Capital Gains Tax Calculation Formula

Finance Formula • Published on September 01, 2026 • Last updated September 01, 2026

Mathematical Equation

$$\text{Net Capital Gain} = \text{Sale Consideration} - (\text{Indexed Cost of Acquisition} + \text{Transfer Expenses})$$

Variable Definitions

Sale Consideration

Total gross selling price of asset

Indexed Cost

Purchase cost adjusted for inflation via Cost Inflation Index (CII)

Transfer Expenses

Brokerage, stamp duty, legal fees incurred

Detailed Explanation

In-Depth Guide

Capital Gains Tax is levied on net profit realized from selling capital assets like shares, equity funds, debt funds, gold, or real estate. Holding period determines classification into Short-Term (STCG) or Long-Term (LTCG) gains.

How to Calculate: Step-by-Step

1. Subtract acquisition cost and transfer expenses from selling price. 2. Apply inflation indexation if selling real estate held over 24 months. 3. Apply STCG rate (e.g. 20% on equity) or LTCG rate (e.g. 12.5% on equity gains above ₹1.25 Lakh) per latest tax rules.

Worked Calculation Example

Bought equity mutual fund units for ₹2,00,000 and sold after 18 months for ₹3,50,000: - Total Profit = ₹1,50,000. - Exemption (LTCG Section 112A) = ₹1,25,000. - Taxable Gain = ₹25,000. - LTCG Tax at 12.5% = ₹3,125.

Common Use Cases

Stock market tax planning
Real estate sale profit calculation
Mutual fund redemption tax estimates

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