CAPITAL GAIN



1. What is a Capital Gain?

Any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain. This gain or profit is comes under the category ‘income’, and hence you will need to pay tax for that amount in the year in which the transfer of the capital asset takes place. This is called capital gains tax, which can be short-term or long-term.

2. Defining Capital Assets?

Land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, and jewellery are a few examples of capital assets

3. Types of Capital Assets?
1. Short-term capital asset
2. Long-term capital asset

4. Calculating Capital Gains

Terms You Need to Know:
Full value consideration:The consideration received or to be received by the seller as a result of transfer of his capital assets.
Cost of acquisition:The value for which the capital asset was acquired by the seller.
Cost of improvement: Expenses of a capital nature incurred in making any additions or alterations to the capital asset by the seller.

TAX ON SHORT-TERM AND LONG-TERM CAPITAL GAIN



Tax Type Condition Tax applicable
Long-term capital gains tax Except on sale of equity shares/ units of equity oriented fund 20%
Long-term capital gains tax On sale of Equity shares/ units of equity oriented fund 10% over and above Rs 1 lakh
Short-term capital gains tax When securities transaction tax is not applicable The short-term capital gain is added to your income tax return and the taxpayer is taxed according to his income tax slab.
Short-term capital gains tax When securities transaction tax is applicable 15%.


TAX ON LTCG



•The long-term capital gains (LTCG) on the sale of listed equity shares have been made taxable from 1 April 2018.
•In the case of equity investing, long-term means a holding period of more than one year from the date of purchase. Long term capital gains are the profit earned on the sale of listed equity shares.
•Before the Budget 2018 was launched, LTCG earned on the sale of equity shares was tax-free in the hands of investors. Such equity shares had already been subject to Securities Transaction Tax (STT).
•It means that when you sold the equity shares after holding them for more than a year, the capital gains were exempt from tax. Only the short-term capital gains were taxed at a rate of 15%.
•The objective behind keeping LTCG tax-free had been to increase the participation of investors in equity markets in India.

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