Indexation v/s non indexation for capital gains

capital gains with indexation works out to 4000000 and without indexation is 5500000 when i enter capital gains u/s 54 as 4000000 a amount of 1500000 is added in the total income though it is not considered while calculating taxes . However if i enter 5500000 in sec 54 the income under capital gains becomes 0. in the first option the surcharge becomes applicable but not in the second option.

please advise as to why this difference is coming and which is the correct figure to be entered.