Switch to Digit Insurance

Trusted by 2 crore Indians

1 Year Waiting Period

Health
Car
Bike
Commercial
COVID-19 covered

Travel
More

Enter Your Car Registration number

Mobile Number

+91

Enter Mobile Number to Proceed

+91

OR ENTER YOUR CAR NUMBER

DON'T KNOW YOUR CAR NUMBER?

or renew digit policy

I agree to the Terms & Conditions

Registration Number

Previous policy expiry

Not Expired

Expired

DON'T KNOW REGISTRATION NUMBER?

I KNOW MY REGISTRATION NUMBER

IT'S A NEW BIKE

OR RENEW DIGIT POLICY

I agree to the Terms & Conditions

Which countries are you visiting?

Most Popular(You can select more than one)

Leaving date

Return date

I agree to the Terms & Conditions

As mandated by Spanish Authorities your travel insurance needs to extend 15 days after your trip ends.
We will extend your coverage period accordingly.

Pin Code

In case, you wish to buy a plan for your siblings, aunts, uncles or any other relatives, you can buy a separate plan for them.

Add Members you want to insure

Mobile Number

Port my existing Policy

You can select more than one member

-+ Max kids

(s)

Registration Number

Mobile Number

+91

City

Mobile Number

+91

OR ENTER YOUR REGISTRATION NUMBER

DON'T KNOW YOUR REGISTRATION NUMBER

or renew digit policy

I agree to the Terms & Conditions

Switch to Digit Insurance

Capital Gains Tax: Long Term & Short Term Gains

capital gains tax — (Source: canarahs)

Taxation in India varies based on the category of income reported. In this regard, taxpayers often face confusion regarding what capital gains are. If you are wondering the same thing, you have come to the right page!

Here is an in-depth look at what capital gains represent, and it also answers your question ‘what is capital gains tax?’

Explaining Capital Gains: Which income fall under this category

Capital gains refer to any income that you earn by selling any capital assets. Now the question arises as to what capital assets are. Simply speaking, capital assets include the following –

Jewellery
Lease rights
Trademarks and patents
Building
Land
Machinery
House property
Rights in any Indian company

Now that you know what capital gains are in income tax, also make it a point to assess the exclusions. Here are some incomes, which do not come under capital gains –

Agricultural land owned in the rural parts of India
Furniture and clothes owned for personal use
Special bearer bonds
Consumable items or stocks held for professional or business-related use
National defense bonds, 6.5% gold bonds, and 7% gold bonds. All of which must be issued by the government
Special bearer bonds

Now that you have a clear idea of what a capital gain is in income tax, you must start understanding the intricacies of taxes on such gains.

What does Capital Gains Tax mean?

Capital gains tax or CGT is a tax specifically levied on the profit generated after the sale of a capital asset. For this to hold true, you would need to sell the particular capital asset at a price higher than what you paid to buy it.

Therefore, property or capital assets inherited do not qualify for this taxation. In such cases, no transaction occurs, but only a change of hands from one person to another.

Types of Capital Gain

Capital gains are divided primarily into two parts, namely –

Short-term capital gains
Long-term capital gains

Before assessing what is a long-term capital gain and short-term gain, you must understand that the difference is mainly in the amount of time one holds the capital assets before deciding to sell them.

What is a Long-term Capital Gains Tax?

In most instances, any capital asset owned for more than 36 months is known as long-term capital gains. Taxes on these earnings are known as long-term capital gains tax.

However, a few assets are considered long-term, even if they are held for 12 months or more. These include:

Quoted or unquoted Unit Trust of India bonds.
Securities, such as debentures, bonds, and government securities, which are listed on a recognised Indian stock exchange.
Equity mutual funds.
Zero-coupon bonds.
Equities or preference shares of a company listed on a recognised Indian stock exchange.

Calculation of long-term capital gains would require you to follow a few simple steps:

Step 1: Start off with the total amount received after capital asset sale.
Step 2: Deduct the indexed cost of transfer + indexed cost of acquisition + indexed cost of improvement.

Now, to ensure proper calculation, you must know what each of these terms represents. Read on –

Indexed cost of transfer = Expenses incurred for advertising, deals, and legal expenses.
Indexed cost of acquisition = Cost of inflation index for the concerned acquisition year X acquisition cost/transfer year cost of inflation index.
Indexed cost of improvement = Improvement expenses X inflation index cost of the improvement year /transfer year cost of inflation index.

What is Short-term Capital Gains Tax?

Profits earned from capital assets that are held for 36 months or less are known as short-term capital gains. However, there are some exceptions to this segregation. For example, in the case of land, building, or house property, this span has been reduced to 24 months only. Thus, if you sell such assets after owning them for more than 24 months, it would be classified as a long-term capital gain.

The formula for short-term capital gains calculation is the same as that for long-term capital gains. It is as follows –

Short-term capital gain = Full value of consideration – (cost of improvement + cost of acquisition + cost of transfer)

What are the Capital Gain Tax Rates?

What is the long-term capital gain tax rate

Condition	Tax Rate
Gains from the sale of equity funds or shares	10% on any amount exceeding Rs.1 lakh
Gains from the sale of assets other than equity funds or shares	20%

What is the short-term capital gain tax rate

Condition	Tax Rate
In the case of securities, the transaction is applicable	15%
In the case of securities, the transaction is not applicable	Short-term capital gain tax is added to the individual’s income tax return. The person’s income slab determines final taxation

Exemptions of Long-term Capital Gain Tax Payment

If you are wondering ‘what are the rules regarding exemption of capital gain,’ the following situations would permit a complete exemption from having to bear long-term capital gains taxes –

Individuals aged 80 years or above with an annual income of less than Rs.5 lakhs. Thus, this answers the question, ‘what is the limit for LTCG to be tax-free?’
Individuals aged between 60 and 80 years with an annual income less than Rs.3 lakhs in 2021 will be exempted from paying this tax.

However, keep in mind that exemptions under Section 80U and Section 80C do not apply to long-term capital gain taxes.

You must know about these aspects of capital gains before investing to maximise the scope of gains.

Frequently Asked Questions

✓ I have sold a house that I purchased 5 years ago. Which type of capital gain tax would be applicable on such a transaction?

Such a transaction would be treated as long-term capital gain, since you held the property in question for more than 24 months. Thus, the taxes applicable would be calculated accordingly.

✓ What is the rate of tax on long-term capital gains for NRI selling property in India?

20% long-term capital gain tax would be applicable in such cases. However, this tax would be calculated on the profits from such a transfer and not on the whole amount received.

Disclaimer: The information mentioned here is collected from different online websites, news websites and government sources. They may change as per time. Please check the official government websites and verify the information before making any decision.

More article about Income Tax in India

Income Tax Benefits for Senior Citizens

Income Tax Slabs in India

Income Tax Slab for Senior Citizen

Individual Income Tax Slab

Income Tax Slab for Women

How to Save Tax in India

Deductions under Section 80C

Tax Saving Options other than 80C

How your Family can help you save Tax?

New Income Tax Slabs for Senior & Super Senior Citizens

Benefits of Filing Income Tax Return ITR

How to File ITR Online?

How to File Income Tax Return Online for Salaried Employees?

ITR Filing for Businesses & Individuals

How to get Income Tax Return Copy Online?

What is ITR 2 in Income Tax?

What is ITR 4 in Income Tax?

What is ITR 1 Form Sahaj?

What is ITR-3 Form?

How to File Income Tax Return ITR?

How to File ITR for Non-Salaried Person

How to File TDS Return

Last Date of Filing Income Tax Return (ITR)

All you need to know about Income Tax Returns

Capital Gains Tax: Long Term & Short Term Gains

How To Get Income Tax Refund (TDS Refund)

How to Check Income Tax Refund Status Online

Different Types of Income Tax Return Forms in India

How to Download ITR Acknowledgement Online?

What happens if ITR is not Filed?

What is the Penalty for Not Filing ITR?

How to do e-Verification of ITR?

File ITR for Pensioners & Retired Govt Employees

Home Loan Tax Benefits

Section 80TTA of Income Tax Act

Section 194H of Income Tax Act

Section 194A of Income Tax Act

Section 80DDB of Income tax Act

What is TAN Card

Section 80GG of Income Tax Act

Section 80E of Income Tax Act

Section 80CCD of Income Tax Act

Section 80D of Income Tax Act

What is Income Tax Form 16

What is ITR Form 16A

What is ITR Form 26AS?

Section 194I of Income Tax Act

Section 115BAC of Income Tax Act

What is Excise Duty in India?

What is Indirect Tax?

Deductions Under Section 80GGA of Income Tax Act

Difference Between Section 80G and 80GGA

Tax Credit vs. Tax Deduction

Section 80U of the Income Tax Act

What is Deferred Tax?

Section 80CCG of Income Tax Act

Section 80CCC of Income Tax Act

Section 80DD of Income Tax Act

Section 80EE of the Income Tax Act

Difference Between Direct and Indirect Tax

Show more

Get our app

Download man

App Store

Google Play

Health Insurance Guides

Car Insurance Guides

Bike Insurance Guides

Calculators

Income Tax Guides

RTO Offices in India

Important Links

Car Brands & Models

CIN: U66010PN2016PLC167410, IRDAI Reg. No. 158.

Go Digit General Insurance Limited (formerly known as Oben General Insurance Ltd.) - Registered Office Address - 1 to 6 floors, Ananta One (AR One), Pride Hotel Lane, Narveer Tanaji Wadi, City Survey No.1579, Shivaji Nagar, Pune-411005, Maharashtra | Corporate Office Address - Atlantis, 95, 4th B Cross Road, Koramangala Industrial Layout, 5th Block, Bengaluru-560095, Karnataka