Computation of Long-Term Capital Gains – Format & Problems
Property sold for ₹1 cr profit after 10 years - tax ₹20 lakh? With indexation + Section 54 exemption, actual tax could be ZERO! Let's master the complete LTCG computation format with real examples.
LTCG Computation Format
Step-by-step procedure:
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Complete Computation Format
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Example 1: Property Sale with Sect ion 54
Mr. Sharma sold residential house:
Details:
- Purchase: ₹50,00,000 (FY 2016-17, CII 264)
- Improvement: ₹10,00,000 (FY 2020-21, CII 301)
- Sold: ₹1,20,00,000 (FY 2024-25, CII 363)
- Brokerage: ₹1,00,000
- Bought new house: ₹70,00,000 (within 2 years)
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Tax: NIL ✅ (Full exemption!)
If no reinvestment: Tax = ₹38.19L × 20% = ₹7.64 lakh
Example 2: Listed Equity Shares (No Indexation)
Mrs. Kapoor sold equity shares:
Details:
- Purchase: ₹15,00,000 (FY 2020-21)
- Sold: ₹25,00,000 (FY 2024-25)
- Holding: 4 years → LTCG
- STT paid: Yes
No indexation for listed equity!
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Why no indexation?: Flat 10% compensates (simpler calculation)
Example 3: Gold Sale
Mr. Verma sold gold jewelry:
Details:
- Purchase: ₹8,00,000 (FY 2014-15, CII 240)
- Sold: ₹18,00,000 (FY 2024-25, CII 363)
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Without indexation: ₹10L gain × 20% = ₹2L tax (64% more!)
Example 4: Section 54EC Bonds
Property sold with partial exemption:
Details:
- LTCG: ₹80,00,000
- Invested in NHAI bonds: ₹50,00,000 (max limit)
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Tax saved: ₹50L × 20% = ₹10 lakh (from bond investment!)
Example 5: Inherited Property
Complete calculation:
Details:
- Father purchased: ₹25,00,000 (FY 2008-09, CII 137)
- Inherited by son: FY 2018-19 (no capital gain on inheritance)
- Son sold: ₹90,00,000 (FY 2024-25, CII 363)
- Brokerage: ₹50,000
Cost: Father's cost (₹25L) CII: Father's purchase year (137)
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Holding period: From father's purchase (16+ years) → LTCG ✅
Example 6: Section 54F (Shares → House)
Sold unlisted shares, invested in house:
Details:
- Shares sold: ₹1,00,00,000
- Cost (indexed): ₹60,00,000
- LTCG: ₹40,00,000
- Invested in new house: ₹80,00,000
Section 54F formula:
Exemption = LTCG × (Investment / Net Consideration)
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If invested full ₹1 cr: Zero tax (full exemption)!
Tax Rates Summary
| Asset | LTCG Tax Rate | Indexation? |
|---|---|---|
| Listed Equity (>₹1L, STT paid) | 10% (Section 112A) | No |
| Listed Equity (≤₹1L) | Exempt | No |
| Property, Gold | 20% + 4% cess | Yes |
| Unlisted Shares | 20% + 4% cess | Yes |
| Debt Mutual Funds | 20% + 4% cess (check latest rules) | Yes |
Common Mistakes to Avoid
❌ Forgetting indexation: Using actual cost instead of indexed cost
❌ Wrong CII: Using sale year CII for both (must use purchase year CII)
❌ Listed equity indexation: Applying indexation when not allowed
❌ Improvement cost: Not indexing separately from improvement year
❌ Section 54 proportionate: If investment < LTCG, exemption = investment amount (not full LTCG)
Summary
- LTCG format: Sale price - expenses - indexed acquisition cost - indexed improvement cost - exemptions = taxable LTCG
- Indexation: Multiply actual cost by (CII sale year / CII purchase year) - FY 2024-25 CII = 363
- Listed equity: No indexation, flat 10% tax on gains > ₹1L (Section 112A), ≤₹1L exempt
- Property/Gold/Unlisted: 20% tax with indexation benefit
- Section 54: House → House (full exemption if reinvest ≥ LTCG)
- Section 54F: Any asset → House (proportionate: LTCG × investment/consideration)
- Section 54EC: Bonds investment (₹50L max exempt, 5-year lock-in)
- Inherited property: Use previous owner's cost and CII from their purchase year
- Tax savings: Indexation can reduce ₹50L gain to ₹27L (₹4.6L tax saved!)
Quiz Time! 🎯
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