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Microlesson · 5-min read

Computation of Capital Gains [Section 48]

## Computation of Capital Gains [Section 48]

(Format for assets other than depreciable assets under Section 50 / block of assets.)

### Computation format

ParticularsAmount
AFull Value of Consideration (FVC)XXXX
BLess: Transfer expenses (on actual consideration)(XXX)
CNet Consideration (A − B)XXXX
DLess: Cost of Acquisition / Indexed COA + Cost of Improvement / Indexed COI(XXX)
EGross LTCG / STCG (C − D)XXXX
FLess: Exemptions under the 54 series(XXX)
GTaxable Capital Gains (E − F)XXXX

### Notes

1. FVC = actual consideration, or deemed consideration under Sec 50C, 50CA or 50D, as applicable.

2. Transfer expenses — incurred wholly and exclusively for the transfer (brokerage, stamp duty, registration fees, legal expenses, etc.). No deduction for STT paid on transfer of listed securities.

3. Cost of Acquisition (COA) — actual COA or deemed COA under Sec 49 and 55.

  • Indexation is available only for an Individual / HUF who transfers Land / Building on or after 23-Jul-2024, where the asset was acquired before 23-Jul-2024.
  • No deduction for interest on housing loan under Sec 24(b), 80EE or 80EEA.

4. Cost of Improvement (COI) — actual COI or deemed COI under Sec 55. Same indexation rule as COA (Individual/HUF, Land/Building, on or after 23-Jul-2024, acquired before that date).

5. Exemptions (54 series) — deductions claimable subject to investment in new capital assets.

### Special rule — Non-residents: unlisted shares & debentures (1st proviso to Sec 48)

Compute the gain in foreign currency to neutralise rupee depreciation:

  • Step 1: Convert sale consideration, COA and transfer expenses into the same foreign currency originally used (at the average of TT buying and TT selling rates on the relevant dates).
  • Step 2: Compute the capital gains in that foreign currency.
  • Step 3: Reconvert the resulting capital gains into Indian currency at the TT buying rate on the date of transfer.

> This currency-conversion benefit does not apply to Section 112A capital assets.

Memory hook: STT is never deductible; housing-loan interest already claimed elsewhere is never deductible again; and indexation post-Budget July 2024 survives only for Individual/HUF on land/building acquired before 23-Jul-2024.

Worked example

### Example 1

Basic computation: Land sold for ₹80 lakh; brokerage ₹1 lakh; indexed COA ₹40 lakh; indexed COI ₹5 lakh; exemption u/s 54F ₹10 lakh.

  • Net consideration = ₹80 lakh − ₹1 lakh = ₹79 lakh.
  • Gross LTCG = ₹79 lakh − (₹40 lakh + ₹5 lakh) = ₹34 lakh.
  • Taxable LTCG = ₹34 lakh − ₹10 lakh = ₹24 lakh.

### Example 2

Non-resident unlisted shares (1st proviso): A non-resident bought unlisted shares for which he had remitted USD. Sale proceeds, cost and expenses are each converted to USD (at the average of TT buying/selling rates on the respective dates), the gain is computed in USD, and that USD gain is reconverted to rupees at the TT buying rate on the date of transfer. STT is not deductible and this benefit does not apply to Sec 112A assets.

⚠️ Common exam mistakes

  • Deducting STT paid on transfer of listed securities — it is expressly not allowed.
  • Claiming indexation on assets other than land/building, or for assessees other than Individual/HUF, after the 23-Jul-2024 change.
  • Deducting housing loan interest u/s 24(b)/80EE/80EEA again while computing capital gains.
  • Applying the non-resident foreign-currency conversion to listed (Sec 112A) shares — it applies only to unlisted shares and debentures.
  • Computing transfer expenses on the deemed (50C) consideration instead of the actual consideration.
Reference: Section 48 (incl. 1st proviso) — Income-tax Act, 1961
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