Capital Gain Calculator- How it works?

Table of contents What is an asset? What is a capital gain? Capital gain tax on assets LTCG/STCG on mutual funds How can Scripbox’s capital gain calculator help? How to use Scripbox’s capital gain calculator? Illustration of Short Term Capital Gain Tax Calculation Exemptions on capital gains w.r.t. House property Tax on Debt Funds- Capital gains/Losses Tax on Equity Funds- Capital Gains/Losses Tax on SIP- Capital Gains/ Losses Set-off and carry forward of losses Frequently Asked Questions

 

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.

STCG

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.

LTCG

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:

Particulars	Amount
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:

Particulars	Amount
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

1. 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
2. Section-54F, capital gains exemption on the sale of any asset. And the sale proceeds are utilized to buy a house property
3. 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.