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Key Diffrence Long-Term vs Short-Term Capital Gains
Capital gain is the profit you gain from selling or transferring a capital asset, such as jewelry, property, shares, etc. Securities that come under the rules of the SEBI Act of 1992 are known as capital assets in India.
Typically, these assets constitute short-term and long-term investments.
Keep reading to know the key differences between long-term and short-term capital gains.
Table of Contents
What are Short and Long-Term Capital Gains?
Here is the definition of LTCG vs STCG and the difference between long and short term capital gains.
Short-Term Capital Gains (STCG)
These gains are received from the sale of assets held for a short period - less than 24 months for real estate, physical gold, and other mutual funds and less than 12 months for unlisted bonds and securities.
Long-Term Capital Gains (LTCG)
These gains are received from the sale of assets held for longer periods. For most assets, the holding period is more than 24 months, but for unlisted bonds and securities, it is more than 12 months.
List of Difference Between Short-Term and Long-Term Capital Gains
Take a look at the table comparing long-term vs short term capital gains:
How to Calculate Your Capital Gains After Budget 2024?
The Union Budget 2024 hiked the tax rate applicable to STCG to 20% from 15%. Whereas the LTCG tax rates are increased from 10% to 12.5% for all capital assets. So, to know how to calculate your capital gains after Budget 2024, follow these steps:
For Long-Term Capital Gains (LTCG)
- Calculate the total amount obtained from selling the assets.
- Subtract any costs directly related to their transfer and the inflation on the original amount.
- Adjust the cost of any improvements for inflation and subtract this amount as well.
- Deduct the exemptions applicable to you under Sections 54, 54D, 54EC, 54F, and 54B.
- Now, this is the amount that is taxable as per LTCG tax rates.
For Short-Term Capital Gains (STCG)
- Calculate the total amount obtained from selling the assets.
- Subtract any costs directly related to their sale and also the original purchase price of the asset.
- Now subtract the costs of any improvements made to the asset.
- Subtract any exemptions applicable to you under Sections 54B and 54D.
- The remaining amount will be taxed as per the STCG tax rates.
Both short- and long-term capital gains are taxable as these are leading means of income. However, the Income Tax act defines the applicable exemptions for individuals.
Meanwhile, the table above sums up short vs long term capital gains; the primary difference is in the holding period, profit and risk among these two capital gains.