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Capital gains are those that one incurs on assets held for a short or long-term period. Both payments have different attributes and are calculated differently. Let’s understand it better.

What is a Capital Gain Tax Calculator?

The capital gain calculator helps to calculate your applicable capital gain taxes on your investment sold in any financial year. The investments can be taxed at long-term or short-term capital gains, depending on how long you may have invested in that asset. 

Through a capital gain tax calculator, you will be able to inflate the purchase price of your assets by considering the inflation impact and calculate the taxable gain by considering the sale price.

Types of Taxes

There are two types of capital gain taxes and how the taxes are calculated between them. Below are the two types:

1. Short Term

Short-term capital gains refer to any capital gain on selling short-term assets. It refers to any help owned by you or the taxpayer for under 36 months from the date of transfer. For shares listed in the recognized Indian stock market, the period is reduced from 36 months to 12 months for short-term capital gains.

2. Long Term

Any investment that returns for a more extended period is called long-term capital gain. Any investment return between 1 and 3 years can be included in the long-term capital gains. The most common examples of Long term capital gains are jewellery, bonds, trademarks, or mutual funds, to name a few.

Tax on Capital Gains

The tax calculation on both capital gains differs since the period involved differs. Below is the calculation explanation:

  1. In case of a short-term capital gain, the gains are added to your total income, and then the tax is calculated based on the income tax slab you fall into. 
  2. Calculating the long-term capital gain taxes is more complicated than short-term capital gains. The inflations are also considered since the assets are held for extended periods.

What information needs to be added?

When using a capital gain calculator, below is the list of required information that you would have to enter to get your desired results:

  1. The sale price of the asset.
  2. Purchase price of the asset.
  3. Purchase details such as the purchase date, month, and year.
  4. Sale details such as date, month, and year of the sale.
  5. Investment details include shares, mutual funds, debts, fixed maturity plans, and real estate.

What would be the result available through the calculator?

After entering the information mentioned above, you can expect to get the below returns:

  1. Type of investment.
  2. Type of gain.
  3. The purchase year’s cost inflation index.
  4. The sale year’s cost inflation index.
  5. Purchase price and the sale price difference.
  6. The time between purchase and sale.
  7. The indexed cost of acquisition.
  8. Without indexation, long-term capital gains.
  9. With indexation, short-term capital gains.

Short and Long-term Capital Gain Formula

Below are the formulas for short and long-term capital gains:

Short-term capital gains = total value consideration - (cost of asset acquisition + cost of improvement + price of transfer).

Long-term capital gains = total value of consideration accruing or received - (indexed cost of acquisition + indexed cost of improvement + price of transfer).

Benefits of Using a Capital Gain Tax Calculator

The following are a few advantages of using a capital gain tax calculator:

  1. Through the calculator, you can see the capital gain tax on the purchase and sale of equity funds and shares, for instance, in a fraction of a second.
  2. You will get an idea of the actual return from your investments after deducting the taxes.
  3. You can plan for your investments better since you would be aware of the short and long-term capital taxes you will have to incur.

Conclusion

Holding an asset for a specific period is very common, and most people deal with it. But people are unaware of the gains they make of them. Using the capital gain calculator, they can assess their gains after deducting all the taxes.