Capital Gain

Understanding Capital Gains

Capital gains refer to the profit or gain that arises from the sale of a capital asset. When you sell an asset (such as property, stocks, or jewelry) at a higher price than what you originally paid for it, the difference is considered a capital gain. These gains are taxable in the year when the transfer of the capital asset occurs.

Types of Capital Gains

1. Short-Term Capital Gains (STCG):

   • An asset held for 36 months or less qualifies as a short-term capital asset.

   • STCG is taxed at different rates based on the type of asset and your income tax slab.

2. Long-Term Capital Gains (LTCG):

   • An asset held for more than 36 months is considered a long-term capital asset.

   • LTCG is generally taxed at a lower rate compared to STCG.

Defining Capital Assets

Capital assets include:

• Land, buildings, and house properties

• Vehicles

• Patents and trademarks

• Leasehold rights

• Machinery

• Jewelry

• Rights in or related to Indian companies

However, certain items do not fall under the category of capital assets:

• Stock, consumables, or raw materials used for business or profession

• Personal goods like clothes and furniture for personal use

• Agricultural land in rural India

• Specific government bonds and certificates

Taxation and Exemptions

• Tax Calculation: The tax on capital gains is calculated based on the type of asset (short-term or long-term) and the applicable tax rates.

• Exemptions: Certain exemptions are available, such as investing in another house property or specified bonds to save on capital gains tax.

• How to Download your Share & Mutual Fund Transactions: A Step-by-Step Guide

• How to Download your Annual Information Statement (AIS): A Step-by-Step Guide