What Is Capital Gains Tax?
Capital gain is the profit you earn when you transfer (sell, exchange, or relinquish) a capital asset — such as land, building, flat, shares, mutual funds, gold, jewellery, bonds, or intellectual property. This gain is taxable under the head "Income from Capital Gains" as per Sections 45 to 55A of the Income Tax Act, 1961.
Capital gains are classified into two categories based on the holding period of the asset:
📉 Short-Term Capital Gain (STCG)
Gain arising from transfer of an asset held for less than the specified period. Generally taxed at higher rates (slab rates or 20% for listed equity).
📈 Long-Term Capital Gain (LTCG)
Gain arising from transfer of an asset held beyond the specified period. Taxed at concessional rate of 12.5% (post 23 July 2024) and eligible for exemptions under Sections 54, 54F, 54EC, 54B.
Basic Capital Gains Formula
🧮 Computation Structure
Full Value of Consideration (Sale Price)
(–) Expenses on Transfer (brokerage, stamp duty, legal fees)
= Net Sale Consideration
(–) Cost of Acquisition (or Indexed Cost)
(–) Cost of Improvement (or Indexed Cost)
= Gross Capital Gain
(–) Exemptions (Sec 54 / 54F / 54EC / 54B)
= Taxable Capital Gain
Errors in computing indexed cost, forgetting improvement costs, missing exemption deadlines, or wrongly classifying holding period can result in tax notices, interest, and penalties — or in paying far more tax than legally required.
Taxvio, based in Khatauli (Muzaffarnagar, UP), provides accurate capital gains computation, exemption planning, and ITR-2 filing for property sellers, stock investors, and asset sellers across Uttar Pradesh, Noida, Delhi NCR, and pan-India.
Holding Period — Short-Term vs Long-Term
From 23 July 2024, holding periods were simplified to only two buckets — 12 months (listed securities) and 24 months (all other assets).
| Asset Type | LTCG Holding Period | STCG Rate | LTCG Rate |
|---|---|---|---|
| Listed Equity Shares (STT paid) | > 12 months | 20% (Sec 111A) | 12.5% above ₹1.25 lakh (Sec 112A) |
| Equity Mutual Funds (STT paid) | > 12 months | 20% (Sec 111A) | 12.5% above ₹1.25 lakh (Sec 112A) |
| Listed Bonds / Debentures | > 12 months | Slab rate | 12.5% (no indexation) |
| Immovable Property (Land / Building) | > 24 months | Slab rate | 12.5% (or 20% with indexation — see note) |
| Unlisted Shares | > 24 months | Slab rate | 12.5% (no indexation) |
| Gold, Jewellery, Silver | > 24 months | Slab rate | 12.5% (no indexation) |
| Debt Mutual Funds (bought after 1 Apr 2023) | Always short-term | Slab rate | Not applicable |
| Foreign Shares / Assets | > 24 months | Slab rate | 12.5% (no indexation) |
⚠️Important: The Grandfathering Option for Property
For land or building acquired before 23 July 2024 and sold thereafter, a resident individual or HUF may choose the lower of:
- →12.5% on capital gain without indexation, OR
- →20% on capital gain with indexation benefit
Taxvio computes both scenarios and recommends the option that gives you the lowest tax outgo. This option is not available to NRIs, companies, LLPs, or firms.
Cost Inflation Index (CII) & Indexation Computation
Indexation adjusts your purchase cost for inflation, reducing your taxable gain. Although indexation was largely withdrawn from 23 July 2024, it remains relevant for the grandfathering option on property and for transfers made before that date.
🧮 Indexed Cost Formula
* For assets purchased before 1 April 2001, you may substitute Fair Market Value as on 1 April 2001 as the cost of acquisition.
📅 Cost Inflation Index (Recent Years, Base 2001-02 = 100)
2015-16
254
2016-17
264
2017-18
272
2018-19
280
2019-20
289
2020-21
301
2021-22
317
2022-23
331
2023-24
348
2024-25
363
2025-26
376
2001-02
100
* CII is notified annually by CBDT. Verify the applicable index for your assessment year before computation.
💡 Worked Example — Property Sale with Both Options
Transaction Details
- • Purchase year: FY 2015-16 (CII 254)
- • Purchase price: ₹30,00,000
- • Sale year: FY 2024-25 (CII 363)
- • Sale price: ₹80,00,000
- • Transfer expenses: ₹1,00,000
Option A: 12.5% WITHOUT Indexation
- Net Sale = ₹79,00,000
- Less Cost = ₹30,00,000
- LTCG = ₹49,00,000
- Tax @12.5% = ₹6,12,500
Option B: 20% WITH Indexation ✅
- Indexed Cost = 30L × 363/254 = ₹42,87,402
- Net Sale = ₹79,00,000
- LTCG = ₹36,12,598
- Tax @20% = ₹7,22,520
✅ Recommendation: Option A (12.5% without indexation) saves ₹1,10,020
The optimal option varies case-by-case. Taxvio computes both for every client and files using the lower-tax option.
Capital Gains Exemptions — Section 54, 54F, 54EC, 54B
These exemptions can reduce your LTCG tax liability to zero if planned correctly and claimed within the statutory timelines.
Section 54 — Sale of Residential House
Reinvest LTCG into another residential house in India
✅ Conditions
- • Asset sold must be a long-term residential house
- • Available to Individuals and HUF only
- • Buy new house 1 year before or 2 years after sale, OR construct within 3 years
- • New house must be in India
- • If LTCG ≤ ₹2 crore, you may buy TWO houses (once in lifetime)
⚠️ Limits & Cautions
- • Maximum exemption capped at ₹10 crore (from AY 2024-25)
- • Only the amount of LTCG reinvested is exempt
- • Unutilised amount must be deposited in Capital Gains Account Scheme before ITR due date
- • New house must not be sold within 3 years, else exemption is reversed
Section 54F — Sale of Any Long-Term Asset (Other Than House)
Reinvest NET SALE CONSIDERATION into a residential house
✅ Conditions
- • Applies to sale of shares, gold, plot of land, etc. (non-residential-house assets)
- • Available to Individuals and HUF only
- • Entire net sale consideration (not just gain) must be reinvested for full exemption
- • Same timeline as Sec 54 (1 year before / 2 years after / 3 years construction)
⚠️ Restrictions
- • Must not own more than ONE residential house (other than the new one) on the date of transfer
- • Maximum exemption capped at ₹10 crore
- • Proportionate exemption if only part of consideration is reinvested
- • Lock-in of 3 years on the new house
🧮 Proportionate Exemption Formula
Section 54EC — Investment in Capital Gain Bonds
Invest LTCG from land/building into NHAI, REC, PFC, IRFC bonds
✅ Key Features
- • Available only for LTCG from land or building
- • Invest within 6 months of the date of transfer
- • Maximum investment: ₹50 lakh per financial year
- • Lock-in period: 5 years
- • Interest approx. 5.25% p.a. (taxable)
- • Available to all assessees including companies and NRIs
⚠️ Cautions
- • ₹50 lakh limit applies across two financial years combined for a single transaction
- • Premature redemption or loan against bonds reverses the exemption
- • Interest income is fully taxable at slab rates
- • 6-month window is strict — no extension permitted
Section 54B — Sale of Agricultural Land
Reinvest gains into new agricultural land
✅ Conditions
- • Land must have been used for agricultural purposes for at least 2 years before transfer
- • Available to Individuals and HUF
- • New agricultural land must be purchased within 2 years of transfer
- • Applies to both STCG and LTCG
⚠️ Note
- • Rural agricultural land is not a capital asset at all — no capital gains tax applies
- • Section 54B is relevant mainly for urban agricultural land
- • New land must not be sold within 3 years
🏛️ Capital Gains Account Scheme (CGAS) — Critical Deadline
If you are unable to reinvest the capital gain before the ITR filing due date (usually 31 July), you MUST deposit the unutilised amount in a Capital Gains Account Scheme account with an authorised bank to preserve your exemption.
Deadline
On or before ITR due date (31 July for non-audit cases)
Where
Any authorised public sector bank branch (Type A savings / Type B term deposit)
Consequence of Missing
Entire exemption is denied — full LTCG becomes taxable in the year of transfer
How Taxvio Computes Your Capital Gains
Transaction Review & Asset Classification
1 dayWe review your sale documents to identify the asset type (property, listed shares, unlisted shares, mutual funds, gold), determine the exact date of acquisition and transfer, and classify the gain as short-term or long-term based on the applicable holding period.
Cost of Acquisition Determination
1-2 daysWe establish the correct cost base — original purchase price, stamp duty and registration charges, brokerage paid, and where applicable, Fair Market Value as on 1 April 2001 (for pre-2001 assets) or 31 January 2018 grandfathered NAV (for listed equity under Section 112A).
Cost of Improvement Capture
1 dayWe compile all capital improvement expenses — construction, additions, major renovations — with supporting bills. Routine repairs and maintenance are excluded. Each improvement is indexed separately based on the year it was incurred (where indexation applies).
Dual Computation (With & Without Indexation)
1 dayFor eligible property transactions, we compute the tax liability under both the 12.5% without-indexation route and the 20% with-indexation route, then recommend the option that legally minimises your tax outgo.
Exemption Eligibility & Planning
2-3 daysWe assess your eligibility under Sections 54, 54F, 54EC and 54B, compute the exact exemption amount, advise on reinvestment timelines, recommend CGAS deposit where reinvestment is pending, and structure the transaction to maximise relief.
Set-Off of Capital Losses
1 dayWe identify current-year and brought-forward capital losses that can be set off against your gains. Short-term losses set off against both STCG and LTCG; long-term losses only against LTCG. Unabsorbed losses are carried forward for 8 assessment years.
Advance Tax & Interest Computation
1 dayCapital gains attract advance tax obligations. We compute the applicable instalment, quantify interest under Sections 234B and 234C, and advise on immediate payment to prevent further interest accrual.
ITR-2 Filing with Schedule CG
2 daysWe prepare and file ITR-2 with complete Schedule CG disclosures — asset-wise breakup, buyer PAN details for property transactions, exemption claims with reinvestment particulars, TDS credit under Section 194-IA, and e-verification.
✅Total Turnaround
7-10 working days from receipt of complete documents to final computation report and ITR filing. Express service available for urgent cases.
Documents Required for Capital Gains Computation
For Property Sale
- ✓Sale deed / registered conveyance deed (with date and consideration)
- ✓Original purchase deed / allotment letter / builder agreement
- ✓Stamp duty and registration receipts (purchase and sale)
- ✓Cost of improvement bills (construction, renovation) with dates
- ✓Brokerage / commission receipts on sale
- ✓Form 16B / TDS certificate under Section 194-IA (1% TDS by buyer)
- ✓Buyer's PAN and address (mandatory for Schedule CG)
- ✓Home loan interest certificate (if claiming under cost)
- ✓Valuation report as on 1 April 2001 (for pre-2001 properties)
For Shares, Mutual Funds & Other Assets
- ✓Broker's capital gains statement (Zerodha, Groww, ICICI Direct, etc.)
- ✓Demat account transaction statement for the financial year
- ✓Contract notes for buy and sell transactions
- ✓Mutual fund capital gains statement (CAMS / KFintech consolidated)
- ✓NAV as on 31 January 2018 (for grandfathering under Section 112A)
- ✓Gold / jewellery purchase invoice and sale bill
- ✓Unlisted share transfer deed and valuation report
- ✓PAN card and Aadhaar card
- ✓Form 26AS and AIS (Annual Information Statement)
Common Capital Gains Computation Mistakes
These errors regularly trigger income tax notices under Section 143(1) or 148 and result in avoidable tax, interest, and penalty.
⚠️Ignoring Section 50C — Stamp Duty Value Rule+
🔍 Why It Happens
- •Property sold below the circle rate / stamp duty value
- •Assuming actual sale consideration is always accepted
- •Not obtaining a valuation report to contest the stamp value
✅ Correct Treatment
- →Under Section 50C, if sale consideration is less than stamp duty value, the stamp duty value is deemed to be the sale price for computing gains
- →A safe harbour of 10% variation is permitted — if actual price is within 10% of stamp value, actual price is accepted
- →If stamp value is excessive, request the AO to refer the matter to a Departmental Valuation Officer
- →The buyer may also face tax under Section 56(2)(x) on the difference
⚠️Missing the Section 54EC 6-Month Investment Window+
🔍 Why It Happens
- •Delay in receiving sale proceeds from the buyer
- •Assuming the deadline is the ITR filing date
- •Bonds unavailable or subscription closed at the time of application
✅ Correct Treatment
- →The 6-month period runs from the DATE OF TRANSFER, not from receipt of money
- →Apply for NHAI/REC/PFC/IRFC bonds immediately after registration of the sale deed
- →There is no provision to condone delay — the exemption is lost permanently
- →If the window is missed, evaluate Section 54/54F reinvestment as an alternative
⚠️Not Depositing in Capital Gains Account Scheme+
🔍 Why It Happens
- •New property purchase not finalised before ITR due date
- •Unaware that CGAS deposit is mandatory to preserve exemption
- •Keeping the sale proceeds in a regular savings account
✅ Correct Treatment
- →Deposit the unutilised capital gain in a CGAS account before the ITR due date (31 July)
- →Open Type A (savings) or Type B (term deposit) account at an authorised bank branch
- →Withdraw from CGAS only for the specified purchase or construction
- →Unutilised CGAS balance becomes taxable in the year the reinvestment period expires
⚠️Claiming Routine Repairs as Cost of Improvement+
🔍 Why It Happens
- •Including painting, plumbing, and maintenance expenses
- •No supporting bills or invoices retained
- •Cash payments without documentary trail
✅ Correct Treatment
- →Only CAPITAL improvements qualify — additions, new construction, structural changes
- →Routine repairs, painting, and maintenance are specifically excluded
- →Retain dated invoices, contractor agreements, and bank payment proofs
- →Improvements made before 1 April 2001 are entirely ignored
⚠️Incorrect Grandfathering for Listed Equity (Section 112A)+
🔍 Why It Happens
- •Using original purchase cost for shares bought before 31 January 2018
- •Ignoring the highest quoted price as on 31 January 2018
- •Not applying the ₹1.25 lakh exemption threshold
✅ Correct Treatment
- →Cost of acquisition = HIGHER of (a) actual cost, and (b) LOWER of [FMV as on 31-Jan-2018, actual sale consideration]
- →Obtain the 31 January 2018 highest quoted price from the exchange website
- →Apply the ₹1.25 lakh annual exemption before charging 12.5% tax
- →Broker statements often compute this automatically — verify accuracy
⚠️Failing to Set Off and Carry Forward Capital Losses+
🔍 Why It Happens
- •Not reporting loss-making transactions in the ITR
- •Filing a belated return, which forfeits carry-forward rights
- •Incorrectly setting off long-term loss against short-term gain
✅ Correct Treatment
- →Short-term capital loss can be set off against BOTH STCG and LTCG
- →Long-term capital loss can be set off ONLY against LTCG
- →Unabsorbed losses can be carried forward for 8 assessment years
- →Carry-forward is allowed only if the ITR is filed on or before the due date under Section 139(1)
⚠️Overlooking Advance Tax on Capital Gains+
🔍 Why It Happens
- •Believing that 1% TDS under Section 194-IA covers the entire liability
- •Not paying advance tax in the quarter the gain arose
- •Assuming tax can be paid at the time of ITR filing
✅ Correct Treatment
- →1% TDS under 194-IA is only a token deduction — actual LTCG tax is far higher
- →Capital gains advance tax must be paid in the instalment falling due after the transaction
- →Interest under Section 234C applies for shortfall in the relevant quarter
- →Pay self-assessment tax immediately to stop further Section 234B interest
Taxvio's Capital Gains Services
From a single share sale to complex multi-property transactions with exemption planning — we handle every scenario.
Property Capital Gains Computation
Complete LTCG/STCG computation for sale of land, flat, house or commercial property. Includes dual computation (with/without indexation), Section 50C analysis, and improvement cost indexing.
₹3,999
Shares & Mutual Fund Gains
Computation of STCG/LTCG on listed equity, equity mutual funds, debt funds and unlisted shares. Grandfathering under Section 112A, ₹1.25 lakh exemption, and broker statement reconciliation.
₹3,999
Exemption Planning & Advisory
Strategic analysis of Section 54, 54F, 54EC and 54B eligibility. Reinvestment structuring, timeline mapping, CGAS guidance, and written advisory opinion.
₹3,999
ITR-2 Filing with Schedule CG
End-to-end ITR-2 preparation and filing with complete Schedule CG disclosure, buyer PAN reporting, exemption claims, TDS credit and e-verification.
2,499
Loss Set-Off & Carry Forward
Identification and optimisation of current-year and brought-forward capital losses. Tax-loss harvesting advisory and carry-forward documentation for 8 years.
₹2,999
CGAS & 54EC Bond Assistance
Complete support for opening Capital Gains Account Scheme accounts and applying for NHAI/REC/PFC/IRFC bonds within the statutory 6-month window.
₹3,499
Section 50C Valuation Dispute
Representation where stamp duty value exceeds actual sale consideration. DVO reference request, valuation report coordination and AO submissions.
₹7,999
Advance Tax Computation
Quarterly advance tax computation on capital gains, Section 234B/234C interest quantification, and challan payment guidance to minimise interest.
₹1,499
Capital Gains Notice Response
Drafting and filing responses to notices under Section 143(1)(a), 139(9) or 148 relating to capital gains mismatch, AIS discrepancy or exemption denial.
₹5,999
📦 Complete Package Pricing
Basic (Shares/MF)
₹3,499
- ✓STCG & LTCG computation
- ✓Grandfathering under 112A
- ✓Broker statement reconciliation
- ✓Loss set-off analysis
- ✓Computation report
Standard (Property)
₹5,999
- ✓Everything in Basic
- ✓Property LTCG computation
- ✓Dual indexation comparison
- ✓Exemption eligibility check
- ✓ITR-2 filing included
Premium (Complete)
₹9,999
- ✓Everything in Standard
- ✓Full exemption planning
- ✓CGAS & 54EC assistance
- ✓Advance tax computation
- ✓1 year notice support
Real Stories from Our Clients
"I sold ancestral land bought in 1998 and had no idea how to value it. Taxvio arranged the 2001 valuation, computed both indexation options, and structured a 54EC investment. My tax came down from an estimated ₹14 lakh to ₹4.2 lakh — completely legally."
Vinod Aggarwal
Muzaffarnagar
"My broker statement showed ₹6 lakh LTCG on shares but the grandfathering was applied wrongly. Taxvio recomputed using the 31-Jan-2018 NAV and the correct figure was ₹2.1 lakh. After the ₹1.25 lakh exemption, my tax was barely ₹10,000."
Sneha Rastogi
Noida
"I sold my flat and got a 143(1) notice for capital gains mismatch because the buyer's TDS wasn't matching. Taxvio reconciled everything with Form 26AS, filed a rectification, and the demand of ₹3.8 lakh was fully dropped."
Capt. R. S. Malik
Meerut
Capital Gains Tax Services Across India
Taxvio is based in Khatauli, Muzaffarnagar, UP and provides capital gains computation and ITR filing for property sellers, stock investors, and asset sellers across Noida, Delhi NCR, Meerut, Ghaziabad, Mumbai, and pan-India online.
Frequently Asked Questions — Capital Gains Tax
Is indexation benefit completely abolished?+
How much LTCG on shares is tax-free?+
Can I claim both Section 54 and Section 54EC exemptions together?+
What happens if I sell the new property within 3 years of claiming Section 54?+
How is capital gain computed on inherited or gifted property?+
Do I need to pay advance tax on capital gains?+
Is the 1% TDS deducted by the property buyer my final tax?+
Compute Accurately, Save Legally
Get Your Capital Gains Computed Today
Don't overpay tax on your property or share sale. Taxvio delivers accurate STCG/LTCG computation, dual indexation comparison, complete exemption planning under Sections 54/54F/54EC, and ITR-2 filing. Starting ₹3,499.