Costing and Taxation · Ch 2 — Income from Capital Gains
Computation of Capital Gains — Simple Problems
Computation of Capital Gains — Simple Problems
With the Capital Asset identified, its holding period classified, and a Transfer confirmed to have taken place, the actual Capital Gain is computed by a short, fixed formula.
Computing the Capital Gain
Capital Gain = Full Value of Consideration (the sale price/consideration received or accruing on the transfer) − Expenses incurred wholly and exclusively in connection with the transfer (e.g., brokerage, legal charges) − Cost of Acquisition of the asset − Cost of Improvement of the asset (if any).
This is the SIMPLE, unindexed computation this chapter's problems use throughout. The earlier practice of inflating the Cost of Acquisition/Improvement by a Cost Inflation Index ('indexation') before subtracting it was withdrawn by the Finance (No. 2) Act, 2024 for most transfers — a narrow transitional choice survives only for certain immovable property acquired before 23 July 2024, which is beyond this syllabus's 'simple problems' scope.
Cost of Acquisition
The price actually paid, or the value at which the asset was originally acquired by the assessee.
Cost of Improvement
Capital expenditure incurred in making an addition or alteration to the asset AFTER it was acquired — e.g., adding a room to a house, or levelling and walling a plot of land. Ordinary repairs and routine maintenance are NOT cost of improvement, and are never deducted in this computation. …
The sale price or other consideration received/accruing to the transferor as a result of the transfer of …
Full Value of Consideration − Expenses on Transfer − Cost of Acquisition − Cost of Improvement (unindexed, per the current rule effective from F …