How to calculate Capital Gain as per Income Tax Act? - Professionals - Taxation - TIK Share
0 Likes 465 Views

How to calculate Capital Gain as per Income Tax Act?


Rahul Rai

2013-12-15

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

Vedanta Deshika

2013-12-16

@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   

Reply