An online financial tool called a capital gains tax calculator can assist you in figuring out how much tax you will have to pay when selling or disposing of capital assets like stocks, ULIP funds, real estate, or investments. Considering variables like purchase and sale prices, holding periods, and applicable tax rates, this tool streamlines calculating capital gains taxes. This is a crucial tool for precise and effective tax preparation and adherence.
Among other assets, this tool is especially helpful for equities, bonds, real estate, and precious metals.
What is Capital Gain Tax?
An ‘income from capital gains’ refers to any profit or gain realized from selling a 'capital asset.' These capital gains are subject to capital gains tax in the year the capital asset is transferred. There are two categories of capital gains: short-term (STCG) and long-term (LTCG).
A residential property is one of the most sought-after investments, mainly because you get to own a house. Some investors, however, might do so to make money when they sell the property later on. It is significant to remember that, for income tax purposes, real estate is considered a capital asset. Any profit or loss realized from the sale of real estate may be subject to taxation under the 'Capital Gains' heading. Similarly, selling various capital assets can result in profits or losses.
How do Capital Gains Calculators Work?
A capital gains tax calculator uses the following formula to determine capital gains tax (CGT):
Capital Gains Tax Rate (CGT) = (Purchase Price - Selling Price)
Within this formula:
Selling Price: The money you got when you sold the item.
Purchase Price: The sum paid when the asset was first acquired.
Capital Gains Tax Rate: The tax rate that applies to the capital gain, which varies depending on the asset type and your income level, among other things.
Types of Capital Gain Tax?
There are two categories of capital gain tax:
1. Short-Term Capital Gains Tax: A short-term asset is any asset held for less than three years, which for immovable properties is 24 months. The proceeds from the sale of such an asset would be subject to short-term capital gain taxation.
2. Long Term Capital Gain: A long-term asset is any asset owned for more than three years. Gains from the sale of such an asset are taxable as long-term capital gains and subject to taxation.
Assets such as zero-coupon bonds, preference shares, stocks, UTI units, securities, and equity-based mutual funds are also regarded as long-term capital assets if held for over a year.
What are Capital Assets?
Among the various types of capital assets are land, buildings, houses, cars, machinery, jewelry, patents, trademarks, and leasehold rights. This covers owning interests in or ties to an Indian business. It encompasses all other legal rights as well as the rights of administration and control.
The following items do not fit under the capital asset category:
a. Any inventory, supplies, or raw materials stored for a trade or professional purpose
b. Personal items kept for one's use, such as clothing and furniture
c. India's rural (*) agricultural land
d. Central government-issued 6 1⁄2% gold bonds (1977), 7% gold bonds (1980), or National Defence gold bonds (1980).
e. 1991's special bearer bonds
f. Gold Monetization Scheme, 2015-issued deposit certificates or bonds issued under the 1999 Gold Deposit Scheme
* The definition of a rural area (as of AY 2014–15) – A rural area is any place with 10,000 or more people that is not under the control of a municipality or cantonment authority. Furthermore, it must not fall under the parameters listed below.
| Distance (to be measured by air) |
Population (as per the latest census). |
| 2 kilometers from the municipality's or cantonment board's local limit |
If the municipality or cantonment board has a population of more than 10,000 but not more than one lakh |
| 6 kilometers from the municipality's or cantonment board's local limit |
If the municipality or cantonment board has a population of more than one lakh but not more than ten lakh |
| 8 kilometers from the cantonment board or municipality's local boundary |
If the municipality or cantonment board has a population of greater than 10 lakh |
Distance (to be measured by air) Population (as per the latest census).
2 kilometers from the municipality's or cantonment board's local limit If the municipality or cantonment board has a population of more than 10,000 but not more than one lakh
6 kilometers from the municipality's or cantonment board's local limit If the municipality or cantonment board has a population of more than one lakh but not more than ten lakh
8 kilometers from the cantonment board or municipality's local boundary If the municipality or cantonment board has a population of greater than 10 lakh
Types of Capital Assets?
In India, capital assets are categorized into short-term and long-term based on their holding period. These include tangible assets like property and machinery and intangible assets such as patents and trademarks. Understanding these classifications is essential for understanding the tax implications of gains from their sale.
1. STCA (Short-Term Capital Asset)
A short-term capital asset is held for less than three years.
The requirement for immovable properties from FY 2017–18, including land, buildings, and houses, is 24 months. For example, any income received upon selling real estate after 24 months of ownership will be recognised as a long-term capital gain if the sale occurs after March 31, 2017.
Transportable items, such as jewelry and debt-oriented mutual funds, are not covered by the 24-month term that was previously specified.
When owned for less than a year, they are classified as short-term capital assets. This policy is in effect if the transfer date falls on or after July 10, 2014, regardless of the purchase date. The following are the assets:
Preference or equity shares of a business that is listed on an established Indian stock exchange
Securities listed on an approved stock market in India, such as bonds, debentures, government securities, etc.
UTI units, whether or not they are quoted
Mutual fund units focused on equities, whether or not they are quoted
Zero coupon bonds, with or without a quotation
2. LTCA (Long-Term Capital Asset)
A long-term capital asset has been owned for more than three years. As previously stated, if it is retained for more than 36 months, it will be categorised as such.
If the owner has owned a capital asset for more than 24 months, such as land, a building, or a house, it is deemed a long-term asset (effective FY 2017–18).
On the other hand, assets below the list held for more than a year are regarded as long-term capital assets:
Preference or equity shares of a business that is listed on an established Indian stock exchange
Securities listed on an approved stock market in India, such as bonds, debentures, government securities, etc.
UTI units, whether or not they are quoted
Mutual fund units focused on equities, whether or not they are quoted
Zero coupon bonds, with or without a quotation
Tax Rate on Long-Term Capital Gain and Short-Term Capital Gain
According to Income Tax Act Section 80C:
If the investor chooses to sell it within a year, the short-term capital gains will be subject to a 15% tax.
10% capital gains tax on long-term mutual funds would be levied on profits over Rs. 1 lakh from shares and funds with an emphasis on equity.
The computation of India's short- and long-term capital gains taxes is displayed in the table below.
| Type of Tax |
Condition |
Applicable Tax |
| Long-term Capital Gains Tax |
Sale of Equity shares Sale of units of equity-oriented mutual fund |
10% over and above Rs 1 lakh |
|
Others |
20% |
| Short-term Capital Gains Tax |
When Securities Transaction Tax isn't applicable |
Normal Tax Slab Rates |
|
When STT is applicable |
15% |
Key Terms For Calculating Capital Gain Tax
To calculate capital gain tax in India, one must be familiar with several terms essential to determining the amount of tax due when selling an asset. The following are the keywords you should be aware of:
Capital Asset
Short-Term Capital Asset
Long-Term Capital Asset
Cost of Acquisition
Cost of Improvement
Sale Consideration
Indexed Cost of Acquisition and Improvement
Short-Term Capital Gains (STCG)
Long-Term Capital Gains (LTCG)
Exemptions and Deductions
How to Compute Short-Term Capital Gains?
Computing short-term capital gains in India involves understanding the sale of assets within 36 months of purchase. Calculate the difference below:
Step 1: Begin by taking into account the entire worth
Step 2: Subtract these amounts:
Costs incurred totally and completely about this transfer
Acquisition Cost
Improvement's cost
Step 3: This sum represents a brief capital gain.
How to Compute Long-term Capital Gains?
Calculating long-term capital gains in India involves determining the profit from the sale of a capital asset held for more than 36 months, adjusting for inflation using the Cost Inflation Index (CII), and applying the applicable tax rate.
Step 1: Begin by taking into account the entire worth
Step 2: Subtract these amounts:
Costs incurred totally and completely about this transfer
Acquiring cost index
Cost of improvement index
Step 3: Subtract the exemptions allowed by sections 54, 54EC, 54F, and 54B from this total.
Capital Gains Tax Calculator Benefits
You can profit from a capital gains tax calculator in the following ways:
Precision - Guarantees accurate computations, lowering the possibility of mistakes in tax reporting.
Saving Time - Fast and effective, saving you time compared to computations done by hand.
Tax Guidance - Assists you in planning and making wise financial decisions.
Compliance - Guarantees that tax rules and regulations are followed.
Analysis of Investments - Enables you to assess how different investment options will affect your taxes.
Documents - Keeps a record of previous transactions for future use.
Economy of Cost - Frequently offered online for free, saving costs.
Tranquillity of mind - Gives assurance and clarity while handling capital gains taxes.
