Asset Holding Period (in months)0
Type of Capital Gain0
CII of Year the asset was sold0
CII of Year the asset was bought0
Indexed Buying Price0
Capital Gain / Loss0
Effective Tax Rate0
What is an asset?
Under the Income Tax Act, 1961 a capital asset is any asset irrespective of being held for business or personal use. It may be movable, immovable, tangible or intangible, fixed or circulating. These assets include land and house property, shares and stocks, bonds and debentures, mutual funds, and trademarks.
What is a capital gain?
A capital gain arises when a taxpayer transfers or sells a capital asset belonging to him. The profit or loss from the sale of the asset is capital gain or loss. The gain comes under the income category and hence a taxpayer needs to pay tax on the gain.
Here the sale of an asset is a prerequisite to capital gain. When a taxpayer inherits an asset or receives a gift, it is a transfer of ownership. It is not a sale of an asset, there is no exchange of money in cash or kind. Hence this transfer of ownership does not qualify for capital gain.
Capital gain tax on assets
Once a taxpayer sells an asset, he/ she incurs a capital gain. Now the type of capital gain and taxability depends on the holding period of the asset.
The holding period is the tenure for which the asset is held by a taxpayer. For instance, Mr.Arun bought land on the 10th of December 2017 and sold the land on the 10th of December 2019, he was holding the land for a tenure of 24 months. This is the holding period of the land i.e 24 months
There are 2 types of capital gains .i.e short-term capital gains and long term capital gains.
Short term capital gains arises when an asset is held for less than 36 months. The period of 36 months is not valid across all the types of assets, There are assets with 24 months and 12 months tenure to qualify as an STCG.
A long term capital gain arises when an asset is held for more than 36 months. These 36 months are calculated from the date the asset was bought by the taxpayer.
Following table explains the type of gain for each asset's basis on the holding period
|Asset||Short Term Capital Gains||Long Term Capital Gains|
|Listed Equity or Preference Shares||Period of Holding < 12 months||Period of Holding > 12 months|
|Units of Equity Oriented Mutual Funds|
|Units of UTI|
|Zero Coupon Bond|
|Other Listed Securities|
|Unlisted Shares||Period of Holding < 24 months||Period of Holding < 24 months|
|Debt Oriented Mutual Funds||Period of Holding < 36 months||Period of Holding < 36 months|
|Immovable Property||Period of Holding < 24 months||Period of Holding < 24 months|
|Other Capital Asset||Period of Holding < 36 months||Period of Holding < 36 months|
LTCG/ STCG on mutual funds
The taxability is different for equity funds and debt funds. A mutual fund is an equity-oriented fund is the asset allocated to equities is more than 65% of the total portfolio.
|Fund||STCG Tax||LTCG Tax|
|Equity Funds||15%||Capital gain < 1 lakh- Exempt
Capital gain > 1 lakh- 10%
|Debt Funds||Applicable slab rate||20% with indexation|
How can Scripbox's capital gain calculator help?
While calculating the capital gain on stocks and mutual funds, taxpayers need to keep in mind a few things. The applicable tax rate, holding period, type of asset, cost of indexation, net purchase cost, nest sale price, and so on.
The computation of the final tax payable value can be confusing and tedious sometimes. Our capital gain calculator helps you compute the tax payable while you only need to enter the basic details. An online calculator that is easy to use helps you determine the capital gain earned as well.
You can also use Scripbox's income tax calculator to estimate the final tax payable. The income tax calculator calculates the tax payable after considering the income under all the heads and deductions. This will help you in also estimating the advance tax payable. A delay or default in paying the advance tax leads to interest payable at the time of tax filings.
How to use Scripbox's capital gain calculator?
The capital gain calculator helps you calculate the tax payable on the below-mentioned assets:
- Shares and stocks
- Equity- oriented mutual funds
- Debt-oriented mutual funds
- Gold ETF
You need to input the below information:
- Type of asset sold. Select from the given drop-down
- Asset sold date
- Asset bought date
- The Net selling price
- The Net buying price
While, Net selling price:- The price at which the asset is being sold minus the charges incurred to sell the asset.
On the other hand, Net buying price:- The price at which the asset is purchased minus the incurred to buy the asset
The calculator will provide the below output:
- Asset holding period
- Indexed buying price
- Type of capital gain
- Capital gain/ loss
- Effective tax rate
- Tax payable
Illustration of Short Term Capital Gain Tax Calculation
Amit bought 200 shares of Reliance Industries Limited in December 2019 at a cost of Rs. 1300 per share and sold the same in January 2020 for Rs. 1500. He did this transaction through a broker who charged a commission of Rs. 30.
Here is how you can calculate tax on capital gains in this case:
|The full value of the consideration received (200 shares @ Rs 1500 per share)||Rs 3,00,000|
|Less: expenditure incurred in connection with such sale (brokerage)||Rs 30|
|Net sale consideration (A)||Rs 2,99,970|
|Less: cost of acquisition (200 shares @1300 per share) (B)||Rs 2,60,000|
|Short-term capital gain(C=A-B)||Rs 39,270|
|Period of holding||1 month|
|Rate of tax||15%|
|Tax payable||Rs 39,270 * 15%= Rs 5891|
Illustration of Long Term Capital Gain Tax Calculation
Suppose Amit had invested in debt-oriented mutual funds in April 2016 and the investment amount was Rs. 1,00,000 at a NAV of Rs. 10 and decided to redeem the same in July 2019 say at a NAV of Rs. 20
In the above case, the gains arising from the sale will be considered as long term capital gain and the benefit of indexation will be allowed while computing the capital gain.
Here’s how to calculate tax on capital gains in such a case:
|The full value of the consideration received (10,000 units @ Rs 20)||Rs 2,00,000|
|Sale consideration(A)||Rs 2,00,000|
|Less: Indexed cost of acquisition||Rs 1,09,470|
|Long-term capital gain(C=A-B)||Rs 90,530|
|Period of holding||More than 36 months|
|Rate of tax||20%|
|Tax payable||Rs 90,530 * 20%= Rs 18,107|
Indexed cost of acquisition will be calculated as below :
Cost of acquisition * (CII of the year in which units are sold/CII of the year in which units are purchased)
= (Rs 1,00,000)*(289/264)
= Rs 1,09,470
Indexed cost is arrived at when the price is adjusted against the rise in inflation in the asset’s value. For calculating the indexed cost of acquisition, we use the CII notified by the Income Tax Act, 1961.
Exemptions on capital gains w.r.t. House property
The below are the exemptions on capital gains
- Section-54, capital gains exemption on the sale of one house property. The tax exemption is allowed if the sales proceeds are utilized to buy another house property
- Section-54F, capital gains exemption on the sale of any asset. And the sale proceeds are utilized to buy a house property
- Section-54EC, capital gains exemption on the sale of a house property. And the sales proceeds are invested in specific bonds. These bonds are issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC). The tax exemption is allowed only on fulfilling the condition
Tax on Debt Funds- Capital gains/ Losses
Short Term Capital Gain
Any STCG, arising on transfer of debt-oriented mutual funds, will be tax slab rates applicable to the individual. The gain will be added to the total income.
Long Term Capital Gain
Any long-term capital gain, arising on transfer of debt mutual funds, will be liable to tax @20% with indexation benefit.
Indexation is used to adjust the purchase price of an investment to reflect the effect of inflation on it. It increases the purchase price of the asset which will eventually lead to lower profits hence bringing down your taxable income.
Tax on Equity Funds- Capital Gains/ Losses
Short Term Capital Gain
Any STCG, arising on sale of equity-oriented mutual funds, will be taxed @15%, provided securities transaction tax has been paid on such a sale.
Long Term Capital Gain
Any LTCG, exceeding Rs 1,00,000, arising on sale of equity-oriented mutual funds, will be liable to LTCG tax @10%. But provided securities transaction tax has been paid on the purchase and sale of the equity-oriented mutual fund.
Any LTCG, below Rs 100,000 arising on sale is tax-free.
Securities transaction tax(STT) is levied on purchase or sale of securities which includes units of an equity-oriented mutual fund.
Tax on SIP- Capital Gains/ Losses
SIP’s are taxed differently as compared to the above-mentioned method. If you think of it, SIP’s are nothing but just a different way of investing in mutual funds. It allows a person to invest small or large depending on their financial capability coupled with the flexibility to choose the tenure of the investments.
When it comes to taxability of SIP, each investment made (say monthly) will be treated as a new investment and the period of holding will be counted from the date of the investment for computation of capital gain.
So, in a case where you have made a SIP of say Rs. 5000 per month, only the gains which have been earned on the investments made a year ago will be tax-free
Set-off and carry forward of losses
As a thumb rule, any capital loss can be set-off only against a capital gain. A capital loss cannot be set-off against any other source of income. A short term capital loss can be set-off against a short term capital gain as well as a long term capital gain. Whereas a long term capital loss can only be set-off against a long term capital gain.
A capital loss can be carried forward up to 8 assessments years from the year in which loss is incurred. However, to carry forward a loss, the income tax return must be filed within the due date.
Frequently Asked Questions
The applicable tax rate on long term capital gains on the sale of a property is 20%. The capital gains on property sale can be calculated as: STCG = sale price – (cost of acquisition + house cost of improvement + transfer cost). LTCG = sale price – (transfer cost + indexed acquisition cost + indexed house cost of improvement).
No, the benefit of the cost inflation index is available only on the sale of a long term capital asset instead.
In budget 2018, section 112A was introduced which provides for taxation of gains arising on transfer of equity shares. The tax will be at a concessional rate of 10% on the gains exceeding Rs. 1 lac without the benefit of indexation.The provisions of this section are applicable from the financial year(FY) 2018-19 i.e assessment year (AY) 2019-20.
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