Capital Gains Calculator

There are a number of capital gain calculators available online that individuals can use to see how much they stand to receive as profits from the sale of property. Based on the input provided in the calculator, which includes purchase price, sale price, etc., an individual will be able to view the amount he or she stands to receive in the form of capital gains.

Calculation of capital gains can also be done manually. Here is an example:

Mr. Joshi purchased a property in September 2004 for an amount of Rs. 60 lakhs. After a decade, he decided to sell the property for Rs 1.5 crores. For the purpose of calculating the gains, the cost shall be indexed since the asset falls under the long-term category.

The CII for 2004-05 shall be factored in for the purpose of indexation. Therefore, cost for calculating capital gains for Mr. Joshi shall be Rs. 60 lakhs x CII of 2014-15/CII of 2004-05. This would total to Rs. 1.28 crores (60,00,000 x 1024/480). The net gain for Mr. Joshi is Rs. 22 lakhs.

What are Capital Gains on Sale of Property?

Sale of property would result in a large cash inflow. Any profit that is made from this transaction shall be treated as capital gains. Knowledge of capital gains is essential not only for assessing the surplus, but also helps in determining how much in taxes an individual would have to pay.

Now, for the purpose of tax calculation, capital gains on the sale of property can be classified into ‘long-term’ or ‘short-term’. Profits from the sale of property owned for more than two years is referred to as long-term capital gains. If the property is sold in less than two years from its purchase, the profits, if any, will be regarded as short-term capital gains. Taxes applicable will differ depending on which of the categories the gains get placed in.

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Method to Calculate Capital Gains on Sale of Property

In order to calculate short-term capital gains, the following costs need to be deducted from the final sale price of the property:

  • Purchase Cost
  • House Improvement Cost
  • Transfer Cost

In order to calculate long-term capital gains, the following costs need to be deducted from the final sale price of the property:

  • Indexed Purchase Cost
  • Indexed House Improvement Cost
  • Transfer Cost

Tax on Short-Term and Long-Term Capital Gains

Long-Term Capital Gains Tax

The tax on long-term capital gains is payable at the rate of 20% (plus education cess 4% for FY 2018-19/AY 2019-20 and 3% for FY 2017-18/AY 2018-19). One cannot claim any kind of deductions under Chapter VI-A (like deductions under Section 80C, 80D, etc.) from such gains. Should an individual have invested or contributed any amount into tax-saving instruments, he or she must claim that sum from gross income, excluding LTCG. If the taxable income after availing all the deductions is below the maximum exempt limit, as per slab rates for individuals, which presently is Rs. 2,50,000, then the difference between Rs. 2,50,000 and the taxable income (not including these gains) shall be allowed as deduction, and the individual will be levied tax at the rate of 20% on the remaining sum.

  • Save Tax on Long-Term Capital Gains: One of the ways to save on LTCG tax applicable on property is through re-investing the proceeds into one residential house in the country, within a specified time frame, subject to the conditions in Section 54F of the Income Tax Act, 1961. Besides this, individuals can also consider investing in certain bonds notified by the government under Section 54EC.

Short-Term Capital Gains Tax

The amount of tax applicable on short-term capital gains from the sale of property will come down to which income tax slab rate a person falls in. The income tax slab for FY 2018-19 is as under:

Income Tax Slabs Tax Rate Health and Education Cess
Income up to Rs 2,50,000 No tax -
Income from Rs 2,50,000 – Rs 5,00,000 5% 4% of Income Tax
Income from Rs 5,00,000 – 10,00,000 20% 4% of Income Tax
Income more than Rs 10,00,000 30% 4% of Income Tax

Source: The Income Tax Department

  • Save Tax on Short-Term Capital Gains: Deductions under Chapter VI A can be claimed for short term capital gains. An individual can therefore claim tax deduction under Sections 80C, 80CCC, 80CCD, 80CCF, 80CCG, 80D, 80DD, 80DDB, 80E, 80EE, 80G, 80GG, 80GGA, 80GGB, 80GGC, 80 IA, 80IB, 80IC, 80ID, 80IE, 80JJA, 80JJAA, 80LA, 80P, 80QQB, 80RRB, 80TTA and 80U for appropriate investments. An essential point to be noted is that one cannot claim any exemption or savings on STCG tax under Section 54 of the Income Tax Act. This benefit is only applicable in case of long-term capital gains.

Impact of Cost Inflation Index on Capital Gains

Cost inflation index (CII) is an important element in the calculation of inflation-indexed long-term capital gains. It helps in evaluating the estimated increase in price of property due to inflation.

Long-term capital assets, like residential property, are recorded at cost price. Even with the rising inflation, they exist at the cost price and cannot be revalued. When such assets are sold, the gains will be considerably high, which in turn means high income tax. For the benefit of the taxpayers, CII benefit is applied to the long-term capital assets, on account of which purchase price increases, reflecting the current market value. This brings down the profits and lowers the taxes applicable.

The below table shows the value of CII from base year 2001-02:

Financial Year Assessment Year CII Value
2017-18 2018-19 272
2016-17 2017-18 264
2015-16 2016-17 254
2014-15 2015-16 240
2013-14 2014-15 220
2012-13 2013-14 200
2011-12 2012-13 184
2010-11 2011-12 167
2009-10 2010-11 148
2008-09 2009-10 137
2007-08 2008-09 129
2006-07 2007-08 122
2005-06 2006-07 117
2004-05 2005-06 113
2003-04 2004-05 109
2002-03 2003-04 105
2001-02 2002-03 100

Old Cost inflation index:

Financial Year Index Financial Year Index
1981-82 100 1999-00 389
1982-83 109 2000-01 406
1983-84 116 2001-02 426
1984-85 125 2002-03 447
1985-86 133 2003-04 463
1986-87 140 2004-05 480
1987-88 150 2005-06 497
1988-89 161 2006-07 519
1989-90 172 2007-08 551
1990-91 182 2008-09 582
1991-92 199 2009-10 632
1992-93 223 2010-11 711
1993-94 244 2011-12 758
1994-95 259 2012-13 852
1995-96 281 2013-14 939
1996-97 305 2014-15 1024
1997-98 331 2015-16 1081
1998-99 351 2016–17 1125

Frequently Asked Questions

What does long-term capital asset mean?

Any capital asset which is held by an individual for over 36 months, immediately preceding the date of its transfer, shall be regarded as long-term capital asset. Starting from AY 2018-19, the period of holding of immovable property, such as land or building, is 24 months instead of 36 months.

How to compute long-term capital gains?

Long term capital gain arising from sale of long-term capital asset shall be computed as follows:

Particulars Rs.
Full value of consideration (i.e., Sales consideration of asset) XXXXX
Less: Expenditure incurred wholly and exclusively in connection with transfer of capital asset (E.g., brokerage, commission, etc.) (XXXXX)
Net sale consideration XXXXX
Less: Indexed cost of acquisition (XXXXX)
Less: Indexed cost of improvement, if any (XXXXX)
Long-Term Capital Gain XXXXX

Source: The Income Tax Department

How to compute short-term capital gains?

Short-term capital gain from sale of short-term capital asset is computed as follows:

Particulars Rs.
Full value of consideration (i.e., Sales value of the asset) XXXXX
Less: Expenditure incurred wholly and exclusively in connection with transfer of capital asset (E.g., brokerage, commission, etc.) (XXXXX)
Net sale consideration XXXXX
Less: Cost of acquisition (i.e., the purchase price of the capital asset) (XXXXX)
Less: Cost of improvement (i.e., post purchase capital expenses incurred on addition/improvement to the capital asset) (XXXXX)
Short-Term Capital Gain XXXXX

Source: The Income Tax Department

Is the benefit of indexation available while assessing short-term capital gains from sale of asset?

Indexation is a process whereby a capital asset’s cost of acquisition is adjusted against inflationary rise. The benefit of indexation only applies to long-term capital assets and not for short-term capital assets.

Which bonds can one invest capital gains to claim tax relief?

According to Section 54EC of the Income Tax Act, 1961, one can claim tax relief by parking long-term capital gains from sale of land or building into bonds issued by the Rural Electrification Corporation Limited or the National Highway Authority of India. The investment needs to be made within 6 months from the date of transfer of the asset and bonds must not be redeemed before three years. The maximum amount that qualifies for investment is Rs. 50 lakhs. In other words, this deduction cannot be claimed for more than Rs. 50 lakhs. This benefit is not available for short-term capital gains.