How to calculate capital gain taxes?

            If you have made capital gains on any financial transactions e.g. on shares, property, you may have to pay tax on these gains. Read on to know which capital gains are taxable in your hands and how to calculate the tax. 

Long-term capital gains (LTCG) and short-term capital gains (STCG) are taxed at different rates as per the income tax laws. Further, there are specified cases where these gains are taxed at special rates. 

General rates 
LTCG: It is taxed at 20 per cent (plus education cess @ 3 percent for FY 2017-18/Ay 2018-19 and 4% for FY2018-19/AY 2019-20). You cannot avail any deductions under Chapter VI-A (such as deductions under Section 80C, 80D, etc.) from these gains. If you have invested/contributed any amount in tax-saving instruments, then you must claim that amount from your gross income excluding LTCG. Further, in case your taxable income after availing all the  .. 

For example: You have a gross total income of Rs 3,00,000 (from sources like salary, business, interest income, etc.) and you have invested Rs 1,20,000 in tax-saving instruments. Then your total taxable income after claiming deductions would be Rs 1,80,000 which is less than the exemption limit in tax slab (i.e., Rs 2,50,000). You also have LTCG of Rs 10,00,000 from the sale of gold which are to be taxed @ 20% (plus education cess). 

STCG: It is taxed at normal slab rates of an individual. We need to add the same to our gross total income and pay accordingly after claiming deductions. 

Special rates 
LTCG: Sale of equity shares and equity-oriented mutual funds, held for more than one year, on or after April 1, 2018 will be chargeable to tax at 10 percent plus cess @ 4 percent. Budget 2018 has increased cess from3 percent to 4 percent. Therefore, cess of 4 % from 01/04/2018....

No indexation benefit will be allowed on such transactions. However, capital gains up to Rs 1 lakh in a single financial year will be exempt from tax w.e.f FY2018-19. 

Further, capital gains accrued till March 31, 2018 will remain exempt from tax. Therefore, while filing ITR for FY 2017-18, you will not have to pay tax on the capital gains accrued from the sale of equity shares and equity mutual funds. 

If you are an NRI, then you have to pay tax @ 10% without giving effect to Indexation on your LTCG, instead of paying tax @ 20% after giving effect to indexation. This rate is applicable only if the LTCG arise from sale/transfer of unlisted securities (like shares of a private company). 

STCG: Similarly, STCG from the sale of equity shares or equity oriented mutual funds on which STT is charged on sale transaction are taxed at 15 percent (plus education cess) instead of your normal slab rates. So if you are an individual who comes in the 10% tax bracket, then you would have to pay more on these gains, but if you fall in the 20% or 30% tax bracket, then this special rate of 15% is beneficial for you. 
Here also, cess has been increased from 3%(for FY 2017-18) to 4%( for FY 2018-19). 

Also, you cannot avail any deductions under Chapter VI-A (like deduction under Section 80C, 80D, etc.) from these gains. Further, the relaxation of reducing your capital gains amount in case your total taxable income is less than the minimum exemption limit of Rs 2,50,000 is also available in this in the same manner as explained above (in case of general rates - LTCG). 


Here one must remember that, NRIs do not have the option to adjust their capital gains either long-term or short term against the basic exemption limit of Rs 2.5 lakh. 

Option to the taxpayer 
As an individual, you have an option to pay tax @ 10% on your LTCG, instead of 20% with some minor changes in computation methodology. 

Calculate your LTCG without giving effect to indexation. This means that instead of deducting indexed cost of acquisition (ICOA) and indexed cost of improvement (ICOI), you need to deduct the COA and COI from the sale value. 
Now compute tax @ 10% on the newly computed gains. In case the tax computed @ 20% on LTCG (with indexation) is more than the tax computed @ 10% on LTCG (without indexation), then you can pay the latter amount as you LTCG tax. 

This option is only available to a resident individual. Further, this option can only be availed if the LTCG is from the sale of listed bonds, units of a debt mutual funds, non equity ETFs or from the maturity of a zero coupon bond. 

Exemption from Capital Gains 
There are certain exemptions available under section 54 of the Income Tax Act which helps the assessee reduce his capital gains subject to tax. 

For example: Buying a new residential house could exempt your capital gains earned from sale of the old house. Also, investment in certain bonds notified by the government (NHAI bonds) could reduce your capital gains up to Rs 50 lakh.