Income From
Capital Gain
The profit or gains arising from the transfer of a capital asset made in the previous year will be charged to income tax under the head”Capital gains”. Such capital gains will be considered the income of the previous year in which the transfer took place.
The Capital Gains have been divided in two parts under Income Tax Act 1961. One is short term capital gain and other is long term capital gain.
Short Term Capital Gains: If any taxpayer has sold a Capital asset within 36 months and Shares or securities within 12 months
Long Term Capital Gain: A Capital Asset held for more than 36 months and 12 months in case of shares or securities is a long term capital asset and the gain arising therefrom is a long term capital gain.
Tax on Short-Term and Long-Term Capital Gains
| Tax Type | Condition | Tax applicable |
|---|---|---|
| Long-term capital gains tax | Except on sale of equity shares/ units of equity oriented fund | 20% |
| Long-term capital gains tax | On sale of Equity shares/ units of equity oriented fund | 10% over and above Rs 1 lakh |
| Short-term capital gains tax | When securities transaction tax is not applicable | The short-term capital gain is added to your income tax return and the taxpayer is taxed according to his income tax slab. |
| Short-term capital gains tax | When securities transaction tax is applicable | 15%. |
CAPITAL GAIN COMPUTATION
Computation of Short term Capital Gains Section 48
Short term capital gain shall be computed in the manner given below:
| Full Value of Consideration | xxx |
| Less: | |
| – Cost of Acquisition | xxx |
| – Cost of Improvement | xxx |
| – Selling Expenses | xxx |
| Short Term Capital Gain | xxx |
| Full Value of Consideration | xxx |
| Less: | |
| – Indexed Cost of Acquisition | xxx |
| – Selling Expenses | xxx |
| Long Term Capital Gain | xxx |
Indexed cost of acquisition: – means the cost adjusted as per cost inflation index. i.e.
Indexed Cost of acquisition =Cost of acquisition x Index of the year in which the asset was transferred Index of the year in which the asset was purchased.
Indexed cost of any improvement: – means the cost adjusted as per cost inflation index. i.e
Indexed Cost of improvement =Cost of improvement x Index of the year in which the asset was transferred Index of the year in which cost was incurred.