Capital gains definition:
Capital gains are the gains arising from the sale of any type of capital assets like immovable property, equity shares (listed or Un-listed), debt-fund, mutual fund, Jewellery etc. We’ll know the difference between Short term and Long term capital gains below in detail. (source: Income tax India)
Capital gains are of 2 types:
Short term capital gains and Long term capital gains
Short term capital gains for different types of capital assets:
Such type of deals are closed in a short time like:
| Type of Capital assets | Time duration of deal closing (Buy to Sell) |
| Equity Shares : Listed at Exchange | < 12 months |
| Equity Shares : Un-Listed | < 24 months |
| Equity oriented Mutual fund | < 12 months |
| Debentures and Government securities | < 12 months |
| Immovable Property (land / house / building) | < 24 months |
| Jewellery (Gold, Silver, Platinum, precious metal or alloy) | < 36 months |
| Any other capital asset except Agricultural Land | < 36 months |
Long term capital gains for different types of capital assets:
Such type of deals are closed in a time duration like:
| Type of Capital assets | Time duration of deal closing (Buy to Sell) |
| Equity Shares : Listed at Exchange | > 12 months |
| Equity Shares : Un-Listed | > 24 months |
| Equity oriented Mutual fund | > 12 months |
| Debentures and Government securities | > 12 months |
| Immovable Property (land / house / building) | > 24 months |
| Jewellery (Gold, Silver, Platinum, precious metal or alloy) | > 36 months |
| Any other capital asset except Agricultural Land | > 36 months |
Short Term capital gains calculation for income tax purpose :
| Sale Value | xxxx |
| Less : Commission, brokerage etc. | (xxxx) |
| Net Sale Value | xxxx |
| Less: Buy value | (xxxx) |
| Less : Expenditures on property for improvement | (xxxx) |
| Short term capital gains | xxxx |
Example of Short Term capital gains calculation:
Ram, a salaried employee, in November 2019 purchased Gold worth Rs. 720,000 and sold in July 2022 for Rs. 900,000. To sale the gold, he paid Rs. 20,000 as brokerage. What will be the taxable capital gains?
Since the difference between sale and buy is less than 36 months for Gold, so short term gains will be applicable here. Now, we’ll calculate that short term capital gains below:
| Sale Value of gold | 900,000 |
| Less : Commission, brokerage etc. | – 20,000 |
| Net Sale Value | 880,000 |
| Less: Buy value | – 720,000 |
| Less : Expenditures on property for improvement | Nil |
| Short term capital gains | 160,000 |
Income Tax rates on Short term capital gains:
There are 2 types of income tax rates on Short term capital gains:
| STCG covered under section 111A of Income tax act | STCG Not-covered under section 111A of Income tax act | |
| Applicable to sale of | 1. Equity share listed 2. Equity oriented Mutual Fund (65% allocation to equities) 3. Units of business trust 4. Transaction done on a recognised stock exchange | 1. preference shares, Zero coupon bonds 2. Un-listed shares 3. Debentures, Bonds and Government securities 4. Debt oriented (Non-equity) mutual fund 5. Immovable property, Gold, Silver, etc |
| Income Tax Rates | 15% (plus surcharge and cess) | As per normal Tax rate slabs depending on the total income and age |
| Adjustment of STCG against the basic exemption limit by (1. Exemption limit for residents < 60 years – 250,000 2. Exemption limit for residents of 60 to 80 years – 300,000 3. Exemption limit for residents > 80 years – 500,000) 4. Exemption limit for non-residents of any age – 250,000) | Resident Individual and Resident HUF can only adjust STCG against basic exemption limit. | Non-Resident Individual and Non-Resident HUF cannot adjust STCG against basic exemption limit.. |
| Deductions under section 80C to 80U from STCG | Deduction under sections 80C to 80U is not allowed from the income in a financial year. | Deduction under sections 80C to 80U is allowed here from the income in a financial year. |
Income Tax rates on Long term capital gains:
Long term capital gains is under Section 112A of Income Tax Act.
| On equity share sale | 10% (over Rs. 1 lakh profit) |
| On equity-oriented mutual fund sale | 10% (over Rs. 1 lakh profit) |
| On Non-equity shares or Non-equity mutual fund | 20% with indexation |
| On Immovable property like, land, building, flat etc. | 20% with indexation |
Kindly verify from official website before making a decision