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Can Brokerage and Taxes be Included in LTCG Calculation?

Ramalingam Kalirajan |9730 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Feb 04, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Aug 04, 2024Hindi

For the purpose of calculating the LTCG on a equity transaction for filing Income Tax Return whether the brokerage paid to DP and various taxes /levies charged at the time of settlement can be included ie. Sales Realization= Market Value of sale minus the brokerage and various taxes/levies paid and Acquisition Cost = Market value of Purchase Plus the brokerage and various taxes/levies paid .

Ans: When filing Income Tax Returns, calculating Long-Term Capital Gains (LTCG) on equity transactions requires clarity on cost components.

Sales Realisation and Brokerage Deduction
LTCG is calculated as Sale Price – Indexed Cost of Acquisition.

Sale Price refers to the actual consideration received for the sale of shares.

Brokerage paid to the Depository Participant (DP) can be deducted while calculating net sale price.

STT (Securities Transaction Tax) is not allowed as a deduction. This is specifically mentioned in the Income Tax Act.

However, other charges like exchange transaction charges, GST, and stamp duty can be deducted.

Acquisition Cost Considerations
Acquisition cost includes the purchase price plus brokerage paid at the time of buying.

GST on brokerage, stamp duty, and SEBI charges can be added to the purchase cost.

STT paid at the time of purchase cannot be included in the acquisition cost.

The indexed cost of acquisition applies only to debt funds and real estate, not equities.

Final Insights
Brokerage and some levies can be deducted from sale price while computing LTCG.

STT cannot be included in either purchase or sale consideration.

Proper documentation of all charges is necessary for accurate tax reporting.

If unsure, consulting a Certified Financial Planner helps in tax-efficient investment planning.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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Question by rajesh - Nov 10, 2022Hindi

I am a NRI and recently sold my apartment in Bangalore and have few questions on computation of LTCG tax. 1. To calculate ‘cost of acquisition” should I include stamp duty which I had paid? 2. I had to travel to India to complete the sale paperwork and can I deduct this as expense incurred exclusively for transfer? 3. Is the entire amount (less than 50L) invested in 54EC eligible for deduction?

Ans: With reference to the query of stamp duty, yes, it can form part of the cost of acquisition. However, you must be aware that stamp duty paid at the time of purchase is allowed as deduction u/s 80C. Thus, an argument can be raised that if it is added to the cost of acquisition, it will result in double deduction.

With reference to travel expenses, in my view you should not claim said expenses as Expenditure incurred are not wholly and exclusively in connection with transfer of capital asset.

With reference to investment in bonds specified in Sec 54EC, NRIs are not eligible to invest in certain specified government bonds.

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