How to save money with Indexation?

Who provide the Cost Inflation Index ?

CII provided by The Central Government by notifying in the official gazette.

What is Capital Gain?

Capital Gain is the difference between cost of sale minus cost of acquisition.

Types of Capital Gain?

1. Short Term Capital Gain 2. Long Term Capital Gain

STCG Period

For Non-Equity Funds: Up to 36 Months For Equity Funds: Up to 12 Months

Tax on Non-Equity Funds?

Short Term Capital Gain (STCG) taxed at Income Tax Slab Rate for Non-Equity Funds.

Tax on Equity Funds?

Short Term Capital Gain (STCG) taxed at 15% for Equity Funds.

LTCG Tax on Equity Funds?

Capital gains up to Rs. 1 lac a year are tax-exempt. Any gains beyond this attracts tax at the rate of 10% & No benefit of Indexation

LTCG Tax on Non-Equity Funds?

Long Term Capital Gain (LTCG) taxed at 20% with Indexation or 10% without Indexation

How Indexation Calculated?

(Index Value for the year sale /Index Value for the year acquisition) x Acquisition Cost

Index Cost Calculation?

If Non-Equity Funds purchased at 20 lacs in AY 10-11 and sold in AY 20-21 at 80 lacs. Indexed Cost (711/301) x 20 = 47.24 lacs

Actual Tax?

Without Indexation LTCG taxed on Rs. 80 lacs at 10% rate i.e. Rs. 8lacs, LTCG Taxed with indexation at 20% of Rs. 32.76 (80-47.24) lacs, Rs. 6.55lacs; saving of Rs. 1.45lacs

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