Question: When Benefit Of Indexation Is Not Available?

Is indexation allowed on mutual funds?

Indexation refers to recalculating the purchase price, after adjusting for inflation index, as published by the Income Tax authorities.

Since the purchase price is adjusted for inflation, the capital gain gets reduced.

In case of LTCG for non-equity funds, investors can avail the indexation benefit..

Is indexation applicable on debentures?

For listed bonds and debentures, long term capital gains are taxed at 10%. There is no benefit of indexation available for such securities. … For some assets such as zero coupon bonds and select listed securities, you have an option to select between two rates. Flat 10% without indexation or 20% with indexation.

How indexation is done?

Indexation means adjusting a price, wage, or other value based on the changes in another price or composite indicator of prices. Indexation can be done to adjust for the effects of inflation, cost of living, or input prices over time, or to adjust for different prices and costs in different geographic areas.

When benefit of indexation is not available?

Amid adverse reactions coming from stock markets to the proposed long-term capital gains tax on securities, the income-tax department on Sunday clarified that price indexation (adjustment to inflation) will not be available for this tax. The tax comes into effect from April 1, 2018, the clarifications said.

How is indexation benefit calculated?

The purchase price is multiplied by the CII for the year in which the sale is made and divided by the CII for the year in which the purchase was made. The indexed price so arrived at is used to calculate the capital gains on which LTCG tax of 20% plus surcharge of 10% plus education cess of 4% (22.88%) is applicable.

What are the two indexation types?

There are two general types of indexes: those produced by computer algorithms for the sake of search engines, and those produced by live indexers who can read between the lines.

Is debt mutual fund tax free?

Long term capital gains upto Rs 1 Lakh is totally tax free. … Short term capital gains (if the units are sold before three years) in debt mutual funds are taxed as per applicable tax rate of the investor. Therefore, if your tax rate is 30% then short term capital gains tax on debt fund is 30% + 4% cess.

How is capital gain calculated?

Long term capital gain is calculated as the difference between net sales consideration and indexed cost of property. The benefit of indexation is allowed to set off the impact of inflation from the gains made on sale of the property so that the actual gains on property will be taxed.

What is indexed cost of acquisition?

Indexed cost of acquisition is calculated as Cost of acquisition / Cost inflation index (CII) for the year in which the asset was first held by the seller, or 2001-02, whichever is later X cost inflation index for the year in which the asset is transferred.