How to compute long term capital gain

Computation of long term capital gain

 long term capital gain will be computed by deducting Indexed cost of acquisition, indexed cost of improvement and selling expenses from full value of consideration

Thus,

Note: if any money is received under any insurance on account of damage or destruction to capital asset, the money received will be the value of consideration.

Indexed cost of acquisition means an amount which bears to the cost of acquisition, the same proportion as Cost inflation index for the year in which the asset is transferred bears to the Cost inflation index for the first year in which the asset was held by the assessee or for the year beginning on 1st April, 1981, whichever is later.

Indexed cost of improvement means an amount which bears to the cost of acquisition, the same proportion as Cost inflation index for the year in which the asset is transferred bears to the Cost inflation index for the year in which the improvement to the asset took place.

How to compute indexed cost of acquisition

For assets acquired before 1/4/1981

For assets acquired after 1/4/1981

Here, cost means cost of acquisition or fair market value of the asset as on 1/4/1981, whichever is higher

How to compute indexed cost of improvement

Note, expenses incurred before 1/4/1981 will not be considered as cost of improvement

Find out cost inflation index