It is computed similar to Short Term Capital Gains

The only difference is that

  1. Instead of COA-
    We take ICOA (Indexed Cost of Acquisition)
  2. Instead of COI
    We take ICOI (Indexed Cost of Improvement)

 

What is Indexation

Price of every item increases every year due to inflation.

This is not taken into account while calculating Cost of Acquisition

Hence, Government has introduced the Concept of Cost Inflation Index so that cost is properly adjusted for inflation.

 

Different Cost Inflation Indexation Factors declared by Government for each year as shown below

Financial Year CII Financial Year CII
Before 1/4/2001 100 2010-11 167
2001-02 100 2011-12 184
2002-03 105 2012-13 200
2003-04 109 2013-14 220
2004-05 113 2014-15 240
2005-06 117 2015-16 254
2006-07 122 2016-17 264
2007-08 129 2017-18 272
2008-09 137 2018-19 280
2009-10 148    

Q4
Suppose Jwellery purchased for Rs 100000 on 10 March 2010. It was sold for Rs 130000 on 20 March 2018

Compute Capital Gain

View Answer

 

Q5

Suppose Mr A Property purchased for Rs 10 lacs on 15 Jan2007. Mr A spent 8 lacs on construction of the house (7 lacs in 2006-07 and 1 lacs in 2007-08).Property was sold for Rs 50 lacs on 20 March 2018.

Suppose Mr A gave 1% commission to Broker on Sale of Property

Compute Capital Gain

CII Index is  
2006-07 122
2007-08 129
2017-18 272
View Answer

Asset Acquired on or before 1/4/2001

There was no Inflation index prior to 1/4/2001.

If Asset purchased before that date or improvement done before that date, we take Fair Market Value as on 1/4/2001.

Q6
Suppose property purchased on 19/05/1977 for Rs 2 lacs

He spent following amount on construction

FY Amt Spent
1999-2000 100000
2003-2004 400000


He sold the property on 10 Dec 2017 for Rs 130 lacs

Fair Market Value as on 1/4/2001  was 7 lacs

CII Index is  
1999-2000 100
2003-2004 109
2017-18 272
View Answer
  1. Income Tax
  2. Income from Capital Gains

About the Author

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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 10 years. He also provides Accounts Tax GST Training in Delhi and Pune.