What is Inflation? Inflation is a rise in price of a goods and services in particular period of time. In inflation the purchasing power is decreases. Example: Suppose on 25 may 2021 Mr. Gupta pays Rs. 20 for one pencil set and now in 2022 those pencil set cost Rs. 50. The rise in price shows the inflation and you can also notice that the value of money is decreases because those pencils which Mr. Gupta bought in Rs. 20 is now increases by Rs. 30. The price of product is definitely increases but the value of product is decreases. What is Capital gain? Capital gain is rises due to sale of capital assets. It can be short term or long term. Formula: Indexed cost of acquisition = Cost of acquisition * cost of inflation indexed of the year the asset is being transferred / cost of inflation indexed of the year the asset was acquired or 2000-01 (whichever is later) Indexed cost of improvement = Cost of improvement * cost of inflation indexed of the year the asset is being
This blog is totally for education purpose which helps to solve finance related numerical like time value of money, annuity ,perpetuity, technique of capital budgeting, cost of capital, working capital management and hire purchase etc.