Capital Gains: formula sheet

Key formulas

Capital gain

Capital gain = FVC − transfer expenses − cost of acquisition − cost of improvement

Short-term gain when the asset is held for the short-term period or less; long-term otherwise. Deduct expenses of transfer only if wholly and exclusively connected with the transfer.

Stamp duty value rule (land or building)

If SDV ≤ 110% × actual consideration, FVC = actual consideration; if SDV > 110% × actual consideration, FVC = SDV

Applies when actual consideration is less than SDV. Do not apply the 110% limit to the whole SDV; once it is crossed, the full SDV is used, not just the excess.

Date of agreement rule

SDV is taken on the date of agreement if the date of agreement differs from the date of registration and the whole or part of the consideration was received on or before the agreement date by account payee cheque or draft, ECS through a bank account, or another prescribed electronic mode

Cash received on the agreement date does not qualify, and neither does a cheque or draft that is not account payee. Otherwise SDV on the date of transfer (registration) is used.

Unquoted shares and undeterminable FVC

If FVC of unquoted shares is less than FMV per the Rules, FVC = FMV; if FVC cannot be determined, FVC = FMV on the transfer date

FMV is computed under the prescribed Income-tax Rules. The question usually gives the FMV.

Indexed cost (only where indexation is allowed)

Indexed cost = Cost × CII of year of transfer ÷ CII of year of acquisition

Use for the same treatment of cost of improvement, with the CII of the year of improvement. Indexation is not available for most transfers now. Use it only where the question or law allows.

Pre-1 April 2001 assets

Cost of acquisition = actual cost or FMV on 1 April 2001, at the assessee's choice; improvements before that date are ignored

For land or building, the FMV chosen cannot exceed the SDV on 1 April 2001.

Period of holding for long term

Listed securities: more than 12 months. Other assets (including land, building, unlisted shares): more than 24 months

Unlisted bonds and debentures transferred on or after 23 July 2024, and market-linked debentures, are deemed short-term capital assets irrespective of the holding period. Confirm the period for the specific asset in the related topic on holding period.

Residential house exemption: who and what

Individual or HUF; long-term gain on transfer of a residential house (income under house property); reinvest in one residential house in India

Buy 1 year before or 2 years after transfer, or construct within 3 years after. Cost of new house counted for exemption is capped at ₹10,00,00,000. Option of two houses applies once in a lifetime if the long-term gain is not more than ₹2,00,00,000.

Residential house exemption: amount

Exemption = lower of (capital gain, cost of new house capped at ₹10 crore)

Taxable gain = capital gain − exemption.

Exemption on other long-term asset (not a residential house)

Exemption = Cost of new house × Capital gain ÷ Net consideration; full gain exempt if cost of new house ≥ net consideration

Individual or HUF. On the date of transfer you must not own more than one residential house other than the new house. Do not buy another residential house within 2 years, or construct one within 3 years, after transfer. Otherwise the exempted gain becomes taxable. Cost of new house is capped at ₹10 crore.

Lock-in on new house

Transfer within 3 years → cost of new house reduced by exemption claimed; gain is short-term if the new house was held for 24 months or less, long-term if held for more than 24 months

For exemption on the house sold, the reduction applies in computing gain on the new house. The gain is short-term or long-term by the 24-month holding test, so a new house sold after 24 months but within 3 years gives a long-term gain on the reduced cost. For exemption on other assets, the exempted gain is taxed as long-term gain of the year of transfer of the new house.

Agricultural land exemption

Urban agricultural land used for agriculture by the individual or his parent, or by the HUF, for 2 years before transfer; buy other agricultural land within 2 years after transfer

Available only to an individual or HUF (parent's use counts for an individual). Applies to both short-term and long-term gain. Exemption = lower of gain and cost of new land. If the new land is not bought before the due date of the return, deposit the unused amount in CGAS before that date. Lock-in is 3 years: if transferred earlier, cost of new land is reduced by exemption claimed.

Specified bond exemption

Long-term gain on land or building or both; invest in notified bonds within 6 months after transfer; exemption = lower of gain and amount invested

Any assessee. Investment is capped at ₹50 lakh in the tax year of transfer and the next year taken together. Lock-in is 5 years. A loan or advance against the bonds is treated as conversion into money. If you transfer the bonds or convert them into money earlier, the exempted gain is taxed as long-term capital gain of the year in which the bonds are transferred or converted into money.

Capital Gains Account Scheme

Deposit unused amount before the due date of return; withdraw only for the specified purpose

Amount not used within the time allowed is taxable as capital gain of the tax year in which the allowed period ends.

Long-term holding period for immovable property

Held for more than 24 months

Residential house and land or building must meet this to be long-term. For agricultural land exemption, short-term gain also qualifies.

Quick revision

• Follow the order: asset, transfer, value, cost, holding period, exemption, set-off, rate.
• Check the asset is a capital asset and not on the excluded list before computing anything.
• Confirm that a transfer actually happened in the tax year, including any deemed transfer.
• Holding period decides short-term or long-term, so verify it before choosing the rate.
• Deduct transfer expenses from sale value, and add improvement cost to cost of acquisition where allowed.
• In special cases, check whose cost and whose holding period you must use.
• For every exemption, note the time limit, the amount to reinvest and the lock-in period.
• Failure to meet exemption conditions makes the gain taxable in a later year.
• Capital loss set-off follows its own rules, so do not treat it like other losses.
• Apply rates exactly as stated in the Income-tax Act, 2025 as amended by the Finance Act, 2026.
• Check residential status when a non-resident or cross-border transfer is involved.
• State your answer in provision, facts and conclusion form.

Common mistakes

• Taking SDV as FVC whenever it is higher than the actual price. Fix: Compute SDV ÷ actual price. If it is 110% or less, use the actual price. If it is more, use the whole SDV.
• Using SDV on the registration date when an advance was paid earlier by cheque. Fix: Check whether the agreement date differs from the registration date and whether any part was received on or before the agreement date by account payee cheque or draft, ECS through a bank account, or another prescribed electronic mode. If yes, use SDV on the agreement date.
• Claiming the exemption on any gain when the exemption needs long-term gain. Fix: Always test the holding period first. Only the agricultural land exemption covers short-term gain.
• Using cost of the new house instead of net consideration when applying the exemption for other long-term assets. Fix: For other long-term assets, the formula is cost of new house × gain ÷ net consideration. For a house sold, compare the gain with the cost.

Exam tips

• For any land or building sale, write the SDV ÷ price check as a visible step. Examiners give marks for it even if the arithmetic slips later.
• Read dates carefully in case scenarios. They decide short or long term, the agreement-date rule and whether indexation or pre-2001 rules apply.
• Write cost of improvement and transfer expenses as separate lines. Do not add them into one figure.
• Do not state indexation as available unless the question gives CII values or the conditions fit. State the law in one line before using it.
• In MCQs on this topic, compute FVC first. Wrong options are usually built from using the actual price or the wrong-date SDV.
• In MCQs, read the assessee first. Companies and firms cannot claim the house exemptions, but they can claim the specified bond exemption.
• Write the window and lock-in in numbers every time: 1 and 2 years, 3 years, 6 months, 5 years. Examiners award marks for the condition.
• Show the formula before computing for other long-term assets. A wrong answer with a right formula still earns marks.