How to calculate long term capital gain

Refer: https://www.bankbazaar.com/tax/how-calculate-capital-gains.

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Sir,

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Patwari certificate............ or valuation report by government approved valuer (CA/Lawyer approved by ITD)

How to Calculate Long-Term Capital Gains?

1. Start with the full value of consideration
2. Deduct the following:
   • Expenditure incurred wholly and exclusively in connection with such transfer
   • Indexed cost of acquisition
   • Indexed cost of improvement
3. From this resulting number, deduct exemptions provided under sections 54, 54EC, 54F, and 54B
4. This amount is a long-term capital gain

Long-term capital gain = Full value consideration Less expenses incurred exclusively for such transfer Less indexed cost of acquisition Less indexed cost of improvement Less 

Expenses that Can be Deducted From Full Value for Consideration

Expenses from sale proceeds from a capital asset, that wholly and directly relate to the sale or transfer of the capital asset are allowed to be deducted. These are the expenses which are necessary for the transfer to take place.

In the case of sale of house property, these expenses are deductible from the total sale price:

• Brokerage or commission paid for securing a purchaser
• Cost of stamp papers
• Travelling expenses in connection with transfer – these may be incurred after the transfer has been affected.
• Where property has been inherited, expenditure incurred with respect to procedures associated with the will and inheritance, obtaining succession certificate, costs of the executor, may also be allowed in some cases.

Indexed Cost of Acquisition/Improvement

Indexed cost of acquisition is calculated as:

Cost of acquisition / Cost inflation index (CII) for the year in which the asset was first held by the seller, or 1981-82, whichever is later X cost inflation index for the year in which the asset is transferred.

Indexed cost of improvement is calculated as:

Indexed cost of acquisition = Cost of acquisition * Cost inflation Index (CII) of the year in which the asset is transferred

Cost inflation index (CII) of the year in which asset was first held by the seller or 1981-82 whichever is later

Indexed cost of improvement = Cost of improvement *Cost inflation index of the year in which the asset is transferred

Cost inflation index of the year in which improvement took place

(Note: From FY 2017-18, the base year of 2001-02 will be considered instead of 1981-82)

Why is cost of acquisition and improvement indexed? Indexation, done by applying CII (cost inflation index), is made to adjust for inflation over the years. This increases one’s cost base and lowers the capital gains.

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