| INDIVIDUAL / HUF | COMPANY # | NRI ^ | |
|---|---|---|---|
| Equity Oriented Schemes | |||
| Short term capital gain (Holding period <=12 months) | 15% | 15% | 15% |
| Long term capital gain upto Rs 1 Lakh (Holding period >12 months) | NIL | NIL | NIL |
| Long term capital gain exceeding Rs 1 Lakh (Holding period >12 months) * | 10% | 10% | 10% |
| Other Than Equity Oriented Schemes | |||
| Short term capital gain (Holding period <=36 months) | According to tax slab | 30% | According to tax slab |
| Long term capital gain (Holding period >36 months) | 20% with indexation | 20% with indexation |
|
| INDIVIDUAL / HUF | COMPANY | NRI | |
|---|---|---|---|
| Equity oriented schemes | NIL | NIL | NIL |
| Other than equity oriented schemes | NIL | NIL | NIL |
Indexation is a process of adjusting the purchase price for inflation mainly for calculating long term capital gains tax. This is done so that the investor is taxed only on the capital gain over and above the price rise caused by inflation.
The way it works is that it allows you to inflate the purchase price of the asset to take into account the impact of inflation. The end result is that you get the benefit of lowering your tax liability.
Indexed Purchase Price = Purchase Price * (CII for current year / CII for year of purchase)
Now,
Tax liability = Tax Rate * (Sale price – Indexed Purchase Price)