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Computation of Long Term Capital Gain/Loss

Long term capital gain means capital gain arising from transfer of long term capital asset. Indexation benefit is available for long term capital gains.

Long term capital gain is computed as under

Long Term Capital Gain/Loss Amount
Full value of consideration
Less: Expenses incurred wholly and exclusively in connection with such transfer
                                                                                                        Net ConsiderationLess: Indexed Cost of acquisition
Less: Indexed Cost of improvement                                                                                              Long Term Capital Gains
Less: Exemption under section 54, 54B, 54D, 54EC, 54F, 54G, 54GA, 54GB
xxx
xxx
xxxxxx
xxxxxx
xxx
                                              Taxable Long Term Capital Gain (Loss if negative) XXX

Securities Transaction Tax (STT) is not allowed as deduction of expenses while calculating capital gain whether short term or long term.

Indexed Cost of Acquisition = (Cost of Acquisition x CII of year of transfer) / CII of year of acquisition of asset or CII for year 1981 whichever is later.

Indexed Cost of Improvement = Cost of Improvement x CII of year of transfer) / CII of year in which improvement took place

Cost Inflation Index (CII) Table

 

3 comments

  1. Hello Rohit / Prateek,

    I and my wife bought a under-construction property in joint name for the purpose of home loan since my wife would not have secured the home loan individually under her name, eventually after the loan approval, she had been regularly paying the EMIs for the same.

    After a gap of 2 years, we sold the property (still under-construction) and this led to a Short term Capital Loss; my queries are as follows:
    1. Are we entitled to Claim Short term capital loss considering the bank interest, processing fees, documentation, advocate charges that were paid over a period of 2 years?
    OR should we just look at the indexed cost of acquisition and then subtract this figure from the actual sale proceeds (after deducting transfer expenses)?

    2. Since my wife had been footing the EMI largely, can we choose to keep the Short term Capital loss under her account only and carry forward in subsequent years if we wish to? I do not wish to get this under my account.

    Pls advise…

    • Rohit Pithisaria

      Hello Vikram,

      Please find my answer below:-

      1) No, only the cost of property is allowed to be deducted from sale proceeds. Section 24 provide deduction for interest on pre acquisition/ pre construction period. Also, interest include service fees, brokerage, commission, prepayment charges etc. So it will not be allowed to be added to cost of house property.

      2) The STCL is distributed between you and your wife in the ratio of the ownership of the house property.

      • Rohit Pithisaria

        Hello Vikram,

        Can you please give me some time to get back to you again. I am trying to find some case law which is similar to your problem.

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