To improve the subdivision accuracy of the capacitive angular displacement encoder, and address the problem of nonlinear distortion caused by parasitic capacitance, processing and installation error interference of the sensing signal, this article proposes an encoder sine and cosine signal subdivision error compensation method based on the time domain signal, the state duty cycle. Based on the timespace periodic sine and cosine signal sensing model of the capacitive encoder, the partial derivative model of the corresponding relationship between the gain error, the zero position offset error, and the time point of the time-domain signal is designed. Different from the traditional complex fitting algorithm, this method uses the high-frequency clock to collect and record the time information of the voltage threshold intersection of the pre-set periodic signal in real time, divides the sine and cosine single periodic signal into four time-domain state intervals, and defines the proportion of the duration of each interval in the whole cycle as "state duty cycle". The time point and zero offset of the actual signal are calculated based on the recorded time information and voltage threshold information, and the real-time correction of subdivision error caused by gain error and zero offset error is further realized. In this paper, a 16-bit small capacitive encoder with an outer diameter of d=50 mm manufactured by PCB process is used as the experimental object, and the subdivision error before and after compensation is tested and analyzed by using this method. The results show that the measurement error of the encoder can be reduced from ±30″ to ±10″, and the standard deviation of error can be reduced from 16.48″ to 6.85″. This method breaks through the traditional matrix operation compensation framework and is easy to implement at the hardware level. It has lower time and space complexity, faster response time, and can effectively improve the environmental adaptability, dynamic response characteristics of the encoder, and the reliability and stability of angle measurement.