What Is Cost of Acquisition for Capital Gains?
Cost of acquisition is the amount used as the acquisition cost of a capital asset for the applicable capital-gain computation. The correct cost can depend on how and when the asset was acquired.
Quick Answer
Cost of acquisition is not always simply the amount visible on a current statement. Purchase records, corporate actions, inheritance, gifts and special statutory rules can affect the applicable cost.
For a Normal Purchase
For an ordinary purchase, the acquisition cost is generally established from the transaction and supporting purchase records, subject to the applicable tax provisions.
For Shares and Mutual Funds
Transaction statements can establish the acquisition value and date. Multiple purchases of the same security may require lot-level matching.
For Inherited or Gifted Assets
Special rules can apply to assets acquired by inheritance or gift. Records relating to the previous owner and the manner of acquisition may be relevant.
For Corporate Actions
Bonus issues, rights issues, mergers, demergers and similar events can have specific cost-of-acquisition rules. The original purchase cost cannot always be carried forward unchanged.
Why Supporting Records Matter
Correct acquisition cost can materially change the capital gain. Retain purchase statements, deeds, broker records and other evidence used in the calculation.
Important
Cost of acquisition is a tax-computation concept. The accounting value or current market value of an asset should not automatically be substituted for the applicable tax cost.
Frequently Asked Questions
Is cost of acquisition the same as purchase price?
Often it starts with the purchase price for a normal transaction, but statutory rules and transaction-specific adjustments can affect the final tax cost.
What if I cannot find my old purchase records?
Try to obtain historical broker, mutual fund, bank, property or other records. The appropriate method depends on the asset and applicable rules.
Does inherited property use the heir's purchase price?
Inherited assets can be subject to specific rules concerning the previous owner's cost and acquisition date. The facts and applicable provisions should be checked.
Related EZTax Resources
- What Is AIS (Annual Information Statement) in Income Tax?
- AIS vs Form 26AS: What Is the Difference?
- Does AIS Show Capital Gains?
- AIS Reconciliation and AI-Powered Income Tax Filing with EZTax
- Capital Gains Indexation Calculator
Official Sources
For current capital-gains and ITR guidance, refer to the Income Tax Department resources for the relevant assessment year.
