Computation of capital gain depends upon the nature of capital assets transferred, viz., short-term capital asset or long-term capital asset. The tax incidence is generally higher in the case of short-term capital gain as compared to long-term capital gain.
S. 48 determines the method of computing Capital gains. Capital gain can be computed by deducting from the value of consideration received or accruing as a result of transfer of the capital asset the following amounts:
1. Expenditure incurred wholly and exclusively in connection with such transfer.
2. The Cost of acquisition of the asset and cost of improvement thereto.
The method of computation of short-term and long-term capital gain is as follows:
Long-Term Capital Gain Computation:
| Particulars | Amount (In Rs.) |
| Sale Consideration Less: Indexed Cost of Acquisition Indexed Cost of Improvement Cost of Transfer | ……
…… …… …… |
Short-Term Capital Gain Computation:
| Particulars | Amount (In Rs.) |
| Sale Consideration Less: Cost of Acquisition Cost of Improvement Cost of Transfer | ……
…… …… …… |
From the resulting sum deduct the exemption provided by S. 54, 54B, 54D, 54EC, 54G, 54GA.
The balancing amount is short-term capital gain or long-term capital gain.
Note:
No deduction will be allowed in respect of payments of Securities Transaction Tax (STT) in computing income under the head “Capital Gain”.
Reference:
As per Section 48, Income-tax Act, 1961-2014-