by Under Section 72 of the Income-tax Act, 2025, capital gains arising from the transfer of a long-term capital asset are computed according to the prescribed capital-gains provisions. A capital asset becomes long-term when it is held for more than the specified period, which varies according to the nature of the asset. The computation generally begins with the full value of consideration received or accruing on transfer. From this amount, eligible transfer expenditure, cost of acquisition and cost of improvement are deducted as permitted by the Act. Applicable exemptions are subsequently considered to determine the taxable long-term capital gain.
Computation of LTCG:
| Particulars | Amount (₹) |
|---|---|
| Full Value of Consideration | XXX |
| Less: Expenditure incurred wholly and exclusively in connection with transfer | (XXX) |
| Less: Cost of Acquisition | (XXX) |
| Less: Cost of Improvement, where allowable | (XXX) |
| Long-Term Capital Gain (LTCG) | XXX |
| Less: Eligible capital-gain exemptions | (XXX) |
| Taxable Long-Term Capital Gain | XXX |
illustration
Suppose Mr. A sells a long-term capital asset for ₹25,00,000. Its allowable cost of acquisition is ₹12,00,000, cost of improvement is ₹2,00,000 and transfer expenses are ₹50,000.
| Particulars | Amount (₹) |
|---|---|
| Sale Consideration | 25,00,000 |
| Less: Transfer Expenses | (50,000) |
| Less: Cost of Acquisition | (12,00,000) |
| Less: Cost of Improvement | (2,00,000) |
| Long-Term Capital Gain | 10,50,000 |
Thus, the LTCG is ₹10,50,000, before considering any exemption available under the Income-tax Act, 2025.
