CA Intermediate · Taxation

Capital Gains: formula sheet

Full chapter guide

Key formulas

Charging rule: Capital gain arises only if: capital asset exists + transfer takes place; If the asset is excluded or the event is not a transfer, there is no capital gain under this head.
Capital asset (general): Capital asset = property of any kind held by the assessee, connected with business or not; The wide opening words include both business and personal holdings. The exclusions are then removed from it.
Excluded items: Stock-in-trade, consumables and raw materials for business; personal effects (other than jewellery and art); rural agricultural land in India; specified gold bonds and deposit certificates; Jewellery, archaeological collections, drawings, paintings, sculptures and works of art are capital assets even when held for personal use, unless they are held as stock-in-trade for business.
Urban agricultural land test: Agricultural land is a capital asset if it is (a) within the limits of a municipality or cantonment board with population of 10,000 or more, or (b) within an aerial distance from the limits of a municipality or cantonment board with population of more than 10,000: 2 km if population is more than 10,000 but not more than 1 lakh; 6 km if more than 1 lakh but not more than 10 lakh; 8 km if more than 10 lakh; Population is as per the last preceding census of which the relevant figures have been published before the first day of the tax year. Distance is measured aerially. The distance test applies only to a municipality with population above 10,000; one with exactly 10,000 has no distance band. Land outside these limits is rural and not a capital asset.
Transfer (inclusive): Transfer = sale + exchange + relinquishment + extinguishment of rights + compulsory acquisition + conversion into stock-in-trade + other deemed cases; Conversion into stock-in-trade is taxed in the tax year in which the stock is sold, using fair market value on the date of conversion as the full value of consideration. A mere mortgage or pledge does not extinguish ownership and is not a transfer.
Not a transfer: Distribution of assets on HUF partition; transfer under a gift or will or an irrevocable trust (gratuitous transfers only); holding company to its subsidiary (the transferee must be an Indian company wholly owned by the holding company); subsidiary to holding company (the transferor subsidiary must be wholly owned by the holding company and the transferee holding company must be an Indian company); amalgamation or demerger (conditions met); and similar listed cases; In the holding and subsidiary cases the asset transferred must be a capital asset. A transfer for consideration is not covered by the gift exclusion, and shares allotted to employees under an employee stock option scheme are not covered either. Cost and holding period of the previous owner carry over to the new owner in gift and similar cases.
Period of holding: Period of holding = Date of transfer − Date of acquisition (start date as per special rules); Count in months and days. Use the exact dates, not just the months.
12-month group: Long-term if held for more than 12 months; Applies to: securities (other than units) listed on a recognised stock exchange in India (including listed units of a business trust), units of UTI, units of equity-oriented mutual funds and zero coupon bonds. Unlisted bonds and debentures are not in this group; they are deemed short-term for transfers on or after 23 July 2024.
24-month group: Long-term if held for more than 24 months; Applies to all other capital assets, including land, buildings, unlisted shares, gold and jewellery.
Short-term asset: Short-term if not long-term (held for 12 months or less, or 24 months or less, as applicable); Exactly 12 or exactly 24 months is still short-term.
Previous owner's period included (specified cases only): Holding period = Previous owner's period + Your own period; Applies where you get the asset in a transaction not regarded as a transfer, in the specified cases only: gift, will, inheritance, partition of HUF, certain amalgamations, and transfer by a holding company to its Indian wholly owned subsidiary company (the subsidiary adds the holding company's period). It does not apply to every case where cost is taken from the previous owner.
Bonus and right shares: Bonus shares: from date of allotment. Right shares subscribed: from date of allotment. Shares subscribed on a renounced right (by the renouncee): from date of allotment. The renounced right itself: from date of the offer to the original holder.; The original shares keep their own date of acquisition. Each lot is classified separately. The renouncee's shares are counted from allotment, while the holding period of the renounced right itself is counted from the date of the offer to the original holder.
Demerger: Shares of resulting company: period includes holding of shares in demerged company; The shareholder's original holding period carries over.
Deemed short-term assets: Certain assets are short-term whatever the period held; Examples are units of specified mutual funds (funds investing more than 65% of their proceeds in debt and money market instruments, as defined in the Income-tax Act, 2025) and market linked debentures. Unlisted bonds and debentures are also treated this way for transfers on or after 23 July 2024. Check the latest rule before answering.
Basic capital gain: Capital gain = Full value of consideration − Expenses on transfer − Cost of acquisition − Cost of improvement; For long-term assets where indexation is allowed, use indexed cost and indexed improvement cost instead.
Indexed cost of acquisition: Indexed cost = Cost of acquisition × CII of year of transfer ÷ CII of year of acquisition (or of 2001-02 if acquired earlier and the 1 April 2001 option applies); Use only where indexation is permitted, for example land or building acquired before 23 July 2024 by a resident individual or HUF who opts for 20% with indexation.
Indexed cost of improvement: Indexed improvement = Cost of improvement × CII of year of transfer ÷ CII of year in which the improvement was made; Use the improvement year's CII, not the acquisition year's. Improvements made before 1 April 2001 are ignored.
Gifted, inherited or will asset: Cost = Cost to previous owner (plus previous owner's improvement cost); Holding period = previous owner's period + your period; Applies to gift, will, succession, inheritance and certain transfers not treated as a transfer. The cost is the previous owner's cost however he acquired the asset, worked out under the normal rules, including the 1 April 2001 FMV option. The cost of acquiring the asset by gift itself is not counted.
Asset acquired before 1 April 2001: Cost = Actual cost or FMV on 1 April 2001, at your option; For land or building the FMV chosen cannot exceed the stamp duty value on that date, if one exists.
Bonus shares: Allotted after 1 April 2001: cost = nil, holding period from date of allotment; If allotted before 1 April 2001, cost is the FMV on 1 April 2001.
Rights shares and renunciation: Rights shares: cost = price paid; holding from date of allotment. Renounced rights entitlement: cost = nil; The amount received for renouncing is a short-term capital gain.
Block of depreciable assets: Short-term gain = Sale proceeds − Expenses on transfer − (Opening WDV of block + additions in the year), when this is positive. If the block ceases to exist and (Opening WDV + additions) exceeds net proceeds, the difference is a short-term capital loss.; If the block continues and proceeds are lower than the block value, there is no capital gain or loss. The block is simply reduced for depreciation.
Short-term gain on listed equity (STT paid): Tax = 20% × short-term gain; Applies to listed equity shares, equity-oriented fund units and business trust units where STT is paid on transfer.
Long-term gain on listed equity (STT paid): Tax = 12.5% × (total long-term gain of the year − ₹1,25,000); The ₹1,25,000 is one threshold for the whole year across all such gains, not per transaction. If the gain is below it, tax is nil. No indexation.
Other long-term gains: Tax = 12.5% × long-term gain (no indexation); For example unlisted shares and land or buildings. The ₹1,25,000 threshold does not apply. Check the transitional option for land and buildings acquired before 23 July 2024 if the question gives it.
Other short-term gains: Added to total income, taxed at slab rates; For example short-term gain on shares sold without STT, or on gold.
Grandfathering for assets acquired before 1 February 2018: Cost = higher of (actual cost, lower of (fair market value on 31 January 2018, full value of consideration)); Applies to a long-term capital asset that is an equity share, a unit of an equity-oriented fund or a unit of a business trust, acquired before 1 February 2018 and covered by the concessional long-term rate. It cannot create a loss.
Basic exemption adjustment: Shortfall = basic exemption limit − other income; deduct shortfall from the special-rate gains, then apply rates; Only for a resident individual or HUF. Adjust the shortfall first against the gain taxed at the higher rate (the 20% short-term gain), then against the 12.5% gain, so the assessee gets the maximum benefit. Show each step clearly.
Total tax payable: (Tax on normal income + tax on each special-rate gain) + surcharge if any, then + 4% health and education cess; STT is never deducted from the gain.
Eligible asset transferred: Long-term capital asset being land or building or both; Gain on any other asset (shares, gold, etc.) does not qualify under this section.
Time limit for investment: Investment within 6 months after the date of transfer; Count from the date of transfer, not from the end of the tax year. The window can cross into the next tax year.
Investment cap: Investment in tax year of transfer + investment in next tax year ≤ ₹50,00,000; Amounts above ₹50 lakh in total do not earn exemption, even if the gain is larger.
Exemption amount: Exemption = lower of (long-term capital gain, eligible amount invested); Eligible amount invested means the investment within the time limit, capped at ₹50,00,000.
Taxable gain after exemption: Taxable LTCG = Long-term capital gain − Exemption; The balance is taxed at the applicable long-term capital gains rate.
Lock-in: 5 years from the date of acquiring the bonds; No transfer, conversion into money, or loan or advance against the bonds during this period.
Withdrawal consequence: Exempted gain = deemed LTCG of the tax year of transfer, conversion or loan; Taxed in the year of breach, not in the original year.
Exemption on sale of residential house: Exempt = lower of (LTCG, cost of new house); taxable LTCG = LTCG − exempt; Individual or HUF only. Cost of new house counts only up to ₹10 crore. The amount invested includes amount deposited in the capital gains account.
Time limit for new house (both house reliefs): Purchase: 1 year before to 2 years after transfer; Construction: within 3 years after transfer; Same windows for both house reliefs. Construction time is counted from the date of transfer, not from the start of work. The same periods (2 years for purchase, 3 years for construction, from transfer) are the time limit for using money kept in the capital gains account.
Exemption on sale of other long-term asset: Exempt = LTCG × (Cost of new house ÷ Net consideration), if cost of new house < net consideration; otherwise full LTCG; Net consideration is sale price less expenses on transfer. Full exemption needs the net consideration to be reinvested; reinvesting less gives a proportionate exemption. The amount must actually be invested before the due date of the return, or deposited in the capital gains account by then; otherwise no exemption on that portion. Cost of new house counts only up to ₹10 crore here too. Old asset must not be a residential house. Individual or HUF only.
Condition on assessee's holdings for other-asset relief: On the date of transfer, assessee owns no more than one residential house other than the new house; If he owns more, this exemption is not available. Do not apply it blindly to every sale of shares.
Lock-in of new asset: New asset not transferred within 3 years of purchase or construction; The 3 years run from the date of acquisition of the new asset. If transferred earlier under the house-sale relief, cost of new house is reduced by the exemption already claimed, and gain on it is computed on that reduced cost. The nature of that gain depends on the holding period of the new house (under 24 months is short-term). Under the other-asset relief, the exempted gain becomes LTCG of the year in which the new house is transferred, or in which the other residential house is purchased or constructed. Under the other-asset relief, buying another residential house (other than the new house) within 2 years, or constructing one within 3 years, after the transfer also withdraws the exemption.
Second house option: If LTCG on old house does not exceed ₹2 crore, assessee may invest in two residential houses in India; Applies to the house-sale relief only. The ₹2 crore limit is on the gain on the old house. It is a separate test from the ₹10 crore cap on the cost of the new house, so check both. Available once in a lifetime. Do not assume it for a larger gain.
Exemption on agricultural land: Exempt = lower of (capital gain, cost of new agricultural land); For capital gain, short-term or long-term, on urban agricultural land. Rural agricultural land is not a capital asset. Individual or HUF only. The old land must have been used for agricultural purposes by the individual or his parent (or by the HUF) for at least 2 years before transfer. New land bought within 2 years after transfer and held for 3 years.
Capital gains account scheme: Deposit before due date of return; use within the time limit; unused amount is treated as capital gain of the year in which the time limit expires; Deposit the unutilised amount (not the whole sale price) in an authorised bank account. Exemption is claimed on the amount deposited plus the amount already invested. The time limit runs from the date of transfer: 2 years if the house is purchased, 3 years if it is constructed, and 2 years for agricultural land. The unused amount is taxed in the year that period expires. For the house reliefs it is long-term; for agricultural land its nature follows the original gain.
Deemed consideration for land or building: If SDV ≤ 110% × actual price, full value = actual price. If SDV > 110% × actual price, full value = SDV; Applies when a land or building (or both), held as a capital asset, is transferred for a price below SDV. Once SDV crosses 110%, the whole SDV is used.
Date for SDV: SDV on the date of agreement, if part or full consideration was received by account payee cheque, draft or electronic mode on or before that date; Otherwise SDV on the date of transfer (registration) is used. The agreement date is used only when the payment condition is met.
Valuation Officer reference: Full value = value estimated by the Valuation Officer, but not more than the SDV (the SDV is the ceiling); This is a case-specific reference, not an automatic formula. On the assessee's claim that the SDV exceeds the FMV, where the SDV has not been disputed in appeal before any authority, court or High Court, the Assessing Officer may refer the matter to a Valuation Officer. The full value is then determined on the basis of the Valuation Officer's estimate, subject to the SDV being the ceiling.
Shares other than quoted shares: If price < FMV (as per prescribed rules), full value = FMV; Applies to the seller, for shares not quoted on a recognised stock exchange. The buyer's tax on shares received below FMV is governed by the separate rule for receipts below FMV.
Advance forfeited: Forfeited advance = income from other sources in the year of forfeiture. No deduction from cost of acquisition; Applies where the advance was received in negotiations for transfer of a capital asset and then forfeited.
Capital gain after deemed value: Capital gain = Deemed full value − expenses on transfer − cost of acquisition − cost of improvement; Expenses on transfer such as brokerage are still deducted, but the deemed value replaces the price.

Quick revision

No capital asset or no transfer means no capital gain, so check this first.
Always classify as short-term or long-term from the holding period before choosing the rate.
Listed securities have a shorter holding period for long-term status than most other assets.
Gain = full value of consideration − transfer expenses − cost of acquisition − cost of improvement.
Cost of an asset received by gift or inheritance is generally the cost to the previous owner, and the holding period includes theirs.
STT-paid listed equity has special concessional rates and an annual exemption limit for long-term gains. Take the exact figures from the updated ICAI material.
Most long-term gains are taxed at 12.5% without indexation, but there are specified exceptions and transitional options (for example, the option for land or building acquired before 23 July 2024 for resident individuals and HUFs, and different treatment for some non-resident and foreign-currency cases). Confirm the details in the updated ICAI material.
Bond exemption needs investment in the specified bonds within the time limit, subject to the annual cap.
House property exemptions need a residential house bought or built within the time window, and a lock-in on the new asset.
If the amount reinvested is less than the net consideration or the gain, the exemption is proportionate where the law says so.
A short-term capital loss can be set off against any capital gain (short-term or long-term), while a long-term capital loss can be set off only against long-term capital gains. Neither can be set off against other heads.
Show your working and the heading of every step in written answers to secure step marks.

Common mistakes

Treating all agricultural land as exempt from capital gains. Fix: Only rural agricultural land is excluded. Land within the municipality or distance limits is a capital asset. Always check population and distance.
Treating personal gold jewellery or a painting as a personal effect. Fix: Jewellery, archaeological collections, drawings, paintings, sculptures and works of art are capital assets even if held for personal use.
Treating an asset held for exactly 12 or 24 months as long-term. Fix: Add the limit to the acquisition date. Long-term begins only on a date after that. Exactly 24 months is still short-term.
Using 12 months for all shares. Fix: Ask first whether the share is listed on a recognised stock exchange in India. Unlisted shares need more than 24 months.
Taking the market value on the gift date as the cost of a gifted asset. Fix: For capital gains on sale, the cost is the previous owner's cost. The holding period also includes the previous owner's. Keep the two ideas separate.
Indexing the improvement cost with the acquisition year's CII. Fix: Index each improvement using the CII of the year in which that improvement was made.
Deducting ₹1,25,000 from each sale. Fix: Add all long-term gains on listed equity and equity-oriented funds for the year, then deduct ₹1,25,000 once.
Applying 20% or 12.5% when STT was not paid. Fix: Read the question for STT. If STT was not paid on the transfer, the gain falls outside the concessional regime for listed equity. Short-term gain is then taxed at slab rates. Long-term gain is taxed at 12.5% without the ₹1,25,000 exemption and without indexation.
Applying the exemption to a long-term gain on shares or gold. Fix: Remember that bond investment applies only to long-term gain on land or building or both. Check the asset first.
Investing the whole sale consideration and claiming exemption on it. Fix: Exemption is the lower of the capital gain and the eligible investment. Never exceed the gain.

Exam tips

In theory questions on exclusions, give the list in order: stock-in-trade, personal effects, rural agricultural land, gold bonds. Add the exception for jewellery and art. Examiners give a mark for each point.
For agricultural land problems, write the population and distance test in your working. Many questions are built around the 2 km, 6 km and 8 km thresholds.
For transactions not regarded as a transfer, always check the condition in the facts, such as wholly owned, Indian company or irrevocable trust. Questions often change one fact to flip the answer.
Quote the Act's words in short form, then apply to the facts, then conclude. This provision-facts-conclusion format earns step marks even if the final call is debatable.
MCQs are compulsory and carry no negative marking, so always attempt them. Use the two-gate method to eliminate options quickly.
Write the limit (12 or 24 months) and the two dates before you state the conclusion. Step marks are given for this working.
In MCQs, look for the trap options: exactly 12 months, exactly 24 months, unlisted shares and gifted assets. These are the usual traps.
If a question gives a gift, inheritance or partition, ask yourself immediately whether the previous owner's period is added.