Capital Gain Tax Valuations
Computing capital gains can be a complex and challenging task depending on the nature and number of transactions undertaken by the assessee in a financial year Capital gains arise whenever a capital asset is transferred (by way of sale or otherwise) by the assessee. They are further classified into two: short-term capital gains (STCG) and long-term capital gains (LTCG) on the basis of the holding period of the asset.
The concept of indexation is applicable in the case of LTCG only. Indexation is done to incorporate the time value of money (adjusting the inflation factor) while computing the gains so as to make the computation just and fair. Indexation is done by using Cost Inflation Index (CII).