Income from Capital Gain

Capital gain means any profits arising from the transfer of capital asset.

Capital gain may be either short term capital gain or long term capital gain

If the capital asset is held by the assessee for less than 36 months, gains arising from such asset will be short term capital gain

If the capital asset is held by the assessee for more than 36 months, gains arising from such asset will be long term capital gain

In the case of shares, listed securities, units of UTI, mutual fund 10(23D),ZCB the period mentioned above (36 months) will be substituted by 12 months .

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