Calculate capital gain on shares – In order to determine capital gains on the shares. The purchasing cost of the asset as well as the costs paid or brokerages relevant to the selling of the securities should be taken into account. Capital gains may either be long or short-term.
Capital gains are the increasing price of an investment which renders its present value greater than when it was first acquired by the purchaser. So if you purchased the stock of a company at ₹30 lakh in 2009 and the present value of the shares is ₹40 lakh, the capital gains will be equivalent to ₹10 lakh in 8 years. That being said, once you do not sell the shares, the capital gains will not be noticed and you will not make any money.
Must read – How to calculate capital gain?
How to calculate Short-term Capital Gains on Shares?
Short term capital gain on share can be calculated by subtracting these two things –
- Brokerage or costs generated in relation to the selling of the estate.
- Purchase or buying price of the asset.
Mr Suresh purchased 350 shares of a listed company in January 2016 at a cost of ₹100 per share, paying a total of ₹35,000. He sold them for ₹200 per share in January 2017, at ₹70,000. Calculate capital gain.
Sales value – ₹70,000
Brokerage at 0.5% – ₹350
Purchase price – ₹35,000
So the short term capital gain is ₹34,650
How to calculate Long-term Capital Gains on Shares?
Long term capital gain on share can be calculated by subtracting these two things –
- Brokerage or expenditure incurred
- Indexed purchase price of the asset
The method for checking the indexed purchase price of an asset
= Purchase price X Cost Inflation Index (CII) of the sales year divided by the CII of the purchase year.
Let’s understand by modifying the previous example-
Mr Suresh purchased 350 shares of a listed company in January 2013 at a cost of ₹100 per share, paying a total of ₹35,000. He sold them for ₹200 per share in January 2018, at ₹70,000. Calculate capital gain.
| Financial year | CII |
| 2013-14 | 1000 |
| 2018-19 | 1150 |
Mr Suresh purchased 350 shares of a listed company in January 2013 at a cost of ₹100 per share, paying a total of ₹35,000. He sold them for ₹200 per share in January 2018, at ₹70,000. Calculate capital gain.
Indexed purchase price = 35,000 x 1150/1000 = 40,250
Sales value – ₹70,000
Brokerage at 0.5% – ₹350
Purchase price – ₹35,000
Indexed purchase price – ₹40,652.5
So the Long term capital gain is ₹40,652.5
