In this post we will learn How to calculate Capital Gains or Losses .
A lot of people make mistake in this . If you buy a house in 1995 at Rs 10 lacs and sell it at Rs 20 lacs in 2009 . On how much profit will you pay the tax ? If your answer is Rs 10 lacs , you have no idea how to calculate capital gains . Read ahead to understand .
What is Capital Asset ?
Capital Assets are the properties which can be held by a person . Some examples are Real Estate , Shares , Mutual Funds , Gold and Debt Funds . FD’s and other fixed returns Instruments are not part of it .
Taxation
For taxation of Capital Assets , read this : How to use your looses to Reduce Tax
How to Calculate Capital Gains ?
Most of the people think that
Capital Gain = Sell Price – Purchase Price
But , Actually the real formula is
Capital Gain = Sell Price – Indexed Purchase Price
What is Indexation ?
Indexation is a technique to adjust income payments by means of a price Index , in order to maintain the purchasing power of the public after inflation. We must understand that prices in general also rises, so the actual prices should not be used while computing the profits , rather It should be Indexed as per Inflation in the country ,so that people can get the real value from sale of there assets . Indexation is used in Tax treatment for Debt , Gold and other asset classes
What is Cost Inflation Index (CII) ?
Year
CPI
1981-82
100
1982-83
109
1983-84
116
1984-85
125
1985-86
133
1986-87
140
1987-88
150
1988-89
161
1989-90
172
1990-91
182
1991-92
199
1992-93
223
1993-94
244
1994-95
259
1995-96
281
1996-97
305
1997-98
331
1998-99
351
1999-00
389
2000-01
406
2001-02
426
2002-03
447
2003-04
463
2004-05
480
2005-06
497
2006-07
519
2007-08
551
2008-09
582
How to Calculate Indexed Purchase Price ?
Indexed Purchase Price = Purchase Price * (CPI for current year / CPI for year of purchase)
Once you have Indexed Purchase Price , you can subtract it from Sale Price and get your capital gains .
In some products Long term Capital gains is around 20% without Indexation and 10% with Indexation . In Equities Long term Capital Gains is exempt from Tax .
Let take an Example
Purchase Price
1000000
Year of Purchase
1995
Sale Price
2500000
Year of Sale
2008
No of Years
13
Purchase CII
281
Sale CII
582
Indexed Purchase Price
2071174
Capital Gain
428826
Tax with Indexation
85765
Tax without Indexation
150000
I hope the above example is clear . Below is the calculator I have created for you to calculate Capital Gain tax for your self. Just play with different numbers . Just enter the year of Purchase and Sale and It will figure out the CII (incase it does not, please put CII yourself)
Capital Gains Calculator
I have made a Calculator for you : http://public.sheet.zoho.com/publish/manish.pucsd/temp
Capital Gains Tax with Indexation and Without Indexation
There are some asset classes where you have the choice of using Indexation or not . This is true for debt funds and FMP’s . So the current rate is either 10% with Indexation or 20% without Indexation for Long term Capital Gains .
For Tax without Indexation , you simply find out normal profit (sale price – cost price) and then calculate the tax .
So you can calculate tax using both ways and then choose the one which is lower 
.
How to save your Capital Gains Tax ?
For people who are miser and do not like to pay lot of taxes , govt has provided some relief to them . Govt says that If you dont want to pay tax on your capital gains , you can do following things to save your taxes .
Invest your Capital Gains in Real Estate : If you invest your Capital Gains in Real estate within 2 yrs , you will get the the exemption .Invest in Capital Gain Bonds : There are some specific bonds issued under sec 54EC , some of them are NHAI or REC bonds . You have to invest in these bonds within 6 months. Generally the lock in period is around 3+ yrs . interest on NHAI or REC bonds is around 5-5.5% .
Tax on Capital Gains can be different for different People
Please note that Capital Gains tax can vary from one person to other person depending on which tax bracket he/she belongs to . It will also depends whether Tax with Indexation or without Indexation works out to be cheaper for him or not .
Note : For calculation purpose the Financial years are business year from April – Mar , Not Jan – Dec . If you buy in June 2009 and sell in Jan 2010 , you are in the same year not 2 different years .
Conclusion
So , In this post we learned how you can calculate capital gains and also take advantage of tax benefits for saving your taxes on capital gains , Your aim should be to understand the process and learn about it, so that you can take informed decisions in your financial life . No one should take advantage of your ignorance and also to take quick decisions and make rough calculations when there is a need. If you know these rules , you can take better decisions
Questions for you
Suppose you are age 30 .
– In June , 2000, You buy 20 lacs Home
– In Aug , 2007, You buy stocks worth 10 Lacs
– In April , 2008 , your sell your house at Rs 30 lacs
– In June 2008 , your stocks have gone down in value are worth Rs 3 lacs now .What should you do to avoid paying any tax on capital gains made from House ?
In previous post I have discussed “What is NPS , New Pension Scheme” by Govt of India . Read it
{ 151 comments… read them below or add one }
Ok I read this but I could not figure out this about short term stock transactions
If my mom who is a housewife is doing the stock transactions for me then what happens if she short sells the stock..
She has not other income.. only income is profit from stock sales..
Now will it still be taxed at 15% flat even if its lesser than the lowest tax slab?
Your article says to avoid tax, the goverment says invest in real estate?
What is real estate? Is it only plot or house+plot or flat.. where can I find that info?
Don't kill yourself trying to give these answers, I am just thinking loud..
"If my mom is a housewife who is doing stock transaction for me" ?
There is nothing like that . Either she does it from your account or from hers , If its done from your account . then its done by you , no matter who does it behind the scene . It will be your income and taxed at 15% (short term) .
tax on Equity transactions do not depend on your tax slab , its just taxed at flat 15% .
Saving from Real Estate . As per tax rules , you can save tax in 2 ways from real estate. When you pay your EMI for home loan , it has principle and interest part , you save upto 1 lac on principle and upto 1.5 lacs on interest .
This is applicable to Readmade residential homes or any house which you build on a plot (House+plot) .
Manish
Thanks Manish. That sure helped
@Arun
Great !! , I am glad it helped you
Manish
Is 10% LTCG without indexation also applicable for commercial property?
@Samit
As per Section 2 (ea)(i) of the Wealth Tax Act, guesthouse, residential house and commercial building are treated as assets subject to certain exceptions. These assets are liable to Wealth Tax.
Source : Rediff.com
Which means that the tax rules are same for both kind of real estate .
Manish
That was very value adding..
i have a question,i am soon about to start my job, but the issue is that I will be joining abroad and then remitting money in india to my account.
The issue is that i dont have to pay any taxes on my remittances, but since the remitted money is in my account only will I have to pay taxes in India as I have spent more than 182 days in India,if so then what source of income I am supposed to show?
@Satya
As per my knowledge the amount earned outside india is taxable here in india .. i am not sure of rules in detail on this ..
Can anyone else help us in understanding this better .
Manish
If you earn out of India it is your status which is important that is resident or non resident.
If you remain outside india for more than 183 days in a financial year you will be treated as non resident indian and your income earned out of india will not be taxed in \India.But if you earn out side India and remain ther for less than 183 days that income will be taxed in India along with Income earned in India.
If you want to send money to any of your relative it is best to open and NRE account before goin gabroad and transfer that money from that acccount to anybody you are intrested to give to prevent hurdles of taxation
These transfer of money should be only through banks and not through any havvala transaction .
Thanks for the Clarifications
Manish
Is indexation available in case I hold Shares of a non-listed company which I intend to sell??
I have sold my flat in INDIA and planing to buy a property in UK.
Will i get a tax exemption.
@Karan
Indexation is not even allowed on shares with listed exchanges. The reason is because LTCG is exempt from tax . thats why
@Sandip
I dont think you will get the tax benefit . The rules will be applicable only if the proceeds are used in Real estate purchase in India , because then it will clash with rules in UK and Indian govt wont get any benefit by your investments .
manish
I did check the tax laws and Indexation is allowed in case of non-listed shares
shares which are listed on which STT is paid :- exempt from tax
shares on which STT is not paid ie non-listed:- taxable @ 20%, indexation available
ok , i didnt knew that its allowed for non-listed shares
. Thanks for the info
Manish
Hi,
would investing in real estate to save LT capitaal gains mean buying a new property within 2 years? can the tax be saved by using this capital gains to prepay an existing housing loan which has been purchased 3 years back?
@Reema
You cant save tax on short term capital gain from Real estate (which is before 3 yrs) , and you can save LTCG only if you invest that money in another real estate property within 2 yrs of gains realised .
One thing i am not sure if if you can save tax by investing in something which is already purchased ?
Manish
ok. thanks.
Hi, if my income is in the 30% slab and i have a short term capital gains of Rs 50,000 from sale of shares, would i have to pay the 10% tax on STCG as well as 30% as income tax? i am not getting a clear answer for this. thanks
@Shivkumar
you only pay short term capital gain of 15% (changed from 10% to 15% in last budget) .
You dont pay anything else .
Manish
thanks a lot, Manish
Hi Manish,
I had booked the flat in May 2006 and did Registration in March 2009 and now I'm selling the flat in August 2009 so my profit will be short term capital gain or Long term capital gain.
Thanks in advance
@Sandeep
Sorry but i am not sure on this , but by logic its registration date which should matter . Thats the main thing which is on record , so it would be STCG .
can any body else conform this .
Manish
i have one row house and i m planning to sell it in this year, my purchase prise is 3.4 lac and i expects 40 lac now, so can u pl. guide me what amt. will come on long term capital gain if i puchase a flat or if i dont want to purchase a flat? what will b my tax with indaxtion and withour indation, i tried your calculater but the figure comes grater in tax with indation than the tax without indation can it possible? can u guide me what should i do? pl. advice
prapti
@Prapti
Yes its possible that tax from indexation comes more than without indexation , in that case your tax liability will be the lower of the two , your cost price needs to be indexed first as per your year of purchase , so your sell price will be 40 lacs and your cost price will be the indexed one .
The difference will be the profit , which you can invest in another real estate project (flat) within 2 yrs of sale of your current house .
Manish
Hi Manish
We purchased a flat in 2000 Feb for 7 lacs (Builder cost+registration) Spent again around 4 lacs for interiors(direct execution by us).Sold the flat in 2008 nov for 24.5 lacs.We have not put the money in Capital gain account.But we have purcahesd a new house (agreement done in 2007with another builder )for which we have paid thru loan Rs 18lacs(payment done by may 2008)balance 6 lacs paid in march2009 after selling the old flat. registration is planned in 2009 October .Could you please tell us whether we need to pay CG tax in such situation as detailed h/w?If so, how much it will work out.
Thanks & Reg
Mrs.Pilla
@Geetha
You total cost was 11 lacs and your indexed cost is
>>> 11 * 551/406.0
14.928571428571429
15 lacs approx .
Your profit in that case would be close to 9.5 lacs . Now you have used 18 lacs from loan and only 6 lacs from the profits . which means that rest 3.5 lacs profit would be taxation , and its will be 20% now … (If you want indexation) .
So close to 70k should be your tax here .. All figures are approx figures . You should look for a tax expert for details ..
Manish
Good Job.
Now tell me, what happens for a property bought before 1981-82… lets say in 1971.
I understand one needs to compute the "Fair Market Value" of the property as on 1.4.1981. How is that done? How does one reach such a value?
e.g. I bought a property in 1971 for Rs. 25000 and sold it in 2009 for 21600000. Let's say I spent an actual (not inflated) sum of Rs. 500000 on renovation and repairs of the house over the years. What is the profit to be put up for capital gains with indexation and without indexation.
@Anil
oops .. I have really no idea about that .. This is rare case. there are hardly cases like this where one has hold an investment for so many years .
Your invest ment return has been around 19.5% CAGR which is very very good
. Congrats .. Let me see if i can get any info on this . please share this info if you get from somewhere .
Manish
how & where to invest for capital gain bonds?
You need to search this on net and let us know , I am not sure where to buy it from . But I am sure it will be there on Net .
Manish
Hi Manish,
This is a nice blog you maintain. Few people understand cap gains accurately unless they make one or two mistakes here and there. This page sure will help those people address the cap gains issue more confidently. Keep up the good work !
Srik
.-= Srikanth´s last blog ..YeddyGaddy, ReddySteady goto sush’amma’ =-.
@Srikanth
Yes , You are correct .. people dont know these basic stuff and hence they loose out on many things .. I am sure knowing these things would be great …
Manish
Hi,
Suppose I have bought a land for 1.6lacs in 2005 and sold the same for 16.5lacs in 2009 and used the money gained to pay off my home loan which I took in 2006 for a flat for which i was paying EMI till date and the property is only ready for poccession in 2009 december, will I be excempt from capital gain tax or how much should I pay towards capital gain tax if I have no other source of income. Appreciate your reply.
Thanks ,
Ann
@Ann
So if you invest your proceeds within 2 yrs of sale it should be expempted . But the property was bought in 2006 , Here I am not sure because the deal took place after just 1 yr of buying the Land . You should look for a CA or Tax expert for this .
Manish
Hey Manish
This article still does not explain one condition. Suppose I bought a house in 1990 for Rs.x, sold it in 2006 for Rs.y. But if in between I also did some structural enhancements for Rs. z say in 1995. The how will the indexed value be calculated?
Many thanks for replies in advance
Srikanth
.-= Srikanth´s last blog ..30000Km drive report for Swift VDi DDiS =-.
oops .. I am not sure about this .. But the way it should work is that it should not be covered because when you sell it , you will anyways reap the benefit of that while selling , so the Selling price would incorporate that .
@Srikanth, you need to index x from 1990 to 2006 and Rs z from 1995 to 2006. The sum will give you your total indexed cost.
hmm… I think that makes sense .. Good one
Manish
Hi Manish,
Flat costing 8L was bought in 1995 and sold at 30L in Dec 2009. How much tax I hv to pay. I hv kept the sum of 30L in Capital gains account of Vijaya bank. To avoid paying LTCG tax, do I need to invest the full 30L or only the taxable amount ? If I pay tax to the govt, can I keep rest of the amt in FD to avail interest for my retirement benefit? Do I hv to pay tax on that sum every year even if I keep that amt in FD? If I buy a new flat, can we include registration and stamp duty charges for calculation in order to avoid LTCG taxation?
Regards
vinay
Vinay
You have to pay tax only on profit and not full 30 lacs , Also your profit will not be 22 lacs , it would be lesser because your Cost price will not be taken as 8 lacs , but more because you can use indexation benefit (Inflate the cost) . See my post on Indexation .
I can see that you want to avoid paying the tax . Thats possible . Here is how
1. You can use the profits to invest in another residential property within 2 yrs .
2. you can invest the amount of profit in 5 yrs lock in NHAI or REC bonds , that way you dont have to pay tax ,
Also you can pay the tax and keep the amount in Bank, but then the amount you get every year will again be taxable because its a brand new income for you . this happens with any money you keep in bank , Bank interest is always taxable no matter what .
Manish
Hi Manish,
Txs for the prompt reply. Just correct me if I m wrong.
So by using indexation, my indexed purchase value of my flat becomes Rs 1797683; so my taxable income is Rs 1202317. So actual tax is 20% of this amt i.e. Rs 240463. So options I have are:
1.. Pay this LTCG tax of Rs 1202317 to the govt, keep the remaining money i.e. Rs 2759537 in the bank and pay annual taxation on the interest I earn on my FD.
2. Invest Rs 1202317 in some residential property (and not whole 30L) in 01 year from the property sell of date and save tax of Rs 240463.
3. Put Rs 1202317 in REC or NHAI FD for lock in period of 05 yrs. But initiate this within 06 months of the selling of original property.
Waiting for the advice.
Kind regards.
vinay
Yes ..
2. You can pay invest in a residential property within 2 yrs , not 1 yr .
Also , you can pay 10% tax on profit without indexation incase its coming lower than 20% after indexation
I would say what we have discussed here is basic , Its matter of lacs of rupees , better hire a Tax expert . He would advice in much detail
Manish
Hi Manish,
As I sold my property in Dec 2009, wht is CII for this period? It cannot be 582 as it is meant for transactions bet April 2008 to March 2009. Pl clarify!
Regards
vinay
Its 632
Manish
Hi,
In point 1, I wrote Rs Rs 1202317 as tax; but it shud b read as Rs 240463.
Txs
vinay
Sure..
txs!!
could you calculat capital gain of share listed & non listed?
ok , looks like LTCG tax on them is 20% with indexation or 10% without indexation on unlisted shares . This is just like tax is calculated on debt funds and real estate .
Hi,
An investment in a private limited company was made at Rs 10 per share and later sold at Rs 100 a share after 2 years. In this case what would be the taxation % rate and would indexing be allowed on sale of Pvt Ltd Shares?
You are doing an excellent job, do keep up the great work in educating people like us.
Thanks in advance.
Gagze
Gagze
Rules are not different for pvt and non pvt companies .
Its just that
If STT was paid while buying the shares : Then no tax after 1 yrs on any profit as Long term capital gains are currently exempt.
If STT was not paid : Then the profits will be added to your salary and taxed .
Manish
Hi Manish,
Thanks for the prompt response however, I am told by the CA’s that for private limited companies the rate for capital gains on shares sold is 20 % even though I held them for over a year. I am certain that the STT was not paid therefore per your response the profit would be taxable along with my salary. (does the same hold true for public limited companies as well). Can you please re-check and explain in more detail.
Thanks in advance.
Gagze
Gagze
ok , looks like LTCG tax on them is 20% with indexation or 10% without indexation on unlisted shares . This is just like tax is calculated on debt funds and real estate .
Manish
Dear Shri Manish,
Different CAs give different answers on the vexed question whether the benefit of indexation is applicable for the sale of equity shares of a private limited company, the period of holding the shares being more than 1 year. What is the decision of IT Department? Whether indexation is applicable or not?
What I told you was based on what I read from net . You should consult a trusted CA
Manish
i found this site is really very intersting n helpul, i have a query i have sold some gold in 2009-10 which i bought in yr 1980, now i want to know what will be capital gain tax on it. yhanx
Happy
You should be paying 20% tax on profits after indexation .
Manish
hi manish
found your info very interesting. you haven’t mentioned about long term capital gains tax for privet limited companies ? kindly elaborate. thanx and regard
uday patil
hi manish
i will be more elaborate. what i mean is what if a privet limited company buys a land in say 2006 for say 10 lacs and sells it in 2010 for say 20 lacs. what would be capital gains tax liability for pvt. ltd. company.
tahnx and regards
uday patil
Uday
I have asked a tax expert to comment on this . I have no clue .
manish
Hi Manish,
Excellet Blog!!..very insightful..
I have a question though.
My Father got a flat from a property builder in exchange of a chawl owned by my father in the year 1995
He sold the flat in the year 2008 at 30Lacs. Now we don’t have an exact Purchase price to be able to calculate the Capital gain of the property. what do you suggest we do?
How can i calculate the Indexed Purchase price? The rough Market value of the flat in 1995 was 10Lacs but we don’t have evidence of this price.
Also since the two year term after the flat sale is not complete yet, how much do i have to invest if i have to buy a different property so that i dont have to pay on the capital gains?
Thanks in advance for your Response
Regards
Kishan
Kishan
thanks for your comment
. What you have asked is a common question . Incase you dont know the property value , you have to hire a “valauer” who are certified people to value the real estate at some point in time (you have to find out how to find them , i dont know) .
now if they value that its value was 15 lacs , then you can index it and then find your profit . Now if your profit comes at 8 lacs , then you have to invest this 8 lacs only in the next real estate project and you can save tax on that . Got it ?
manish
Thanks Manish!
That was really helpful!
Cheers!
Manish,
“In Equities Long term Capital Gains is exempt from Tax”!
Just to confirm, if i buy today shares/MF and sell after one year. There will be no tax on profits. Is my understanding correct?
Marshal
Marshal
Didnt you know this ? Yes that is correct. Long term Capital gains from Equity (Shares and Equity funds [65% or more in Equity] ) are exempt from tax given the STT is paid by you , which you pay anyways when you buy from trading account .
So if you buy shares or Equity funds (tax or non tax saving) , any profit you make by selling the fund after 1 yr is all yours , NO TAX .
For less than 1 yr , there is flat 15% tax (2008 , it was 10%) .
Manish
Manish,
I was testing you
just kidding.. i know but confirmation is always better…
Cheers
Marshal
Dear Manish,
I have bought 500 shares from a pvt ltd company not listed in stock exchange but registered with ROC in 2006 june,bonus shares of 4500 was issued in feb 2008.I sold the total 500 shares in nov 2009.Now clarify if the total value of sale -cost of buying will attract LTCG or STCG. If LTCG, do I get option of paying by indexation or without indexation? If the difference of gain was about 6lacs, what could be approx tax to be paid? Pls help as this is my first experience in capital gains
Naresh
there is no point of STCG and LTCG here . you have not paid STT , so all the profits are taxable as per your slab .
manish
Hi Manish,
I am an NRI for long years and have sold a residential property in India in Dec 2009. Capital gains account was opened in December 2009. I am a bit confused, What is the maximum duration before which I should buy another residential propert in order to avoid paying long term capital gains tax? Is is 06 month or 12 months irrespective of NRI or resident indian?
Regards
vinay
Vinay
Its 2 yrs .
Manish
Dear Manish
This querry is in respect to Long Term Capital Gains.I am aware that the LTCG’s can be invested in buying a residential house within one year before to two years from the date of transfer or construct a residential house within three years of the date of transfer of the original house.My question is that if my LTCG is say Rs one crore then can I construct a residential house for say seventy lacs and also buy a residential flat worth thirty lacs and avoid paying any tax towards LTCG’s.
The problem is that I have been getting conflicting responses.I will be grateful if you could clarify.
Thanks a ton .
Ashok
Ashok
The only rule is that you have to use the proceeds in another project , so putting money in two should be ok . That should not be against the rule . but if the money involved is 1 crores , i would suggest consulting a tax expert .
Manish
Dear Manish,
First of all let me thank you for your prompt response.
Thank you for clarifing the issue,an answer which was being propagated by the majority.
As advised I shall take the help of a Tax Consultant.
Wishing you all the best.
Sincerely
Ashok
Great
Best of luck . Keep commenting
Manish
i have sold my polt of land on 12-3 09 and i want that i pay the tax without indexing it can it possible for me that i pay tax without indexing the cost of land and pay tax as 10% slab rate please make me reply as soon as possible
Abhishek
What was the buy date ? If the tenure is not more than 3 yrs than there is no way you can save any tax , the profit will be added to your income and taxed , where as if its more than 3 yrs then either 10% without indexing or 20% with indexation .
Manish
i bought the land on 01.01.1981, when i filled in my software the 10% tax rate is disaalowed by the software
is on land without indexing is possible to determine the tax rate , well i sale out the land on 12.03.09.
plese make me reply as soon as possible
Abhishek
forget software , they are dumb .
You will have to pay the tax at 20% with indexation or 10% without indexation on your profits .
You can also save the tax on this , by either using the profits by investing in other real estate investments within 2 yrs or investing in REC 0r NHAI bonds
Manish
when i talk with income tax officer he said that without indexing is not allowed on plot of land
so plese me clarify wheteher it is allowed or nt.
officer said that without indexation benefit is allowed on equities shares and bond nt on the land so plese make me clear that can i pay tax witout indexation on plot of land for fy 2008-09
Abhishek
We were talking about flats and real estate property in general , if the guy you are talking to is a tax expert than you should take his words .
Manish
A property (plot of land) was purchased in 1979 from a govt scheme for a small value then. It was sold in 2010 by the holder, who is aged 83 now & has many grown up children who are beneficiaries. He himself does not have taxable income.
Indexation commences only from 1981-82. Grateful if you could please advise how capital gains tax can be computed. Will it be a flat 10% without indexation or 20% with indexation ? If indexation is applicable, how do we do it since it starts only from 1981-82 ?
How much of the tax on capital gains can be saved by investing in NHAI or REC bonds ? Is there a limit on investment into these bonds ?
Naveen
The beneficieries are entitled to get any share only after the actual owner of the land dies , not before that .
If a property is bought before 1981 , in that case one has to find a “Valuer” , there are property valuer’s who estimate value of property in year 1981 . Once you get that value you can then apply normal indexation rules.
All the profits can be investing in those bonds , no limit 5 guess .. check it
Manish
I wish to know correct (and current) rules of setting off Capital Gains related to Shares and Mutual Funds. I have done breakup of the Capital Gains as rules for ‘Equity Oriented’ mutual funds are different from ‘Debt Oriented’ mutual funds
Here is the break-up:
a) This year: Equity Based Mutual Fund Short Term
b) This year: Equity Based Mutual Fund Long Term
c) This year: Debt Based Mutual Fund Short Term
d) This year: Debt Based Mutual Fund Long Term
e) This year: Equity stocks Short Term
f) This year: Equity Stocks Long Term
g) Last year: Equity Based Mutual Fund Short Term
h) Last year: Equity Based Mutual Fund Long Term
i) Last year: Debt Based Mutual Fund Short Term
j) Last year: Debt Based Mutual Fund Long Term
k) Last year: Equity stocks Short Term
l) Last year: Equity Stocks Long Term
——————————————————————
I am confused about the rules used for set-off. But following is what I think (which may not be correct)
m) Last Year’s Equity Long Term which cannot be carried forward is = h + l (permanent loss)
n) Last Year’s Debt Long Term that can be carried forward = j
o) Last Year’s Debt Short Term that can be carried forward = i + k
p) This Year’s Short Term so far = c + e
q) This Year’s Debt Long Term so far = b + d + f(?)
r) Short Term offset = p – o = Taxed? or can be offset with ‘s’
s) Long Term offset = n + q = Still available for offset
But if ‘r + s’ is allowed then it is available for offset next year
Yogesh – kulkarniay at gmail dot com
Yogesh
Can you give an example on this .. its little complicated for me to understand . may be things have changed , we can find out .
manish
Just some figures below:
a) This year:Equity Based MF ST : 0.0
b) This year:Equity Based MF LT : -69945
c) This year:Debt Based MF ST : 71572
d) This year:Debt Based MF LT : 244547
e) This year:Equity stocks ST : 288121
f) This year:Equity Stocks LT : -56701
g) Last year:Equity Based MF ST : 0.0
h) Last year:Equity Based MF LT : 12154
i) Last year:Debt Based MF ST : -252751
j) Last year:Debt Based MF LT : -255094
k) Last year:Equity stocks ST : -91317
l) Last year:Equity Stocks LT : -58429
——————————————————————
m) Last Year’s Equity LT which can not be carried forward is = h + l = -46275 (permanent loss)
n) Last Year’s Debt LT that can be carried forward = j = -255094
o) Last Year’s Debt ST that can be carried forward = i + k = -344068
p) This Year’s ST so far = c + e = 359693
q) This Year’s Debt LT so far = b + d + f(?) = 117901
r) ST offset = p – o = 15625 more (Taxed?) or can be offset with ‘s’
s) LT offset = n + q = -137193 (still available for offset)
But if ‘r + s’ is allowed then 120k is available for offset next year
Anyone, who can suggest me correct set-off rules with given example?
If I take a personal loan and finance purchase of shares through share market and then hold them for more than a year. What are the implications?
A Roy
Both of them are not related to each other . Taking personal loan is not related . you pay EMI on your loan and what ever profit you make on shares will be tax free .
However the risk is emmense , dont try this . First point is that making profit from direct investing is tough and not advisable , then if you make any loss , it would be bad coupled with high interest you pay on loan , this does not make sense atall..
Better choice would be to gamble in casino
unless you are a market expert and have experience in minting money from stock market
Manish
Thanx Manish. You are proving to be an absolute asset by providing this service. One more query. Is profit from futures and options taxable as short term capital gains @ 15% or will it be treated as income from other sources and taxed according to slabs.
sir
i have earned profit of 12000/- on shares over a period of six months and loss of 3673 on selling few shares in 2008-09 financial year. what is my tax liability.
Sunny
I would consider that the profit u made in shares was in year 2009-2010 and the losses you made were in year 2008-2009 . Now you can adjust this loss with profit only if you declared the loss in your tax return for 2008-2009 , else forget it . there is no proof of it now .
Manish
Hi,
With respect to Short term capital gains on sale of property/Apartment I have the following queries.
1. Can the interest paid to the bank for Home loan be taken/added to the purchase price ?
2. Can any closure charges pais to the Bank on account of Home loan be added to the purchase price ?
3. Can amount paid for water connection, Electricity connection be added to the purchase price ?
Muthu
No , the amount you put in the registration is taken as the purchase price .
Manish
My wife has annual income of one lakh (from other than shares) in FY2009-10.She made a loss of Rs. 22000 in derivative trading (F&O) this year and is holding equity of less than one year with profits of around same amount (22000) . Can she offset the derivative loss by selling shares before 31.3.2010 or is she liable to pay short term capital gains tax @ 15% even if her income is non-taxable .
Vicky
She will have to pay 15% tax , no matter what tax bracket is she in , Derivative profits and looses are considered as speculative , so you cant offset it with anything
Manish
Thanx Manish for the prompt response.
Can u elaborate on the derivative losses /profit are speculative part .How does she show the loss in IT reurn , can it be carried forward to next year . Is this speculative trading to be treated as business .Can u recommend any literature for furthur elaboration.
Thanx in advance . yr website is a great help to people like us.
Vicky
Hi,
I had purchased house in November 2004 worth 2600000, plus stamp duty, registration and legal another 150000. Now I am selling this house in 5700000 in March 2010. I am buying another house worth 4400000 in April 2010, how much would be the capital gain for me.
I had taken loan from bank of 2350000 in 2004 and rest was my own contributuion, I had spent about 600000 on purnishing on this house. Now I am clearing this existing loan and taking another 2000000 for the new house.
Can someone please help me understand how much tax liability I have due to these transactions.
SAM
Sam
on a first look , seems like your profits are not more than the new house costs , so if you invest in new house now .. there wont be any tax, however its always better to meet a CA for get internal details . This blog is there for very general information ..
manish
Thanks Manish for the promt reply, I will be meeting my tax consultant in cuple of days to clear things, was browsing through and found out this thread so thought of asking people here as well.
Thanks a lot.
Manish,
Excellent blog, gives so much knowledge
I have a question regarding calculation that needs to be done to check if my gain is long term or short term. I will explain it with an example…
Suppose I purchase shares of a company as per pattern below (all dates are in DD/MM/YYYY format)…
Date No of Shares Price
01/11/2008 20 100 (My average price is 100 for 20 shares)
01/02/2009 20 200 (My average price is 150 for 40 shares)
01/05/2009 20 300 (My average price is 200 for 60 shares)
Suppose I sell my shares as per transaction below
Date No of Shares Price
28/02/2010 60 400
If I calculate on average basis, my average investment as of 01/05/2009 is 200 X 60 = 12000. And the sale of shares has given me 400 X 60 = 24000.
So my gain on average basis is 12000.
In this case how do I calculate if my gain is long term or short term? It is actually long term for the first two transactions as my date of sale is greater than 1 year for the first two investments?
Can I do the calculation the way below…
For the first two transactions my investment is 150 X 40 = 6000
Sale of these shares has given me 400 X 40 = 16000
So gain is 10000, can this be considered as long term gain?
For the third transactions my investment is 300 X 20 = 6000
Sale of these shares has given me 400 X 20 = 8000
So gain is 2000, can I consider only this as short term gain that attracts tax?
Regards
Vishal
Manish, did u get a chance to check the query above?
Vishal
Yes , you are correct .. thats how it has to be calculated .
manish
Thanks Manish.
Is indexation applicable on LTCG on listed shares on which STT is paid?
Pari
Its not .. as its tax free at the moment
Manish
Hi i m a c.a student and practically i know its tax free bt in our xams if we have to show the calculation then shud we index the purchase cost or not,,, plz reply keeping in view academic considerations. and specially for LTCG of STT paid listed shares.
well as we all know that us 10(38) any long term capital gain arise from listed share on whichSTT is paid then there is no question of using indexation or without indexation because its always tax free the whole amount u earned from tht amount which is u invested is tax free so no use of word indexation if u gonna use it then it again nothing gonna make difference because answer remain the same tht it is always tax free
well in exam we need nt do calculation of it just write down the sec and thts why it is tax free no further calculation required
Manish,
You have replied to this question before, But One CA has told me otherwise.
You say STCG(in shares) is taxed at 15% irrespective of whether any other income is Zero.But I was told that Upto 160000/-(exemption limit) , there will be no STCG tax and after that only will there be tax of 15%.
Kapil
Kapil
Your CA is wrong . Short term capital gains from sale of shares are taxed @15% special rate. It will not be added to regular income. The tax on regular income if any + special rate 15% tax on STCG will be your tax. So even if total income for a year is say 50,000 which is profit from shares , you have to pay 15% tax.
Inputs from : Rishabh Parakh , CA Pune .
Manish
Manish,
I am a bit confused.My CA also insists that if total income is less than 160000/-, then no tax has to be given.Also I found few links on the web that says the same thing that no tax has to be given if income is less than 160000/-.
http://www.raagvamdatt.com/Long-Term-and-Short-Term-Capital-Gain-Income-Tax-Calculation/148/
Please check.
Kapil
i am going to receive a property as a gift by my father. i want to know if i can sell the property as soon as i receive the gift and buy a new property to claim exemption u/s 54. and will i be allowed to take indexation from the year my father had purchased that property or the year when he transfered it to me.
plz any1 let me konw
Hardik
I think you should be able to get all the benefits you father was suppose to get .. just make sure the documentation is correct and as per law .. check with a tax expert instead .
manish
and will my dad have to pay gift tax or not.
You might not have to pay gift tax .
Manish
dear sir,
i have registery of ikrar nama is this is valid proof for sales consideration
registery of the land is nt made but the power of attorney is transfer to the party and the same is register with the registrar and its was my sales considered which was registered with registry
so does it effect anyhow my capital gain calculation or it quote this for capital gain calculation of land
adviced me
If I sell my land in india with LT capital gain 95 lakh .Can I save tax and how?
Hi
If I sell plot and earn capital gains.Can buy a Flat and save Tax?What is the max amount LT capital gains on which tax can be saved.
Mahesh
you can either invest in another real estate within 2 yrs or invest the profits in REC or NHAI bonds . thats will save all the tax .
Thanks Manish,
But I heard we can not invest more than 50 lakh in LT capital gains in REC or NHAI bonds
Plus I will get this gain after selling a plot not a house. Can I still save after buying a FLAT.
I had purchased a shop in Apr 2008 for Rs 13.5 Lacs in my wifes name. Now in Apr 2010, we are selling the same for Rs 20 Lacs. My wife is a housewife and do not have any other income. What should be the Capital gain applicable and how can we save the same. Thanks for your help in advance.
DEEPAK
You cant save it as the profit is not after 3 yrs . it will be added to your salary .
Manish
Hi Manish,
Article is really informative and detailed, I have one question for you.
I purchased new House for 56lac. + Registration exp.3lac. in Jan 2010 and paid 48lac from Housing loan and balance 11lac from own resources.
In April 2010 I sold my old House for 38lac which I bought for 21lac in Feb.2004. After Indexation Capital gain would be about 10lac (approx.).
My question is, do I still need to deposit this 10lac Capital Gain towards my Housing loan or payment of 11lac from own resources would be considered as investment from capital gain.
Thanks,
Akshay
As the registration date for first house is earliar than the sale of new house , i dont think it can be used for capital gain adjustment . You might have to pay the tax . I recommed you see a CA on this .
Manish
Hi Manish,
Thanks for reply, my understanding was based on following fact, copied from some other article. Any thoughts…
Tax on long term capital gain can be avoided if the sale relates to a property other than one residential accommodation and reinvested in any residential property within a period of 1 year before or 2 years after the date of transfer (Section 54 F).
Akshay
Yes , but your second house was purchased before selling another one , so if you want to save tax on this one , either you use the profits to buy some other property or put that profit in REC or NHAI bonds .
I would suggest to see a CA , my knowledge is limited on this .
Manish
Sir,
I am not a salaried person. I bought a vacant plot in year 2003 and sold it in year 2010. From year 2003- 2010 I do not work and have no income. When calculating the capital gain tax for the above sale, can I use standard deduction for the years 2003-2010 for the capital gains.
i.e
if standard deduction/exemption limit for each year is assumed to be Rs 50000. from year 2003.
then total standard deduction between 2003-2010 is : 7 x 50000 = 350000.
So the taxable capital gain is : cost inflated capital gain – 350000.
Sincerely,
Swaminathan.
Swaminathan
Not sure of the standard deduction part, i think it should be used in the same year of claim , however you can use the indexation .
manish
I purchased a flat in Dombivli for Rs. 10 Lakhs in April 2007. I wish to sell my flat in June 2010 at Rs. 26 Lakhs. How much will the Tax will be.
Sugeesh
You can calculate it using : http://www.jagoinvestor.com/2009/05/how-to-calculate-capital-gains-and-what_7801.html
Manish
Hi,
I had been allotted & purchased some shares in the nineties. There was no STT.
Now I’d like to sell these shares.
If I pay stt on sale, what would be the tax on ltcg?
Thanks,
Goutam
Goutam
You will have to pay tax on that , the rule only applies to shares bought after 31st Mar 2003 , look at http://www.rediff.com/money/2006/jan/16tax.htm
Manish
Hello Manish,
We, living in a joint family, my mother, my elder brothers family and mine, inherited a house from our dad, who is no more. We recently sold the same @ 26.5 lacs. The plot was bought by my dad in 1993 at 1 lac and we built the house in stages, one in 1999 with a cost of 8 lacs and the other in 2004 with an additional 2 lacs. Also from the money that we got from the sale, it was divided equally among the three of us. Kindly let me know the tax liability in this case. Awaiting your reply as soon as possible.
Thanks and regards,
Athreya
Athreya
This is complicated enough
. You should look for CA help on this .
Manish
I accidentally landed on your web-site. I am a retired senior bank executive with 46 years experience. Your service through this web-site is extremely laudable. My best wishes to you
T.M.Ramani
25.07.10
T m Ramani
Thanks sir , we would need your blessings for future . Keep coming
Manish
Dear Manish,
Your blog is very informative. I really appreciate your prompt replies to all the queries asked.
I bought a land in 2002 for Rs. 11,00,000 and constructed a residential complex (6 Flats) in 2005 by imjecting Rs.62,00,000. Now, in 2010, I am selling the flats at Rs. 28,00,000 (total for 6 flats Rs.1,68,00,000). The profits will attract Long Term Capital Gains Tax.
1. Now while computing LTCG Tax how do I incorporate the construction cost?
2. Can we calculate LTCG Tax without indexing the purchase value which will attaract only 10% on the difference between the cost price and selling price?
Gaurav
1) I am not sure on this , you need to involve a CA in this as this is not a general query .
2) 10% is possible , you need to figure out which one turns out to be cheaper for you .
Manish
Hi Manish,
No doubt, lot many ppl have benefitted from this blog. God Bless U.
My question : I have bought flat costing 18lacs (2 lacs own, 16lacs loan) in 2005, furhter I sold it in March, 2010 in 25lacs. I cleared loan of 16lacs. In between all this, i did not open any Capital gain bank account. Further, i have paid 3+ lacs in few other liabilities like car loan etc. Now, i am remaining with 6lacs.
Please advise, if closing down liability(other loans) will reduce capital gain. Also, as I do not hve any capital gain account, do i need to open it now, or I can utilize my bank statements to justify the transactions.
Thanks in advance. Pradeep.
Pradeep
which city is this ?
You can offset capital gains of real estate only with few things , like capital loss of real estate , debt funds , gold etc . You cant offset with any kind of loan , Also as you have made the profit in March , you were entitled to pay the tax on that by this year itself , However you should have had opened the Capital Gains tax scheme , Its late now as far as i understand it .
I advice to consult a CA on this, its not a very general query .
Manish
Dear Shri Manish,
In one of your replies, you have stated that indexation benefit is available for the capital gains derived out of sale of equity shares of unlisted private limited co. But our Auditor says that this benefit is not available. Can you kindly explain the correct position?
2. In the case of debt funds, the cost price will be the original amount invested and the sale price will be the redemption amount and the gains or loss is the difference between the two. Capital gains, if any, is to be calculated on the difference amount. Am I correct?
Regards
S. Krishnamoorthy
1) for unlisted shares long term capital gains will be taxable , but after applying indexation : http://www.taxguru.in/direct-tax-code/capital-gain-taxation-under-dtc-regime.html
2) NO , your cost price will be first indexed , and that will be your real cost price , then difference of your sale price and indexed cost price would be your capital gain .
Manish
Dear Shri Manish,
I have a point to be clarified.
Can the capital gains derived out of sale of equity shares of a private limited company, unlisted, be invested in property for claiming exemption from capital gains tax?
Regards
S. Krishnamoorthy
S. Krishnamoorthy
No , short term and long term capital gains thing does not apply to unlisted shares , you have to add the profit to your salary and pay tax
Manish
Before, I will present to you my case:
I am selling my property today at Rs. 900000/- which was purchased in year 1991-92 for 99000/- (Indexation Cost = Rs. 353,714/-) plus Stamp Duty & Registration Extra. I am buying new property for 2250000 (Agreement value) + Stamp Duty & Registration Charges of Rs. 115000/-, out of which, Rs.2000000/- would be paid from Bank loan and Rs. 360000/- as self contribution.
Now my queries is as follows:
1) Can I claim deduction for brokerage to agent (paid in cash), advertisement in newspapers (paid of cash), transfer fee (in cheque) of Rs. 1000/- paid to the society for my old flat in 1991-92?
2) If i am eligible for the claim no. 1, do I get indexation benefits for the same?
3) Can I claim brokerage to agent for sale of Old Flat and purchase of New Flat as Cost of Purchase of New Flat? Do I have to pay in Cheque only or i can also pay in Cash and take receipt for the same ?
4) I am also going to pay transfer charges for my old Flat too (transfer from my name to new owner name). Can i claim that too ?
What would it be treated as – Cost of Purchase for Old Flat or Cost of Purchase for New Flat ?
Mihir
I dont think you can claim anything other than Registration value of flat, let me confirm this with some others , they will reply to you on this thread.
Anyone ?
Manish
dear manish,
do you please let us know how a private equity will calculate their capital gain tax….as they invest in all kind of iunstrument and in listed and unlisted company, so they basically calculate LTCG. one more thing when they convert debenture to equity share do they need to pay any tax…..if you have any more update relating to the taxation of private equity at the time of exit or conversion of instrument do let me know
Mohit
What is meant by “Private Equity” ?
Manish
hi manish ,
my case is like this :-
-my dad sold his 3 acres of land in 2010.
-he is retired from governmentt services in 2008.
-he received this land from his forefathers. So we dont know in which year our forefathers purchased this land.
- But m sure that the land is purchased around 50-60 years back.
- he sold the land for 45 lacs. (amount on sale deed).
- now i have a flat in my name and to save capital gain tax my dad is purchasing this flat from me.
- i have purchased the flat in may 2009 for 23.5 lacs and my dad is purchasing it from me for 27 lacs.
- now my doubt is :-
1- how much capital gain tax will be saved in this transaction considering indexing , purchasing flat from me. and IS IT A VALID TRANSACTION ?
2- as i am selling this flat to my dad , do i need to pay capital gain tax ?
3 – while doing the sale deed process i need to pay stamp duty and registration charges so will it be CONSIDERED for capital gain tax exemption ? (under COST of ACQUISITION tag)
4 – how much tax will my DAD save in this whole process ?
5 – what would be the optimum purchase price for my DAD considering stamp duty and registration charges , my capital gain tax , capital gain tax ultimately saved for my DAD ?
harshwardhan
This a too big and complex query to discuss here , You need to consult a tax expert for this .
Manish
Hi,
I purchased a flat in 25 Lakhs in 2009. I sold it in 32 Lakhs in 2010. So capital gain is 7 Lakhs. I used this amount to pay off my car and personal loan and this amount is no more in my bank account. It was there just for 1 month only. So tell me how much tax I need to pay on this.
Thanks,
Bhuwan
Bhuwan
It will be added to your yearly income and taxed at your slab , so if your salary was 6 lacs , add this 7 lacs to that , total is 13 lacs and you have to pay tax on 13 lacs
Manish