Capital Gains Calculator: Process, Uses And Taxation Rates

Income Tax

Profits accrued through the sale of assets such as mutual fund units, bonds, patents or trademarks are capital gains. Depending on whether the price of such assets increase or decrease, they can accumulate capital gains or losses. A capital gains calculator can help you estimate these gains/losses for the financial year.

Now, let us learn how to use this utility tool. 

What is a Capital Gains Calculator?

This is a simple, free and easy-to-use online tool that shows you the STCG (short-term capital gains) or LTCG (long-term capital gains) depending on the holding period of your investment. With it, you can also calculate your tax liability on capital gains earned from mutual funds and equity shares.  

The capital gains tax calculator consists of a formula box, where you have to enter the following information to calculate the taxable capital gains:

• Type of asset
• Purchase price 
• Selling price 
• The date of purchasing said assets
• Date of selling assets

The calculator will show the capital gains/losses, total payable tax and holding period in months.  

Also read: How to use Online Income Tax Calculator?

How to Use  Capital Gains Calculator?

Follow the given simple steps to calculate your capital gains/losses and applicable tax.

Step 1

Select the asset type (shares, units of equity mutual funds, debt funds or gold ETFs, etc.).

Step 2

Enter the date on which you bought the assets.

Step 3

Enter the date when you sold these assets.

Step 4

Fill in the net purchase price and selling price of the units sold. Remember to deduct any additional charges required to buy/sell the units.

Step 5

Click on the ‘Calculate’ button to know the results. 

Why Do Investors Use Capital Gains Calculator?

• The computation of capital gains requires you to keep in mind various things like holding period, asset type, number of units, indexation etc. All these factors can make the final calculation confusing and tedious. 
• Besides telling you about capital gains, Navi’s Capital Gains Calculator lets you estimate the final tax payable. This would let you estimate your taxable annual income after taking into account the deductions/exemptions (if available). 
• It helps with financial planning as it provides you with accurate accounts of gains and taxes. With the capital gains calculator, you can plan the holding period so that you save on taxation expenses.
• It is a free-to-use tool that anyone can use to estimate STCG, LTCG and the value of sold shares/mutual fund units in a matter of seconds.

Understanding Capital Gains from Assets

Capital gains are profits gained when a taxpayer transfers or sells a capital asset. Such an asset may be movable, immovable, tangible or intangible. Examples of capital assets include bonds, debentures, shares, land, house property, mutual funds, patents and trademarks. 

There are two main types of capital assets:

Short-term capital assets

STCA refers to an asset with a holding period of 36 months or less. For immovable properties such as plots of land, houses or buildings, the holding period is 24 months, while for listed securities, it is 12 months. 

Long-term capital assets

When you hold assets for over 36 months, they are referred to as long-term capital assets (LTCA). For unlisted shares and immovable property, LTCA is applicable for a holding period above 24 months. However, for listed securities, the holding period is above 12 months. 

When the underlying value of capital assets increases, you can sell them at a value higher than the purchase price for capital gains. When the value of assets decreases from its purchase price, selling them would result in a capital loss. 

How to Calculate Capital Gains from Assets?

For short-term capital gains

The following formula is used to calculate STCG:

STCG = Full Value Consideration – (Acquisition Cost + Cost of Improvement + Cost of Transfer)

Where,

• Full Value Consideration is what the seller received for selling his/her capital assets. 
• Cost of Acquisition is the asset’s value at which the seller acquired it.
• Improvement Costs are the seller’s expenses incurred in making changes/additions to the capital asset.
• Cost of Transfer refers to any expense made during the sale of assets, including brokerage charges and registry fees.

For long-term capital gains

You can use the following formula to calculate LTCG:

LTCG = Full Value Consideration – (Indexed Acquisition Cost – Indexed Improvement Cost + Cost of Transfer)

Where, 

• Indexed Cost of Acquisition adjusts the inflation value over the holding period by applying the Cost Inflation Index (CII). You can also calculate the CII ratio of the year when you sold assets.  

Hence, Indexed Cost of Acquisition = (Total cost of acquisition x CII of the year of transfer)/CII of the year of acquisition.

• Indexed Cost of Improvement = (Improvement Cost x CII of the year of transfer)/CII of the year of Improvement.

Taxation on Capital Gains from Assets

Taxation on capital gains depends on the holding period of assets. For assets such as shares, commodities, bonds or real estate, long-term capital gains taxes are applicable for longer holding periods (12, 24 and 36 months). STCG is applicable when the holding period is less than these limits, depending on the type of assets.

The following are taxation rates of capital gains earned from shares and mutual funds.

Conditions for Tax Exemption on Capital Gains

• You can deposit the gains in a Capital Gains Account Scheme (CGAS) of any public sector bank to save tax. You can keep your money there for 2-3 years to save capital gains tax and invest it somewhere else. 
• Capital gains are exempted from tax under Section 54 on the sale of a house provided that the proceeds are used to buy another house. 
• Under Section 54EC, you can get tax exemption from the sale of a house property if you invest its proceeds in certain bonds. This included bonds from REC (Rural Electrification Corporation) and NHAI (National Highway Authority of India).
• You can also get tax exemption for utilising proceeds from the sale of any asset to buy a house property u/s 54F.
• Taxation on capital gains is also not levied on the sale of agricultural land.

Also read: Take-Home Salary Calculator

Final Word

You can use the capital gains calculator to estimate capital gains from investments based on the holding period and other factors. It also helps you calculate taxation on capital gains, so you can use this tool to plan profitable investments and save taxes. 

Frequently Asked Questions

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