Capital Gain is a big money minting source for Government. Government watch these transactions very carefully and issue notices on any suspecious transaction it finds.

On which type of transactions Capital Gain is applicable?

Capital gain is attracted on any transaction that involves transfer of Capital Assets. Capital Assets are described in income tax act.

Remember capital gain is not attracted on sale of assets which are of personal nature say Car, Music players etc.

How to Calculate Capital Gain?

Capital gain is calculated in this manner:

Net Sale Consideration received = XXXXX - (A)

Less: Indexed cost of Assets      = (XXXX) - (B)

Capital Gain                                 = (XXXX) - (A)-(B)

What is long term capital gain and Short Term Capital Gain?

Long term capital gain is the capital gain accrued on transfer of an Asset which is held for more than 3 years. Other assets are short term.

How to calculate Indexed Cost of Capital Asset?

Indexed cost of capital assets is calculated by multiplying the current years inflation rate and dividing by the Inflation rate in the year of purchase.

For example, if property was purchased in 2008 for 100,000 than the indexed cost of propery will be 939/551*100,000.

What is the treatment on sale of Shares?

In case of purchase and sale of Shares listed in stock exchange, the capital gain provision are different. Here the long term gain term is only 1 year instead of 3 years. And long term capital gain are exempted.

What is the rate of Tax on Capital Gains?

20% for long term capital gain and 30% incase of Short Term Capital Gain. Long term Capital Gains are exempted in case of gain arising from transfering the listed shares.

Any exemption if we invest the consideration received?

Yes exemptions are availabe as per section 54, 54B, 54D etc. of Income Tax Act.

Cost Inflation Index for Capital Gains as per Income Tax Act from financial year 1981-82 to Financial year 2013-14

 Financial Year Cost Inflation Index 1981-1982 100 1982-1983 109 1983-1984 116 1984-1985 125 1985-1986 133 1986-1987 140 1987-1988 150 1988-1989 161 1989-1990 172 1990-1991 182 1991-1992 199 1992-1993 223 1993-1994 244 1994-1995 259 1995-1996 281 1996-1997 305 1997-1998 331 1998-1999 351 1999-2000 389 2000-2001 406 2001-2002 426 2002-2003 447 2003-2004 463 2004-2005 480 2005-2006 497 2006-2007 519 2007-2008 551 2008-2009 582 2009-2010 632 2010-2011 711 2011-2012 785 2012-2013 852 2013-2014 939

Posted 3 years, 11 months ago by Rahul Rai

@Rahul Rai,

I have a very pratical problem on capital gains.

Suppose i bought a house property by taking a loan from a bank of say Rs 40 lakhs with a margin of 2 lakhs. The loan is repaid in 240 EMIs along with the interest. At the end of 20 years, i want to sell the House property.

So here goes my IT doubts

1. What do i consider as my cost of acquisition??
2. Whether can i treat the interest portion (embedded in EMI) also part of COA??
3. What happens if i had claimed interest deduction on home loan u/s 124 i.e. 1.5 laks under income from House property??
4. What happens if i had claimed i had claimed 80c deduction for principal portion??

5. Can i consider the interest as COI ?? Can i get indexation ???

6. What is the present legal solution ( pls quote the section or case law)

Kindly clarify this practical problem for the benefit of the common man

~CA Vedanta Deshika

Posted 3 years, 11 months ago by HS VEDANTA DESHIKA