It is an index used to calculate the notional increase in the value of an asset due to inflation. Therefore, the CII value cannot be used to arrive at LTCG/LTCL on equity mutual funds as the amount that exceeds Rs 1 lakh per fiscal is taxed at a flat rate of 10 per cent without indexation benefit.
What is long-term capital gain without indexation?
The Long-term capital gains (LTCG) over Rs 1 lakh on listed equity shares per financial year is taxable at the rate of 10% without the benefit of indexation.
What is long-term capital gain with example?
Example: Manya bought a house in July 2004 for Rs 50 lakh, and the full value of consideration received in FY 2016-17 is Rs 1.8 crore. Since this property has been held for over 3 years, this would be a long-term capital asset. The cost price is adjusted for inflation and indexed cost of acquisition is taken.
How is long term capital gain index calculated?
Long-term capital gain index calculation is done by using the latest Cost inflation index prepared by the Government of India. It helps to calculate the index cost for capital gain. In other words – To calculate the long-term capital gains, individuals need to find out the indexed cost of an asset in question.
How does indexation benefit affect long term capital gains?
Indexation benefit only applies if your asset qualifies for long term capital gains tax post indexation. Gross Long Term Capital Gain = Fair Market Value or Sale Price (–) Expense on Transfer (–) Index Cost of Purchase (–) Index Cost of Improvement”
When is long term capital gains taxed in India?
But w.e.f FY 2018-19 and AY 2019-20, long term capital gains have been made taxable over and above ₹1 Lakh in a financial year U/S 112A of the Income Tax Act. This Long Term Capital Gains Tax on Shares might probably discourage the investors.
How does inflation affect long term capital gains?
…And when it comes to sales of your long term capital gains, your real profit may actually be much lower because of the rise in prices over time. The Income Tax department recognizes this and issues an annual Cost Inflation Index (CII) that allows you to index your cost of acquisition to take inflation into account.
