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Capital Gains Tax in India

Capital Gains Tax in India

Highlights

  • Know all the Tax Rules related to Capital Gains on Short Term and Long Term Capital Assets.
  • Explore the Assets that are considered a Short Term and Long Term Assets.
  • See the Assets that are not considered as capital assets even if you hold them for more than 36 months.

Every individual is liable to pay taxes on his income even it is a capital gain. Any profit or gain an individual generates by the sale of a capital asset is known as Capital Gain. So, you will have to pay taxes on that income that arises in the form of gain. The tax is charged on the gain in the year when it is generated and the capital asset has been transferred. But the gain can be a short-term gain or a long-term gain. If the individual inherits a property then capital gains will not be applicable to him as there is no selling of property. But if the same person inherits the property and then sells it in the future then capital gain tax will be charged on that income.

Taxes Charged on Capital Gains

Here you can see the rate of taxes charged on Long Term Capital Gains and Short Term Capital Gains. If any type of capital gain occurs on selling a capital asset then you are liable to pay tax on that gain.

ParticularsTaxesTerms and Conditions
Long Term Capital Gains Tax20%When the Gain is not through the Sale of Equity Shares or the units of Equity Related Funds.
Long Term Capital Gains Tax10% on over and above INR 1 LacWhen the Gain is through the Sale of Equity Shares or the units of Equity Related Funds.
Short Term Capital Gains TaxThis gain is taxable as per the Income Tax Slab because the income from this gain is added to your yearly income.Securities transactions are not applicable.
Short Term Capital Gains Tax15%Securities Transactions are applicable.
Short Term Capital Gains Tax on Debt FundsAt Tax Slab Rates of the IndividualNo T&C
Long Term Capital Gains Tax on Debt FundsAt 20% with indexationNo T&C
Short Term Capital Gains Tax on Equity Funds15%No T&C
Long Term Capital Gains Tax on Equity FundsNILNo T&C
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If you hold the Debt Mutual Funds for more than 36 months they will qualify for a long-term capital asset.

Types of Capital Assets and Exclusions

There are two types of capital assets mentioned by the Indian Tax Law and you can see them below:-

Short Term Capital Asset (STCG)

If you hold an asset for a period of 36 months or less then it is considered to be a short-term capital asset. From the financial year 2017-2018, the eligibility criteria of short-term capital assets for immovable properties like land, building, and house property has been reduced to a period of 24 months. So, if you are selling a house property after holding it for more than 24 months after 31st March 2017 then the gain from such a property will be treated as a long-term capital gain.

Long Term Capital Gain

An asset held for a period of more than 36 months then it will be considered as a long-term capital asset. The reduced period criterion of 24 months is not applicable to movable assets like jewellery, debt-oriented mutual funds, and others. The movable assets will be considered as long-term asset only if they are held for more than 36 months. The following assets are termed as a short term asset if they are held for less than 12 months and a long term capital asset if they are for more than 12 months:-

  • Equity or preference shares in a company listed at the stock exchange of India.
  • Securities (like debentures, bonds, govt securities, etc.) listed at the stock exchange of India
  • Units of UTI, whether quoted or not
  • Units of an equity-oriented mutual fund, whether quoted or not
  • Zero-coupon bonds, whether quoted or not
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Exclusions of Capital Assets

  • Consumables, Raw Materials, and Stocks held for the purpose of business or profession.
  • Clothes, furniture, and any other personal goods held for personal use.
  • Agricultural land in the rural area.
  • 6½% gold bonds (1977) or 7% gold bonds (1980) or national defence gold bonds (1980) issued by the central government.
  • Special bearer bonds (1991)
  • Gold deposit bond issued under the gold deposit scheme (1999).
  • Deposit certificates issued under the Gold Monetisation Scheme, 2015.

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