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:
Complete Computation Format
LTCG Computation Format
| Full Value of Consideration | ₹XXX |
| Less: Less: Expenses on Transfer | () |
| Add: - Brokerage/Commission | ₹XXX |
| Add: - Legal charges | ₹XXX |
| Net Consideration | ₹XXX |
| Less: Less: Indexed Cost of Acquisition | (₹XXX) |
| Less: Less: Indexed Cost of Improvement | (₹XXX) |
| Long-Term Capital Gain | ₹XXX |
| Less: Less: Exemption u/s 54/54F/54EC | (₹XXX) |
| Taxable LTCG | ₹XXX |
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)
Property LTCG with Section 54
| Sale Price | ₹1,20,00,000 |
| Less: Less: Brokerage | (₹1,00,000) |
| Net Consideration | ₹1,19,00,000 |
| Add: Less: Indexed Acquisition Cost | |
| Less: ₹50L × (363/264) | (₹68,75,000) |
| Add: Less: Indexed Improvement Cost | |
| Less: ₹10L × (363/301) | (₹12,06,312) |
| Long-Term Capital Gain | ₹38,18,688 |
| Add: Less: Exemption u/s 54 (new house ₹70L) | |
| Less: (investment < LTCG, so full ₹70L) (but limited to LTCG) | (₹38,18,688) |
| Taxable LTCG | ₹0 |
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!
Listed Equity LTCG (Section 112A)
| Sale Price | ₹25,00,000 |
| Less: Less: Purchase Cost (no indexation!) | (₹15,00,000) |
| Long-Term Capital Gain | ₹10,00,000 |
| Less: Less: Exemption u/s 112A (₹1L exempt) | (₹1,00,000) |
| Taxable LTCG | ₹9,00,000 |
| Tax @ 10% (Section 112A) | ₹90,000 |
| Add: Cess @ 4% | ₹3,600 |
| Total tax | ₹93,600 |
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)
Gold LTCG Computation
| Sale Price | ₹18,00,000 |
| Add: Less: Indexed Cost | |
| Less: ₹8L × (363/240) | (₹12,10,000) |
| Long-Term Capital Gain | ₹5,90,000 |
| Tax @ 20% | ₹1,18,000 |
| Add: Cess @ 4% | ₹4,720 |
| Total tax payable | ₹1,22,720 |
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)
LTCG with Section 54EC
| Long-Term Capital Gain | ₹80,00,000 |
| Less: Less: Section 54EC Exemption (bonds investment) | (₹50,00,000) |
| Taxable LTCG | ₹30,00,000 |
| Tax @ 20% | ₹6,00,000 |
| Add: Cess @ 4% | ₹24,000 |
| Total tax | ₹6,24,000 |
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)
Inherited Property LTCG
| Sale Price | ₹90,00,000 |
| Less: Less: Brokerage | (₹50,000) |
| Net Consideration | ₹89,50,000 |
| Add: Less: Indexed Cost (father's) | |
| Less: ₹25L × (363/137) | (₹66,24,088) |
| Long-Term Capital Gain | ₹23,25,912 |
| Tax @ 20% | ₹4,65,182 |
| Add: Cess @ 4% | ₹18,607 |
| Total tax | ₹4,83,789 |
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)
Section 54F Exemption
| LTCG | ₹40,00,000 |
| Add: Investment in house | ₹80,00,000 |
| Add: Net consideration | ₹1,00,00,000 |
| Exemption = ₹40L × (₹80L/₹1cr) | ₹32,00,000 |
| Taxable LTCG | ₹8,00,000 |
| Tax @ 20% | ₹1,60,000 |
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! 🎯
Test Your Knowledge
Question 1 of 5
1. LTCG on listed equity (>₹1L) is taxed at:
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