16/02/2019
Computlation of capital gain depends upon the nature of capital asset transferred, viz, short-term capital asset long-term capltal asset. Capital gain arising on transfer of a short-term capital asset is short-term Capital gain, whereas transfer of a long term capital asset generates long-term capital gain. The tax incidence is higher in the case of short-term capltal gain as compared to long-term capital gain. Method of computation of short-term and long-term capital gains (as applicable from the assessment year 1993-94 onwards) is as follows :
Computation of short-term capital gain :-
1. Find out full value of consideration
2. Deduct the following:
a. expenditure incurred wholly and exclusively in connection with such transfer,
b. cost of acquisition; and
c. cost of improvement.
3. From the resulting sum deduct the exemption provided by sections 54B, 54D, 546 and 540A.
4. The balancing amount is short-term capital gain.
Computation of long-term capital gain :-
1. Find out full value of consideration
2. Deduct the following:
a. expenditure incurred wholly and exclusively in connection with such transfer
b. indexed cost of acquisition and
c. indexed cost of improvement
3. From the resulting sum deduct the exemption provided by sections 54, 54B, 54D, S4EC, 54ED, 54EE, 54F, 54G, 540A and 54GB.
4.The balancing amount is Long-term capital gain.
Note : Securities transaction tax is not deductible while computing income under the head “Capital gains".
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