Income-tax Act, 2025 | Section 72
Section 72 - Mode of computation of capital gains
Capital gain is broadly consideration less transfer expenditure, cost and improvement, subject to special currency, indexation and deeming provisions.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Section 72: operativeEffective 1 April 2026Tax Year 2026-27 onwardReviewed 8 October 2026
Current-law controlSection 72 is presented using the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The general commencement date is 1 April 2026. Earlier years and saved proceedings may remain governed by the Income-tax Act, 1961 and the repeal/savings framework.
2-minute professional decode
Capital gain is broadly consideration less transfer expenditure, cost and improvement, subject to special currency, indexation and deeming provisions.
Professional checkpoint: Consideration deeming sections, withholding, foreign-currency rules and special-rate chapters must be overlaid on the base formula.
Who should test this section?
Section 72 matters to investors, property owners, promoters, companies, firms and advisers where the transaction involves mode of computation of capital gains; the charge, computation and relief steps should be separated.
Evidence to retain
The section 72 file should preserve acquisition and transfer instruments, valuation or stamp records, payment evidence, holding-period material and every document that supports the treatment of mode of computation of capital gains.
1961 Act bridge
| Legacy provision | Legacy heading | Mapping |
|---|
| 48 | Mode of computation of capital gains. | Renumbered / mapped |
The bridge is a research aid. Legacy case law carries over only after the current wording and transition rules are matched.
Rules and forms linked to this section
| Rule | Operational role | Mapped form(s) |
|---|
| Rule 15 | Valuation of perquisites | No standalone form mapped |
| Rule 50 | Attribution of income taxable under section 67(10) to capital assets remaining with the specified entity, | Form 27 |
| Rule 52 | Rate of exchange for conversion of rupees into foreign currency and reconversion of foreign currency into | No standalone form mapped |
Worked application
A taxpayer sells a capital asset and incurs transfer costs. Start with full value of consideration, deduct only the amounts allowed by section 72, and apply indexation/foreign-currency or special adjustments only where the relevant sub-section expressly permits them.
Common mistake
For section 72, do not jump from sale proceeds to a capital-gain number: first identify the transfer/charging event, then consideration, cost, timing and any exemption or rollover condition relevant to mode of computation of capital gains.
Compliance approach
Identify the statutory trigger for section 72, lock the relevant tax year, reconcile the facts to the operative sub-section, preserve the evidence trail and separately test every linked Rule, Form, Schedule and exception before finalising the return position.
Numeric / timing checkpoints in the operative text
- (8) For the purposes of this section,— (a) “Cost Inflation Index”, in relation to a tax year, means such Index as the Central Government may, having regard to 75% of average rise in the Consumer Price Index (urban) for the immediately preceding tax year to such tax year, by notification, specify, in this behalf;
- (b) “indexed cost of acquisition” means an amount which bears to the cost of acquisition, the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the first year in which the asset was held by the assessee or for the year beginning on 1st April, 2001,...
- (c) “indexed cost of any improvement” means an amount which bears to the cost of improvement, the same proportion as Cost Inflation Index for the year in which the asset is transferred bears to the Cost Inflation Index for the year in which the improvement to the asset took place;
Current statutory text
72. (1) Income chargeable under the head “Capital gains” shall be computed, by
deducting from the full value of the consideration received or accruing as a
result of the transfer of the capital asset, the following amounts:—
(a) expenditure incurred wholly and exclusively in connection with such
transfer; and
(b) the cost of acquisition of the asset and the cost of any improvement
thereto.
(2) For the purposes of item B of the formula in section 197(3), the provisions of
sub-section (1) shall have effect as if for the words “cost of acquisition” and “cost
of any improvement”, the words “indexed cost of acquisition” and “indexed cost of
any improvement” had respectively been substituted.
(3) In computing the income chargeable under the head “Capital gains”, the following
amounts shall not be allowed as a deduction:—
(a) the interest claimed as deduction under section 22(1)(b) or under
Chapter VIII;
(b) any sum paid as securities transaction tax under Chapter VII of the
Finance (No. 2) Act, 2004 (23 of 2004).
(4) If a unit holder receives any amount from a business trust with respect to a unit
that is not in the nature of income under Schedule V (Table: Sl. No. 3 or 4) and is
not chargeable to tax under section 92(2)(k) or 223(2), then,—
(a) such amount shall be reduced from the cost of acquisition of such unit;
and
(b) if the transaction of transfer of a unit is not considered as transfer
under section 70 and cost of acquisition of such unit is determined under
section 73, the amount received with respect to such unit before as well
as after such transaction, shall be reduced from the cost of acquisition.
(5) In case of value of any money or capital asset received by a specified person from
a specified entity, as referred to in section 67(10), the specified entity, in addition
to deductions under sub-section (1), shall also be entitled to a deduction calculated
in such manner, as may be prescribed for computing the amount chargeable to
income-tax in its hands under that sub-section which is attributable to the transfer
of such capital asset.
(6) In the case of an assessee, who is a non-resident, capital gains arising from the
transfer of a capital asset being shares in, or debentures of, an Indian company
(other than equity shares referred to in section 198) shall be computed—
(a) by converting the cost of acquisition, expenditure incurred wholly and
exclusively in connection with such transfer and the full value of the
consideration received or accruing as a result of the transfer of the
capital asset into the same foreign currency as was initially utilised in
the purchase of the shares or debentures; and
(b) the capital gains so computed in such foreign currency shall be reconverted
into Indian currency, so, however, that the said manner of computation
of capital gains shall be applicable in respect of capital gains accruing
or arising from every re-investment thereafter in, and sale of, shares in,
or debentures of, an Indian company.
(7) In the case of an assessee who is a non-resident, any gains arising on account of
appreciation of rupee against a foreign currency at the time of redemption of rupee
denominated bond of an Indian company held by the assessee, shall be ignored for
computing the full value of consideration under this section.
(8) For the purposes of this section,—
(a) “Cost Inflation Index”, in relation to a tax year, means such Index as the
Central Government may, having regard to 75% of average rise in the
Consumer Price Index (urban) for the immediately preceding tax year
to such tax year, by notification, specify, in this behalf;
(b) “indexed cost of acquisition” means an amount which bears to the cost
of acquisition, the same proportion as Cost Inflation Index for the year
in which the asset is transferred bears to the Cost Inflation Index for
the first year in which the asset was held by the assessee or for the year
beginning on 1st April, 2001, whichever is later;
(c) “indexed cost of any improvement” means an amount which bears to
the cost of improvement, the same proportion as Cost Inflation Index
for the year in which the asset is transferred bears to the Cost Inflation
Index for the year in which the improvement to the asset took place;
and
(d) the conversion of Indian currency into foreign currency and the recon-
version of foreign currency into Indian currency shall be at such rate of
exchange as may be prescribed in this behalf.
Primary-source trail
Source status: full Section 72 statutory text in the local source corpus; reconciled to the current consolidated Act control on 8 October 2026.