the holding period of the asset. Section 48 – Computation of Capital Gains:“The income chargeable under the head ‘CapitalRead more
The computation of Short-Term Capital Gain (STCG) is specified under Section 48 of the Income Tax Act, 1961. The key factor in determining whether a capital gain is short-term is the holding period of the asset.
Explanation:
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See lessShort-Term Capital Asset (STCA):
A capital asset held for 3 years or less is classified as a short-term asset.
For assets like immovable property (land or buildings), the holding period is 36 months.
For listed securities, shares, mutual funds, etc., the holding period is 12 months.
Other assets (e.g., jewelry, bonds, etc.) typically have a holding period of 36 months.
Computation of Short-Term Capital Gain (STCG):
The capital gain is calculated as the difference between the sale consideration and the cost of acquisition of the asset. Unlike long-term capital gains, indexation is not applicable to short-term capital assets. However, the following factors must be considered:
Sale Consideration: This is the price you sold the asset for.
Cost of Acquisition: This is the original price you paid for the asset, including any additional costs incurred like brokerage fees, registration charges, etc.
Cost of Improvement: If you have made any improvements to the asset (like renovation, upgrades, etc.), these costs can also be included.
Expenditure on Transfer: This includes any expenses directly related to the sale, like brokerage fees, legal charges, etc.
Formula for STCG:
STCG=Sale Consideration – (Cost of Acquisition+Cost of Improvement+Expenditure on Transfer)
Tax Rate:
The tax on Short-Term Capital Gains (STCG) depends on the type of asset. For listed securities or equity mutual funds, the tax rate is 15% (as per Budget 2025 changes).
For other assets (e.g., land, buildings), STCG is taxed at the applicable tax slab rates.
When is the benefit of indexation allowed while computing capital gain?
The benefit of indexation while computing capital gains is provided under Section 48 of the Income Tax Act, 1961. This provision allows for the adjustment of the cost of acquisition and improvement of a long-term capital asset to account for inflation, using the Cost Inflation Index (CII). Section 4Read more
The benefit of indexation while computing capital gains is provided under Section 48 of the Income Tax Act, 1961. This provision allows for the adjustment of the cost of acquisition and improvement of a long-term capital asset to account for inflation, using the Cost Inflation Index (CII).
See lessIn respect of capital asset acquired before 1st April, 2001 is there any special method to compute cost of acquisition?
As per Section 55(2)(b) of the Income Tax Act, 1961, for a capital asset acquired before 1st April 2001, the taxpayer has a special option to calculate the cost of acquisition. Section 55(2)(b) – Cost of Acquisition for Assets Acquired Before 1st April 2001: “Where the capital asset became the propeRead more
As per Section 55(2)(b) of the Income Tax Act, 1961, for a capital asset acquired before 1st April 2001, the taxpayer has a special option to calculate the cost of acquisition.
Explanation in Simple Terms:
If you acquired a capital asset (such as land, a building, or unlisted shares) before 1st April 2001, you don’t have to stick to the original purchase price. Instead, you can choose to take the Fair Market Value (FMV) as on 1st April 2001, which could help reduce your capital gains tax liability.
How to Determine FMV (Fair Market Value) as on 1st April 2001?
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See lessFor Land or Property: FMV can be determined through a registered valuer who assesses the asset’s value as of 1st April 2001.
For Listed Shares: FMV is generally taken as the highest price quoted on a recognized stock exchange on 1st April 2001.
For Other Assets: FMV can be determined based on market trends, valuation reports, or any government-approved reference rates.
How cost of acquisition is calculated in capital gain?
The cost of acquisition of a capital asset is determined as per Section 55 of the Income Tax Act, 1961. It varies depending on whether the asset was purchased, inherited, gifted, or acquired before a specific date. Section 55(2) – Cost of Acquisition of a Capital Asset:“For the purposes of sectionsRead more
The cost of acquisition of a capital asset is determined as per Section 55 of the Income Tax Act, 1961. It varies depending on whether the asset was purchased, inherited, gifted, or acquired before a specific date.
Explanation in Simple Terms:
If You Purchased the Asset:
The cost of acquisition is the actual purchase price paid, including any registration fees, brokerage, or legal expenses.
If the Asset was Inherited or Gifted:
The original cost of acquisition of the previous owner is considered.
The holding period of the previous owner is also taken into account to determine whether the gain is short-term or long-term.
If the Asset was Acquired before 1st April 2001:
The taxpayer has an option to take either the actual purchase price or the Fair Market Value (FMV) as of 1st April 2001, whichever is higher.
For Assets Declared under the Income Declaration Scheme, 2016:
The cost of acquisition is deemed to be the FMV as of 1st June 2016 (as per Section 49(5)).
Indexed Cost of Acquisition (Applicable to Long-Term Capital Assets):
If the asset qualifies for indexation benefit (available for immovable property, unlisted shares, debt funds, etc.), the cost is adjusted for inflation using the Cost Inflation Index (CII).
Formula:
Indexed Cost of Acquisition=Original Cost×CII of Year of SaleCII of Year of Purchase\text{Indexed Cost of Acquisition} = \frac{\text{Original Cost} \times \text{CII of Year of Sale}}{\text{CII of Year of Purchase}}Indexed Cost of Acquisition=CII of Year of PurchaseOriginal Cost×CII of Year of Sale
Practical Example:
Suppose you bought a house in 1995 for ₹10 lakhs, and you are selling it in 2025.
Instead of ₹10 lakhs, you can take the FMV as of 1st April 2001 (say ₹25 lakhs).
If the CII for 2001-02 was 100 and the CII for 2025-26 is 400, then:
Indexed Cost=₹25,00,000×400100=₹1crore\text{Indexed Cost} = \frac{₹25,00,000 \times 400}{100} = ₹1 croreIndexed Cost=100₹25,00,000×400=₹1crore
If the house is sold for ₹1.5 crore, then:
Capital Gain=Sale Price−Indexed Cost=₹1.5crore−₹1crore=₹50lakhs.\text{Capital Gain} = \text{Sale Price} – \text{Indexed Cost} = ₹1.5 crore – ₹1 crore = ₹50 lakhs.Capital Gain=Sale Price−Indexed Cost=₹1.5crore−₹1crore=₹50lakhs.
Tax at 12.5% (as per Budget 2025 changes) would be ₹6.25 lakhs.
This method ensures fair tax computation by adjusting for inflation over the years.
See lessIf any undisclosed income [in the form of investment in capital asset] is declared under Income Declaration Scheme, 2016, then what should be the cost of acquisition of such capital asset?
According to Section 49(5) of the Income Tax Act, 1961, as inserted through the Income Declaration Scheme, 2016, the cost of acquisition of a capital asset declared under the scheme shall be deemed to be the fair market value (FMV) as on 1st June 2016. Section 49(5) – Cost of Acquisition in case ofRead more
According to Section 49(5) of the Income Tax Act, 1961, as inserted through the Income Declaration Scheme, 2016, the cost of acquisition of a capital asset declared under the scheme shall be deemed to be the fair market value (FMV) as on 1st June 2016.
See lessWhat constitutes ‘transfer’ while calculating capital gain as per Income-tax Law?
“'Transfer' means—(a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset;(b) the gift of any such asset; and(c) any other mode of transferring such asset or any interest therein.” Explanation:This provision establishes a very broad definition of “transfer” for theRead more
“’Transfer’ means—
(a) the sale, exchange, relinquishment, or extinguishment of any rights in a capital asset;
(b) the gift of any such asset; and
(c) any other mode of transferring such asset or any interest therein.”
Explanation:
This provision establishes a very broad definition of “transfer” for the purposes of computing capital gains. It is not limited to a simple sale for money. Instead, any transaction that results in a change of the beneficial ownership of an asset is considered a transfer. This includes:
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See lessSale or Exchange: When you sell or exchange your asset for money or another asset.
Relinquishment/Extinguishment: When you give up or lose your rights in the asset.
Gift: When you transfer the asset without receiving any consideration, such as gifting it to a family member or through a will.
Other Modes: Any other method by which the ownership or the right to enjoy the benefits of the asset is passed on to someone else.