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How to Calculate Capital Gains, Formula & Calculation Explained

What Are the Online and Offline Procedures to Calculate Capital Gains?

What Are Long-term Capital Gains?

How to Calculate Long-Term Capital Gains?

Let's take an example to understand how to calculate capital gains after selling a property using the following formula mentioned above-

Mr Ashok purchased a land plot worth ₹10,00,000 in the year 2011. In January 2021, he sold this property at ₹30,00,000.

So, the question is – how much will be the long-term capital gain and how to calculate tax capital gains? Here is the following calculation -

Particulars

Amount

Purchasing cost

₹10,00,000

Selling price

₹30,00,000

Improvement cost

NIL

Cost inflation index (index for the FY 2020-21/index for the FY 2011-12; 301/184)

₹1.63

Indexed purchasing cost (CII x purchasing Cost; 1.63 x ₹10,00,000)

₹16,30,000

LTCG (selling price – indexed purchasing cost)

₹13,70,000

Tax rate on LTCG

20%

Tax payable (20% of ₹13,70,000)

₹2,74,000

However, you can avoid using indexation while computing capital gains from equity shares and mutual funds covered under section 112A, and you are liable to pay 10% of tax on capital gains instead of 20%.

[Source]

What Are Short-term Capital Gains?

How to Calculate Short-Term Capital Gains?

Let's understand how to calculate short-term capital gains after selling a property using the formula mentioned above:

Mr Akash is a salaried individual and bought a property worth ₹16,00,000 in December 2020 and sold it in September 2021 at ₹26,00,000. The brokerage cost is ₹12,000.

So, the question is – how much will be the short-term capital gain and the tax payable towards such profit? Here is the following calculation -

Particulars

Amount

Purchasing cost

₹16,00,000

Selling cost

₹26,00,000

Brokerage cost (Transfer Cost)

₹12,000

Improvement cost

NIL

Net sale consideration (₹26,00,000-₹12,000)

₹25,88,000

STCG (Net sale consideration - purchasing cost; ₹25,88,000-₹16,00,000)

₹9,88,000

Tax rate on STCG

The STCG arising from selling property other than securities will be taxed as per the normal income tax slab rate.

What Are the Tax Rates on Long-Term and Short-Term Capital Gains?

Take a look at the following table illustrating the tax rates on long-term and short-term capital gains -

Types of Capital Gains

Type of Transaction

Tax Rates

LTCG

Transfer or sale of equity-oriented fund units or equity shares u/s 112A

10% over and above ₹1,00,000

LTCG

Transfer or sale of a capital asset other than equity-oriented fund units or equity shares

20%

STCG

Transfer or sale of equity-oriented fund units or equity shares (STT Paid units and securities.)

15%

STCG

Transfer or sale of a capital asset other than equity-oriented fund units or equity shares

Added to the income tax return of a taxpayer and taxed as per the income tax slab rate

[Source 1]

[Source 2]

What Are the Tax Exemptions Available on Capital Gains?

FAQs about Capital Gains Calculation