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Long Term Capital Gains

Long term capital gains (LTCG): -

Capital gain arising from the transfer of a long-term capital asset is called as "Long-term Capital Gain". (LTCG) [Section 2(29-B)].

Click here to know the basics of Capital Gains.

Topics Covered in this Page

LTCG tax rate
LTCG tax Calculation
Inflation Index number

Long Term Capital Gain Tax Rate In India

What is the LTCG tax rate in India?

LTCG tax rate in India fir Resident

20% on LTCG.

LTCG tax rate in India for Non Resident Indian

LTCG from specified assets [Section 115E]: 10%
LTCG from other assets: 20%

LTCG tax rate in India for Non Resident

LTCG from units purchased in Foreign Exchange: 10%
LTCG from GDR purchased or Notified bonds: 10%
LTCG Income of FII (Foreign Institutional Investor) from Securities: 10%

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Long Term Capital Gain Tax Calculation In India

How to calculate the Long Term Capital Gain Tax in India?

Sale Consideration		xxx
Less: - Expenses Incurred for Transfer		xxx
Net Sale Consideration		--- xxx
Deduct:
Indexed Cost of Acquisition	xxx
Indexed Cost of Improvement	xxx ---
		xxx ---
Long Term Capital Gain/Loss		xxx ---

Note: -

Indexation is not available for the following Long-term Capital Assets: -

Bonds and Debentures (except for Capital Indexed bonds of Government)
Section 80CCB Units
Transfer of Shares or debentures in Indian company by a Non-Resident and
In the case of slump sale of industrial undertakings.

What is Sale consideration?

Actual amount received or accruing as a result of transfer is treated as Sale Consideration.

However, in the case of immovable properties, the guideline value determined by the Stamp Valuation Authority needs to be taken as the Sale Consideration, if such guideline value is more than the actual sale consideration received or receivable.

Further, there are certain other instances of special charge where the sale consideration has been defined under the Act.

Further, they are certain other instances of special charge where the sale consideration has been defined under the Act.

What is Expenses Incurred for Transfer?

This represents Expenses incurred wholly and exclusively for the purpose of transfer of the Capital Asset.

Such Expenses incurred for Transfer is eligible for deduction. For Ex: Brokerage

However the "Securities Transaction Tax" (STT) paid for the purpose of transfer of shares is not eligible for deduction.

What is cost of acquisition?

It represents the actual cost incurred for acquisition of the Capital asset.

In the following cases the cost of acquisition is 'Cost to the Previous Owner'

S.No	Modes of Acquisition	Sec. Ref.	Cost of Acquisition
1	Distribution of capital assets on the total or partial partition of HUF, or throwing an asset of the member of HUF into HUF.	49(1)(i)	Cost to the Previous Owner
2	Succession, Inheritance or Devolution	49(1)(iii)(a)	Cost to the Previous Owner
3	Transfer of a capital asset under a gift or will or an irrevocable trust	49(1)(ii) & 49(1)(iii)(d)	Cost to the Previous Owner

What is Cost to previous owner?

The cost at which the asset was purchased by the previous owner.

If it is not capable of determination, then it is the Fair Market Value of the Asset on the date on which the capital asset became the property of the previous owner.

What is Fair Market Value?

"Fair Market Value" in relation to a capital asset, has been defined under section 2(22B), to mean

It is the price that the capital asset would fetch on sale in the open market on relevant date; and

where the price referred to in sub-clause (i) is not ascertainable, such price as may be determined in accordance with the rules made under this Act.

What is Cost of Improvement?

Cost of Improvement is defined as given below

In relation to	Cost of Improvement
Goodwill of a business or a right to manufacture, produce or process any article or thing or right to carry on any business.	Nil
Capital asset, which became the property of the previous owner or assessee before the 01.04.1981.	All expenditure incurred in making any additions or alterations to the capital asset on or after the said date (01.04.1981) by the previous owner or the assessee.
In any other case	All expenditure of a capital nature incurred in making any additions or alterations by the assessee after it became his property or by the previous owner.

What is Indexed Cost of Acquisition?

Indexed cost of acquisition is calculated as under: -

Cost of acquisition or FMV as on 1-4-1981 at the option of the assessee
---------------------------------------------
Cost Inflation Index number of the previous year in which the asset was first held by the assessee or 01.04.1981 whichever is later.

Cost Inflation Index for the year in which the asset is transferred.

What is Indexed Cost of Improvement?

Indexed cost of Improvement is calculated as under: -

Cost of Improvement
---------------------------------------------
Cost Inflation Index number of the previous year in improvement was made to the asset.

Cost Inflation Index for the year in which the asset is transferred.

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Long Term Capital Gain Tax Calculation Cost Inflation Index number In India

Cost Inflation Index number: -

Financial Year	Index Number
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
1999-2000	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

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