INCOME TAX ACT 2025 · CHAPTER IV · PART E · SECTIONS 72–81

Computing Capital Gains

How capital gains are computed under the Income Tax Act 2025 — the basic formula, cost of acquisition rules for all special modes of acquisition, depreciable assets, slump sale, stamp duty value substitution, unlisted shares, and advance money.

📘 Sections: 72 (Mode of computation) · 73 (Cost — special modes) · 74 (Depreciable assets) · 75 (Depreciation claimed) · 76 (MLD/Debt MF/Unlisted bonds) · 77 (Slump sale) · 78 (Stamp duty value — property) · 79 (FMV — unlisted shares) · 80 (Unascertainable consideration) · 81 (Advance money)
🔄 Replaces: Sections 48–51 of the Income Tax Act 1961
📅 Effective: 1st April 2026 (Tax Year 2026-27 onwards)

⚡ Jump to:

Section 72 — Basic Formula Section 73 — Cost (24 special cases) Section 74 — Depreciable Assets Section 76 — MLD / Debt MF Section 77 — Slump Sale Section 78 — Stamp Duty Value Section 79 — Unlisted Shares FMV Sections 80–81 Indexation & CII Practical Examples

Section 72 — Mode of Computation of Capital Gains

Section 72(1) — The Basic Formula

      Capital Gains =

         Full Value of Consideration

        ( − ) Expenditure incurred wholly and exclusively in connection with the transfer

        ( − ) Cost of Acquisition of the asset

        ( − ) Cost of Improvement to the asset

Component	Meaning & Notes
Full Value of Consideration	The total price received or receivable on transfer. Subject to deemed substitution rules under Sections 78 (stamp duty value for property), 79 (FMV for unlisted shares), and 80 (FMV when actual consideration unascertainable). Includes all charges incidental to transfer such as club membership fee, car parking fee, electricity/water fee, maintenance fee, advance fee [Section 402(9)].
Transfer Expenditure	Costs directly connected with the transfer — brokerage, legal fees, stamp duty (paid by seller), registration charges, advertisement costs. Must be wholly and exclusively for the transfer. Does NOT include: interest on home loan claimed under Section 22(1)(b) or Chapter VIII deductions, or STT paid [Section 72(3)].
Cost of Acquisition	The price actually paid to acquire the asset. For special modes (gift, inheritance, amalgamation etc.) — deemed costs apply under Section 73. For LTCG on assets acquired before 1 April 2001 — cost deemed to be higher of actual cost or FMV as on 1 April 2001.
Cost of Improvement	Capital expenditure incurred in making additions or alterations to the asset — e.g., construction of additional floor on a house. Improvements made before 1 April 2001 are ignored (cost = nil for pre-2001 improvements).

Section 72(3) — What is NOT Deductible

The following are explicitly prohibited as deductions from capital gains:

Interest on home loan claimed as deduction under Section 22(1)(b) (house property income) or under Chapter VIII
Securities Transaction Tax (STT) paid under Chapter VII of the Finance (No. 2) Act, 2004

Section 72(6) — Non-Residents: Foreign Currency Computation

For a non-resident computing capital gains on transfer of shares or debentures of an Indian company (other than equity shares under Section 198), the computation must be done in the same foreign currency that was used to originally purchase the shares/debentures:

Convert cost of acquisition, transfer expenditure, and full value of consideration — all into the same foreign currency used at time of purchase
Compute capital gains in that foreign currency
Reconvert into Indian Rupees at the prescribed rate of exchange

This rule applies to every subsequent reinvestment and sale of shares/debentures of an Indian company.

Section 72(7) — Rupee Appreciation on Rupee Denominated Bonds (Non-Residents)

For a non-resident holding rupee denominated bonds of an Indian company, any gain arising solely on account of appreciation of the rupee against the foreign currency at the time of redemption shall be ignored — not included in the full value of consideration. Only the actual gain in economic terms (in foreign currency) is taxable.

Indexation & Cost Inflation Index — Section 72(2) & (8)

Important — When Does Indexation Apply in 2025 Act?

Under the 2025 Act, LTCG is taxed at a flat 12.5% without indexation as the default. Indexation (using the Cost Inflation Index) is only relevant for the grandfathering computation under Section 197(3) — i.e., for individual/HUF residents computing the alternative 20% rate with indexation for land/buildings acquired before 23 July 2024, to determine which gives a lower tax outcome.

Definitions [Section 72(8)]

Term	Definition
Cost Inflation Index (CII)	Index notified by the Central Government for each tax year = 75% of average rise in Consumer Price Index (urban) for the immediately preceding year
Indexed Cost of Acquisition	= Cost of Acquisition × (CII for year of transfer ÷ CII for year of acquisition or FY 2001-02, whichever is later)
Indexed Cost of Improvement	= Cost of Improvement × (CII for year of transfer ÷ CII for year of improvement)

Section 73 — Cost of Acquisition in Special Cases (24 Entries)

Where a capital asset is acquired through a special mode (not a direct purchase), Section 73 prescribes deemed costs:

Sl.	How Asset was Acquired	Deemed Cost of Acquisition	Old Sec
1	Gift, will, succession, inheritance, devolution, HUF partition (post 31 Dec 1969), or exempt transfer [Sec 70(1)(a), (c)–(e), (g)–(j), (l)–(o), (t)–(u), (v)–(w), (zd)–(zf)]	Cost to the previous owner who last acquired it by actual purchase + cost of improvements by previous owner or assessee	49(1)
2	Shares in amalgamated company acquired via scheme of amalgamation [Sec 70(1)(f)]	Cost of shares in amalgamating company	49(2)
3	Share/debenture acquired on conversion of bonds/debentures [Sec 70(1)(z) or (za)]	That part of the cost of the bond/debenture/deposit certificate relating to that share/debenture	49(2A)
4	Specified security or sweat equity shares [Sec 17(1)(d)] — ESOP perquisite	FMV on date of allotment as taken for perquisite valuation	49(2AB)
5	Rights of LLP partner acquired on company-to-LLP conversion [Sec 70(1)(ze)]	Cost of shares in the company immediately before conversion	49(2AC)
6	Shares acquired by non-resident on redemption of GDRs [Sec 209(1)]	Price on any recognised stock exchange on date of redemption request	49(2C)
7	Business trust units acquired via SPV-to-trust transfer [Sec 70(1)(zi)]	Cost of the original shares in the SPV	49(2CA)
8	Units in consolidated MF scheme [Sec 70(1)(zj)]	Cost of units in consolidating scheme	49(2CB)
9	Equity shares acquired on conversion of preference shares [Sec 70(1)(zb)]	That part of cost of preference shares relating to such equity shares	49(2CC)
10	Units in consolidated plan of MF scheme [Sec 70(1)(zk)]	Cost of units in consolidating plan	49(2CD)
11	Units in segregated portfolio of a MF	Formula: X = A × (B ÷ C) where A=original cost, B=NAV of segregated portfolio, C=NAV of total portfolio before segregation	49(2CF)
12	Original units in main portfolio after segregation	Original cost minus amount computed under Sl. 11	49(2CF)
13	Shares acquired via JV interest transfer by PSC [Sec 70(1)(zl)]	Cost of the interest in the joint venture	New
14	Shares in resulting company after demerger	Formula: X = A × (B ÷ C) where A=cost of shares in demerged company, B=net book value of assets transferred, C=net worth of demerged company before demerger	49(2C)
15	Original shares in demerged company after demerger	Original cost minus amount computed under Sl. 14	49(2C)
16	Asset where exemption was withdrawn under Section 71(1)	Cost for which the transferee company acquired the asset	49(1)
17	Property transferred where value was subject to tax under Sec 92(2)(m) [unexplained investment]	Value taken for Section 92(2)(m) computation	49(4)
18	Asset declared under Income Declaration Scheme, 2016	FMV of asset as declared under the Scheme	49(5)
19	Specified capital asset (Section 10(37A) of 1961 Act) — possession handed over, transferred after 2 years	Stamp duty value on last day of second tax year after end of tax year of handing over possession	49(6)
20	Share in JDA project (land/building) under Sec 67(14)	Amount deemed as full value of consideration under Section 67(14) [stamp duty value of share + cash at completion certificate]	49(7)
21	Asset of trust/institution where accreted income was computed and tax paid under Section 352	FMV of asset as considered for accreted income computation on specified date	49(8)
22	Capital asset referred to in Section 26(2)(j) [business income — fair value of inventory on conversion]	FMV taken for Section 26(2)(j)	49(9)
23	Electronic Gold Receipt (EGR) acquired on conversion of gold [Sec 70(1)(y)]	Cost of gold for the person in whose name EGR is issued	New
24	Gold released against an EGR [Sec 70(1)(y)]	Cost of the EGR for that person	New

Section 74 — Depreciable Assets: Always Short-Term Capital Gains

For capital assets forming part of a block of assets on which depreciation has been claimed, normal STCA/LTCA classification does not apply. Capital gains on such assets are always treated as Short-Term Capital Gains, regardless of holding period.

Section 74(2) — Block Survives

When some (not all) assets in a block are sold:

        STCG = Sale Consideration

           − Transfer Expenditure

           − WDV of block at start of year

           − Actual cost of assets added during year

If result is negative — no capital gains. WDV of block is simply reduced.

Section 74(3) — Entire Block Transferred

When all assets in a block are sold (block ceases to exist):

        Cost = WDV at start + actual cost of additions during year

        STCG = Sale Proceeds − Transfer Expenditure − Cost

Can result in STCG or STCL depending on proceeds vs WDV.

Section 75 — Special Rule: If depreciation has been claimed under Section 33(2) (additional depreciation) on a specific capital asset, the Written Down Value (WDV) as adjusted under Section 41 is taken as the cost of acquisition for Sections 72 and 73 purposes.

Section 76 — Market Linked Debentures, Debt Mutual Funds & Unlisted Bonds

These assets are ALWAYS Short-Term — regardless of holding period

The gains are computed using a simple formula — no indexation, no long-term rate benefit.

Which assets are covered? [Section 76(2)]

Asset Type	Condition	Old Section
Units of Specified Mutual Fund (debt-oriented MF — >65% in debt/money market instruments)	Acquired on or after 1 April 2023	50AA (1961 Act)
Market Linked Debentures (MLD) — principal is debt security, returns linked to market/indices	Any date of acquisition	50AA (1961 Act)
Unlisted bonds / unlisted debentures	Transferred, redeemed, or matured on or after 23 July 2024	New addition

Formula [Section 76(3)]

    X = A − B − C

    where:

    X = Short-term capital gains

    A = Full value of consideration (sale/redemption/maturity proceeds)

    B = Cost of acquisition

    C = Transfer/redemption expenditure

STT paid is not deductible in computing gains under this section [Section 76(4)].

Section 77 — Slump Sale

A slump sale means the transfer of one or more undertakings as a going concern for a lump sum consideration without individual values being assigned to each asset and liability.

Long-Term Capital Gains [Section 77(1)]

Undertaking or division held for more than 36 months immediately before transfer → LTCG @ 12.5%

Short-Term Capital Gains [Section 77(2)]

Undertaking or division held for 36 months or less → STCG at slab rates

Computation Rules [Section 77(3)–(5)]

Item	Rule
Cost of Acquisition	Net Worth of the undertaking/division = Total assets (as below) minus liabilities (book value)
Full Value of Consideration	Fair Market Value of all the capital assets on the date of transfer (as prescribed)
Depreciable assets in net worth	WDV of the block of assets [Section 41(1)(c)]
Self-generated goodwill	Valued at NIL — not included in net worth
Fully expensed assets [Sec 46]	Valued at NIL
Accountant's report	Mandatory — must include net worth computation and certify correctness, filed before due date of ITR

Change from 1961 Act: Under Section 50B of the 1961 Act, slump sale gains were always LTCG @ 20% with no indexation. Under Section 77 of the 2025 Act, rate is 12.5% (for LTCG) — a reduction. Short-term slump sale (undertaking held ≤ 36 months) remains at slab rates.

Section 78 — Stamp Duty Value as Full Value of Consideration (Property)

When land or building (or both) is transferred at a price below the stamp duty value, the stamp duty value is deemed to be the full value of consideration — preventing underreporting of sale price.

Situation	Treatment
Actual price < Stamp Duty Value (SDV)	SDV is deemed to be the full value of consideration [Section 78(1)]
SDV ≤ 110% of actual price	Actual price is used — the 10% tolerance band avoids minor discrepancies triggering deemed substitution [Section 78(1)(b)]
Agreement date ≠ Registration date	SDV on date of agreement (not registration) may be used if part/full consideration is received on or before agreement date via banking/online mode [Section 78(1)(a)]
Assessee disputes SDV	Assessee may claim SDV exceeds FMV → AO refers to Valuation Officer. If Valuation Officer's value > SDV, SDV is used (not VO's higher value) [Section 78(2)–(3)]

Section 79 — FMV as Full Value of Consideration for Unlisted Shares

Where a share of a company (other than a quoted share) is transferred at a price below its Fair Market Value (FMV), the FMV as prescribed is deemed to be the full value of consideration.

"Quoted share" means a share quoted on any recognised stock exchange with regularity from time to time, where the quotation is based on current transactions in the ordinary course of business. If a share is listed but thinly traded or infrequently quoted, it may not qualify as a "quoted share" under this definition.

Section 79(2) gives the Central Government power to exempt certain classes of persons from this provision by prescription — e.g., venture capital transfers, SEBI-registered funds, etc.

Sections 80 & 81 — Unascertainable Consideration & Advance Money

Section 80 — Unascertainable Consideration

Where the consideration received from transfer of a capital asset is not ascertainable or cannot be determined (e.g., exchange of assets, barter), the FMV of the asset on the date of transfer is deemed to be the full value of consideration for computing capital gains.

Section 81 — Advance Money Received

Where advance money is received during negotiations for transfer of a capital asset and then forfeited (negotiations fail), such advance reduces the cost of acquisition of the asset. Exception: if the advance was already taxed as income under Section 92(2)(h) (unexplained income) or Section 56(2)(ix) of the 1961 Act, it is not deducted from cost — to avoid double taxation benefit.

Practical Examples

Example 1 — Sale of Residential Property (Section 72 + 78)

Property purchased in FY 2020-21 for ₹40 lakh. Sold in FY 2026-27 for ₹90 lakh. Stamp duty value = ₹1 crore. Brokerage = ₹1 lakh.

Step	Amount
Full Value of Consideration — Sale price ₹90L, SDV ₹1 crore. SDV > 110% of ₹90L (₹99L). So SDV = ₹1 crore applies [Sec 78]	₹1,00,00,000
Less: Transfer expenditure (brokerage)	(₹1,00,000)
Less: Cost of acquisition (held >24 months → LTCA)	(₹40,00,000)
LTCG @ 12.5%	₹59,00,000 → Tax = ₹7,37,500

Example 2 — Gift of Shares (Section 73 Sl. 1 + Section 72)

Father purchased listed shares in FY 2019-20 at ₹50/share (100 shares = ₹5,000). Gifted to daughter in FY 2022-23 (not taxable in daughter's hands under gift provisions). Daughter sells in FY 2026-27 at ₹200/share. STT paid. Holding >12 months (including father's holding period).

Item	Amount
Sale proceeds (100 × ₹200)	₹20,000
Cost of acquisition — father's cost [Sec 73, Sl. 1]	(₹5,000)
LTCG (listed equity, STT paid → Section 198)	₹15,000
Tax — LTCG ≤ ₹1.25 lakh exemption → Tax = NIL	₹0

Example 3 — Slump Sale (Section 77)

Company sells an entire division (held 5 years) as a going concern for ₹10 crore lump sum. Division net worth = ₹6 crore (WDV of plant ₹3 crore + other assets at book ₹3 crore, no liabilities). FMV of all assets = ₹10 crore.

Item	Amount
Full Value of Consideration (FMV of assets) [Sec 77(3)(b)]	₹10,00,00,000
Less: Net Worth (cost of acquisition) [Sec 77(3)(a)]	(₹6,00,00,000)
LTCG (division held >36 months)	₹4,00,00,000
Tax @ 12.5% [Sec 197]	₹50,00,000

📖 Capital Gains — Continue Reading

← Capital Asset & Transfer — Sections 67–71 → Tax Rates — Sections 196–198 ← Capital Gains Overview → Exemptions — Sections 82–89

📌 Source: Income Tax Act 2025, Act No. 30 of 2025 — Section 72 (page 103), Section 73 (pages 104–105), Section 74 (page 106), Section 75 (page 107), Section 76 (page 108), Section 77 (page 109), Section 78 (page 110), Section 79 (page 111), Section 80 (page 112), Section 81 (page 113), as published in the Gazette of India Extraordinary dated 21st August 2025. Use the Section Cross-Reference tool to map 1961 Act sections to 2025 Act equivalents.

Computing Capital Gains — Sections 72–81