Step-by-Step Computation of LTCG

Step 1: Determine the Full Value of Consideration (FVC)

• This is the total amount received from the sale of the asset.
  Example: If you sell a property for ₹50,00,000, then FVC = ₹50,00,000.

Step 2: Determine the Cost of Acquisition (CoA) and Cost of Improvement (if any)

• Cost of Acquisition: The purchase price (plus any incidental expenses) at the time the asset was bought.

• Cost of Improvement: Any capital expenditure on improvement (not repair) made during the holding period.

Step 3: Indexation Benefit

• Since the asset qualifies as long-term, you can adjust the original costs for inflation using the Cost Inflation Index (CII) as per Section 55(2).

  Indexed Cost of Acquisition =

  (Cost of Acquisition×CII in the year of acquisition)/CII in the year of sale

• Similarly, calculate the Indexed Cost of Improvement if applicable.

• Step 4: Deduct Directly Attributable Expenses

  • Include expenses incurred wholly and exclusively in connection with the transfer (for example, brokerage fees, stamp duty on transfer, legal fees).

  Step 5: Compute the Long-Term Capital Gain (LTCG)

  • LTCG = FVC – (Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses)

  Step 6: Apply the Tax Rate and Compute Tax Liability

  • Tax Rates:

    • For most assets (other than equity shares where specific rates apply), LTCG is taxed at 20% on the computed gain (plus applicable surcharge and cess).

    • For equity shares or equity-oriented mutual funds (where STT is paid), the LTCG is taxed at 10% on the gains exceeding an exemption threshold (currently ₹1,00,000) under Section 112A.