|
Case Studies on Capital Gains
-----------------------------------
Purchase Price - Rs. 1000000
Year of Purchase - 1995
Sale Price - Rs. 2500000
Year of Sale - 2008
Cost Inflation Index (CII) - Purchase - 281
Cost Inflation Index (CII) - Sale - 582
Calculate
Indexed Purchase Price
Capital Gain
Tax with Indexation (20%)
Tax without Indexation (10%)
capital gain =sale price-(purchase price*(cii sale/cii price))
=2500000-(1000000*(582/281))
=428825.7
Tax without indexation=1500000 × .10
Tax with indexation=428826.6 × .20
...............................................
Long Term Capital Gain
Cost of purchasing a property in April 2007 - Rs 35,00,000
Cost of selling the property in May 2011 - Rs 50,00,000
Inflation Index- 2007-2008 - 551
2011-2012 - 785
Indexed Purchase Cost - 35,00,000 x 785/551= Rs 49,86,388
Long Term Capital Gains = 50,00,000-49,86,388 = Rs 13612*
Tax on LTCG= 13612 x 20%= Rs 2722
Education Cess= 2722 x 3% = Rs 82
Total Tax on LTCG = Rs 2804
*The non-indexed gain would have been Rs 15 lakh
Thus, the indexation benefit reduces the tax liability substantially which otherwise would have been a huge payout for any investor.
...............................................
This is how short-term capital gains are calculated:
Cost of Equity Mutual Funds units bought in 2011 - Rs 100,000
Price of same units sold after 6 months - Rs 120,000
Short Term Capital Gains - Rs 20,000
Tax Applicable - 20,000 x 15%= Rs 3000
Education Cess - 3000 x 3%=Rs 90
Total Tax payable = Rs 3090
……………………………………………………………………………………………………………………………………………
|
