Capital Gain Tax

Capital gain refers to the profit that seller get by selling their property in much higher rates than buying price. Transaction will come under tax scrutiny that investor will perform in one financial year. This tax is for property related transaction, loss or gain through the transaction of assets.

Apart from below specified asset, people need to pay tax for every property they will buy or sale.
a. Gold Deposit bonds under Gold Deposit Scheme.
b. Stock in trade.
c. 6.5 percent Gold Bonds, National Defence Gold Bonds and Special Bearer Bonds.
d. Consumable stores or raw materials held for the purpose of business or profession.
e. Agricultural land. The land must not be located within 8kms from a town committee, municipality, notified area committee, Municipal Corporation, or a cantonment board with a minimum population of 10,000.
f. Personal effects that are movable except drawings, paintings, sculptures, jewellery, archaeological collections or any art work held for personal use.

What is Capital Gain Tax (CGT)

Captain gain tax came into effect when investor earns benefits through buying or selling property. TO remove complication from this tax, government has classified CGT into two sections long and short term capital asset.

Long Term Capital Asset

If investor is associated with that share or security policy for more than three years then this type of property will called long term capital asset. If investor holds the share of listed stock exchange, shares, mutual funds, zero bond coupons, UTI, government policies will calculate the duration of 36 months as 12 months.

Short Term Capital Asset

If investors hold share, asset and securities for less than three years, in that case capital will be referred as short term capital asset. This duration includes transfer date of that property too.

Capital Gain Tax in India

As per the policy of government of India gains through mutual funds and stocks are exempted from tax system at the same time short term capital gains will be charged up to 15% of earned amount. If investor is earning through debt mutual funds then both long and short capital gain tax will be imposed. If earning resource is short term capital gain then 20% tax will be add in income tax and if individual is earning through long term mutual funds then 10% tax will be added in tax slab of that person. Indexation increase the value of asset at the same time reduces the chances of benefits. If you are tax payer then you can check your statement from online portals like karvy and CAMSOnline. Companies will send report in registered email id.

Capital Gain Calculation

There are following way to calculate your CST:
a. Long-term capital gain = Full value of consideration received or accruing (indexed cost of acquisition + indexed cost of improvement + cost of transfer).
b. Short-term capital gain = Full value consideration- (cost of acquisition + cost of improvement + cost of transfer)
c. Indexed cost of improvement = cost of improvement X cost inflation index of the year of transfer / cost inflation index of the year of improvement
d. Indexed cost of acquisition = Cost of acquisition X cost inflation index of the year of transfer/ cost inflation index of the year of acquisition

Capital Gain Index

When it comes to cost inflation and long term capital gain then it is quite important to know about the tax calculation procedure to avoid any doubt. Calculation is being performed on the basis of indexed coast of improvement along with acquisition of indexed coast.

Indexation is quite important factor in calculation because value of Indian currency is not constant due to inflation. All these process help allow you to make tax paying much easier and flexible at the same time it also reduces the chances of earning maximum advantages. Cost Inflation Index (CII) is prime factor that decide the acquisition price of the deal.

Capital Gain Tax on Property

As its name suggest that capital gain will be imposed on amount than base price of the product. If someone sale the property in 36 months then it will be calculated as short term and tax will be imposed as per income of that person and minimum possibility of tax is up to 20 percentages.

Is someone is investing to buy home or in construction of home or any investment that comes under section 54 and 54F then this type of investment is known as long term capital gain. If you want to get exemption from tax then you have to buy new house within two years of transfer of house. New property must be situated in India and construction of new house must be completed in first 36 months from date of transfer of your previous house.

Individual can buy or construct new building within 24 months of selling their property. Another way to save your tax is renting any flat in decent price. Amount that will transfer in that particular year will be calculated as your income from other resources and tax will be included in that amount too. If you are really looking forward to get exemption in tax payment the buy Capital Gains Account Scheme (CGAS) of any ban as per your interest and enjoy the facilities. Some other options that you can use to save your tax are National Highways Authority of India and Rural Electrification Corp. Ltd. after selling your property as soon as you can.

Investor must remember that they can invest in single year otherwise they will get exemption in capital gain tax. If you are going to pay advance amount then that amount will be included as income from other resources in same financial year and if due to any reason you reject the deal then your tax will be merge in further transactions.

Exemption in Capital Gain Tax (CGT)

1. If you have agriculture land in rural areas then for kind of your information, this type of property is not part of capital gain property and there is not tax related policy in for this property.
2. Under section 54 exemption will be offered to customer fulfill the following condition while buying new property or house. Some of them are
a. You do not purchase a new house apart from the new one within 2 years or construct a residential house within a period of 3 years.
b. You will have to purchase a house in 1 year before or 2 years after the sale.
c. You must not own more than 1 residential house other than the new one on the date of transfer.
d. Under construction properties must be completed within 3 years from the date of transfer of the original house.
e. The new house must be situated in India.
f. You will not sell the house within 3 years of the purchase or construction.

If you fulfill all the above describe condition then you may proceed for buying new house and at the same time you do not need to pay any tax in case of capital gain.
1. If you utilizing capital gain account scheme, then you do not need to pay any tax in case of capital gain though as per ban policy you have to invest specific amount for certain time period. You have to pay tax if you are not investing as per policy of bank.
2. Investors will get exemption in capital gain tax only if they buy long term investment bonds from any government authorized organization. So always buy plans not only to get financial benefits but at the same time look for the policy that will help you to exemption in CGT.

Capital Gain Tax Calculator

Before processing for CGT always remember the following useful details:
a. Sale details like the date, month and the year it was sold on.
b. Purchase price
c. Investment detail.
d. You can invest the capital gains toward share, debt mutual funds, equity mutual funds, real estate, gold and fixed maturity plan.
e. Number of units
f. Sale Price.
g. Sale details like the date, month and the year it was sold on.
h. Purchase details like the date, month and the year it was purchased on.

Once you will click on CALCULATE CGT button the following details will appear on your screen:
a. Long-term capital gain with indexation.
b. Investment type.
c. Long-term capital gain without indexation.
d. Time between the purchase and the sale.
e. Difference between the sale and the indexed purchase price.
f. Gain type, if it is a short-term capital gain or a long-term capital gain.
g. Purchased index cost.
h. Cost inflation index of the year of purchase.
i. Difference between the sale and purchase price.
j. Cost inflation index of the year of sale.