Home > Income Tax > Help Center > A Guide on Capital GainsLast Updated: Sep 24th 2023
Profits or gains arising from transfer of a capital asset are called "Capital Gains" and are charged to tax under the head "Capital Gains". Income from capital gains is classified as "Short Term Capital Gains" and "Long Term Capital Gains".
Quick Income Tax guide on Capital Gains. Learn what is a Capital Gains (CG) Asset, Cryptos new rules, Short Term (STCG), Long Term (LTCG), tax rates, CII, CGAS, JDA, NHAI, REC, Sec 54, re-investment options, and Savings
Capital Asset defined as
Refer When to consider Agriculture Land as Capital Asset? to know more.
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.
Period of holding to be considered as 24 months instead of 36 months in case of unlisted shares of a company or an immovable property being land or building or both.
Any other 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.
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 (i.e. Purchased cost of asset with indexation ) | (XXXXX) |
Less: Indexed cost of improvement, if any (*) | (XXXXX) |
Exemptions provided under sections 54, 54EC, 54F, and 54B | - |
Long-Term Capital Gain | XXXXX |
Cost of Improvement means All expenditure of capital nature incurred in making any additions to alterations to the capital assets
Property tax, Interest paid on Home Loans, Repairs and Maintenance cannot be claimed as cost of improvement while computing capital gain.
Sometimes the taxpayer will receive Advance money for transfer of capital asset. But there is a chance that negotiations will fail and the taxpayer will retain the advance. In this case, advance forfeited is taxable under the head Income from Other sources w.e.f 01st April 2014
Note: Stamp Duty and Registration expenses will form part of cost of acquisition and indexation can be applied for both
Circle rates are the minimum reference price when purchasing or selling a home. Refer Circle Rates for Property Valuation by State to know more background, rates and faqs
Indexation is the process that takes into account inflation from the time taxpayer bought the asset to the time taxpayer sell it. The way it works is that it allows taxpayer to inflate the purchase price of the asset to take into account the impact of inflation. The end result is that you get the benefit of lowering your tax liability.
Sl. No. | Financial Year | Cost Inflation Index |
---|---|---|
1 | 2001-02 | 100 |
2 | 2002-03 | 105 |
3 | 2003-04 | 109 |
4 | 2004-05 | 113 |
5 | 2005-06 | 117 |
6 | 2006-07 | 122 |
7 | 2007-08 | 129 |
8 | 2008-09 | 137 |
9 | 2009-10 | 148 |
10 | 2010-11 | 167 |
11 | 2011-12 | 184 |
12 | 2012-13 | 200 |
13 | 2013-14 | 220 |
14 | 2014-15 | 240 |
15 | 2015-16 | 254 |
16 | 2016-17 | 264 |
17 | 2017-18 | 272 |
18 | 2018-19 | 280 |
19 | 2019-20 | 289 |
20 | 2020-21 | 301 |
21 | 2021-22 | 317 |
22 | 2022-23 | 331 |
23 | 2023-24 New | 348 |
Reinvestment Options: While taking the tax consultation from EZTax.in expert would be beneficial, below are options available to do reinvestment to avoid / reduce the capital gains tax
Important: How long we can keep the Capital Gain in Capital Gains Deposit Account Scheme (aka CGAS Scheme)?
Subject | Section 54 | Section 54B | Section 54D | Section 54EC | Section 54EE | Section 54F | Section 54G | Section 54GA | Section 54GB |
---|---|---|---|---|---|---|---|---|---|
Eligible Taxpayers | Individual and HUF | Individual and HUF | Any person | Any person | Any Person | Individual and HUF | Any person | Any person | Individual and HUF |
Capital gains eligible for exemption | Long-term | Short-term or Long-term | Short-term or Long-term | Long-term | Long-term | Long-term | Short-term or Long-term | Short-term or Long-term | Long-term |
Capital gains arising from transfer of | Residential House property | Agriculture land used by taxpayer or by his parents or HUF for agriculture purposes in last 2 years before its transfer | Compulsory acquisition of land or building forming part of industrial undertaking (which was used for industrial purposes for at least 2 years before its acquisition). | Any long-term capital asset being Land or Building or Both | Any long-term capital asset | Any long term asset (other than a residential house property) provided on date of transfer taxpayer does not own more than one residential house property (except the new house) | Land, building, plant or machinery, in order to shift industrial undertaking from urban area to rural area. | Land, building, plant or machinery, in order to shift industrial undertaking from urban area to SEZ. | Residential property (house or a plot of land) Note: Provisions of this section shall not apply to any transfer of residential property made after March 31, 2017. However, in case of an investment in eligible start-up, the residential property can be transferred up to March 31, 2019. CBDT Circular 06/2022 : Claiming exemption u/s 54, 54B, 54EC, 54F, 54G, 54GA (CG Reinvestment) to 54GB (eligible 'Startups') whose last date falls between 01st Apr 2021 to 25th Feb 2022 can be invested on or before 31st Mar 2023. |
Assets to be acquired for exemption | One residential house property Two residential house property
| Agricultural land (may be in urban area or rural area) | Land or building for shifting or re-establishing said industrial undertaking | Bond of NHAI or REC, etc. | Units of such fund as may be notified by Central Government to finance Start-ups | One residential house property | Land, building, plant or machinery, in order to shift industrial undertaking to rural area. | Land, building, plant or machinery, in order to shift industrial undertaking to SEZ. | Subscription in equity shares of an eligible company. Note: 1. W.e.f. April 1, 2017, eligible start-up is also included in definition of eligible company. 2. The eligible company should utilize the amount of subscription for purchase of new assets (i.e., plant and machinery except vehicle, office appliances, computer or computer software etc.). However, In the case of eligible startup, the new asset shall include computers or computer software. |
Time limit for acquiring the new assets | Purchase: within 1 year before or 2 years after date of transfer Construction: within 3 years after date of transfer | Within 2 years after date of transfer | Within 3 years from date of receipt of compensation | Within 6 months from date of transfer | Within 6 months after the date of transfer of original asset | Purchase: within 1 year before or within 2 years after date of transfer Construction: within 3 years after date of transfer | within 1 year before or 3 years after date of transfer | Within 1 year before or within 3 years after date of transfer | Investment by the assessee - Before due date for furnishing of return under Section 139(1). |
Exemption Amount | Investment in new assets or capital gain, whichever is lower | Investment in agricultural land or capital gain, whichever is lower | Investment in new assets or capital gain, whichever is lower | Investment in new assets or capital gains, whichever is lower, however, subject to Rs. 50 lakhs limit | Investment in new assets or capital gains, whichever is lower, however, subject to Rs. 50 lakhs limit | Investment in new assets X capital gain/net consideration | Investment in new assets or capital gain, whichever is lower | Investment in new assets or capital gain, whichever is lower | Investment in new assets X capital gain/net consideration |
Withdrawal of exemption | If new asset is transferred within 3 years of its acquisition | If new asset is transferred within 3 years of its acquisition | If new asset is transferred within 3 years of its acquisition | If new asset is transferred or it is converted into money or a loan is taken on its security within 5 years of its acquisition | If new asset is transferred within a period of 3 years from the date of its acquisition. |
| If new asset is transferred within 3 years of acquisition | If new asset is transferred within 3 years of acquisition | If equity shares in company or new asset acquired by company is sold or transferred within a period of 5 years from date of acquisition. |
Deposit in Capital gains deposit scheme before due date under Section 139(1) | Yes | Yes | Yes | No | No | Yes | Yes | Yes | Yes |
If the amount deposited in Capital Gain Account Scheme (CGAS) is not utilized within 2/3 years, the unutilized amount will be treated as capital gain of the previous year in which the specified period expires.
If the taxpayer has died before the prescribed period, the unutilized amount in Capital Gains Account Scheme is not chargeable to tax in the hands of legal heirs of the deceased individual. It will be a part of the estate devolving upon them.
W.r.t #6.3, Income Tax Act does not clearly states that the due date includes belated due date of filing income tax returns (Eg. March 31st 2022 for AY 2021-22, and Dec 31st for the next year)
With reference to various Case Laws, The tribunal has given judgement that the due date of filing includes the due date of filing belated return and AO cannot deny the exemption merely due to the fact that the taxpayer has reinvested after original due date and before the belated due date.
Joint Development Agreement (JDA): JDA means the registered agreement in which the owner of land or building or both agrees to allow another person to develop a real estate project on such land or building or both in consideration of share i.e., land or building or both in such project whether with or without payment of part of consideration in cash.
Before 01/04/2017: Capital Gains tax liability will arise in the year of transfer of land or building or both to developer for development of a project even though the actual constructed property will be received only after few years
After 01/04/2017: With a view to minimise genuine hardship in above case, w.e.f 01/04/2017, the taxpayer is required to pay capital gain tax in the year in which the completion certificate is issued by competent authority. This provision will not be applicable if the taxpayer transfers his share in project before the date of issuance of completion certificate
Note : If the taxpayer transfers his share in project before the date of issuance of completion certificate, Capital gains tax will be applicable in the year of transfer of property to developer
Sale consideration (Full Value of Consideration) in JDA is 'Stamp duty value' of his share on the date of issue of completion certificate + Cash consideration
to help investors in long-term gains to save on taxes. It allows the tax payer to inflate the purchase price of the asset by considering the impact of inflation, also calculate the taxable gain by considering the sale price
To calculate Capital gains arise from a sale of an asset, the first thing to assess is the period of holding whether it is a Long-term (LTCG) or Short-term capital gain (STCG) ?
Save on Capital Gains Tax using Capital Gains Reinvestment Calculator by simply selecting asset type, reinvestment options to calculate the effective capital gains tax.
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