Capital Gains Tax in India|e-filing income tax returns in India on trutax

Capital Gains

Capital Gains

Profits or gains arising from transfer of a capital asset are called “Capital Gains” and are charged to tax under the head “Capital Gains”.

 

Short Term

Any capital asset held by the taxpayer for a period of not more than 36 months immediately preceding the date of its transfer will be treated as short-term capital asset. However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.

 

Long Term

Any capital asset held by the taxpayer for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset. However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.

 

Indexation

Indexation is a process by which the cost of acquisition is adjusted against inflationary rise in the value of asset. For this purpose, Central Government has notified cost inflation index.

The benefit of indexation is available only to long-term capital assets.

For computation of indexed cost of acquisition following factors are to be considered:

  • Year of acquisition/improvement
  • Year of transfer
  • Cost inflation index of the year of acquisition/improvement
  • Cost inflation index of the year of transfer

Indexed cost of acquisition is computed with the help of following formula :

(Cost of acquisition × Cost inflation index of the year of transfer of capital asset) / (Cost inflation index of the year of acquisition)

Cost Inflation Index
Financial Year CII Financial Year CII Financial Year CII Financial Year CII
Before 1/4/1981 100 1989-90 172 1998-99 351 2007-08 551
1981-82 100 1990-91 182 1999-00 389 2008-09 582
1982-83 109 1991-92 199 2000-01 406 2009-10 632
1983-84 116 1992-93 223 2001-02 426 2010-11 711
1984-85 125 1993-94 244 2002-03 447 2011-12 785
1985-86 133 1994-95 259 2003-04 463 2012-13 852
1986-87 140 1995-96 281 2004-05 480 2013-14 939
1987-88 150 1996-97 305 2005-06 497 2014-15 1024
1988-89 161 1997-98 331 2006-07 519 2015-16 1081