How do you calculate Capital Gains in India for Income Tax purpose?

Answer 1

There are two type of capital gain. The procedure are given below-

Procedure to calculate short-term Capital Gains.

The computation of capital gains depends upon the nature of capital asset transferred, i.e., short-term or long-term capital asset. Tax incidence is higher in case of short-term capital gain as compared to long-term capital gain. The procedure for computation of short-term capital gain from the assessment year 1993-94 is as follows:

Step 1- Find out the full value of consideration. The expression full value means the whole price without any deduction whatsoever and it cannot refer to the adequacy or inadequacy of the price bargained for, nor has it any reference to the market value of the capital asset, which is subject matter of the transfer. The consideration for the transfer of the capital asset is what the transferor receives in lieu of the asset he parts with, namely money or money's worth.

Step 2- Deduct the following:

1.

1. expenditure incurred wholly and exclusively in connection with such a transfer

2. cost of acquisition

3. cost of improvement

Step 3- from the resulting sum deduct the exemption provided by sections 54B, 54D, 54G and 54H

Step 4- the balance amount is short-term capital gain

Procedure to calculate long-term capital gain.

Step 1- Find out the full value of consideration.

Step 2- Deduct the following:

1.

1. expenditure incurred wholly and exclusively in connection with such a transfer

2. indexed cost of acquisition

3. indexed cost of improvement

Step 3- from the resulting sum deduct the exemption provided by sections 54, 54B, 54D, 54EA, 54EB, 54F and 54G

Step 4- the balance amount is long-term capital gain

In case long term capital gains is covered by section 115AB, 115AC or 115AD, it is taxable at the rate of 10%.

Deductions under section 80CCC to 80U and rebate under section 88 is not available in respect of long term capital gains.