Long Term Capital Gain = Sale consideration –Indexed cost of acquisition- Indexed cost of improvement (if any)-Expenses incurred exclusively for the sale of the Asset-Exemption u/s 54, 54F, 54EC if any availed. Long-term capital gains are calculated in the same way as short-term capital gains, but the purchase cost and cost of improvement are replaced with the indexed cost of acquisition and indexed cost of the improvement. So under long-term capital asset, the benefit of indexation is available plus the person who falls in the tax bracket of 30% also get the advantage of paying the lower tax rate of 20%. It will increase your cost and reduce your gains and thereby, tax liability. Indexation is basically a technique to adjust the cost of the asset according to the inflation index. Long-term capital gains are taxed at the rate of 20.8% (rate including health and education cess 4%) with indexation. sale not made through Indian stock exchange, will be subject to tax as per the income tax slab rate applicable to the individual. In the case of a short-term capital gain on listed shares/equity-oriented mutual funds (if sold within a period of one year), it will be taxable at the rate of 15.60% (including health and education cess But in case of sale of unlisted shares, i.e. Short Term Capital Gain = Sale Consideration – Cost of acquisition- Cost of improvement (if any) – Expenses incurred exclusively for the sale of the Asset. Gain/loss from the sale of the asset is calculated by deducting the cost of purchase, cost incurred for improvement of the asset and expenses incurred exclusively in connection with the sale from the sale proceeds of the asset. For instance, if the short-term capital gain is Rs 6 lakh and the person falls in the 30% tax bracket, then he/she has to pay 31.20% on Rs 6 lakh, i.e. Short-term capital gains are taxed as per the income tax slab rates applicable to the individual.
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