Quick Summary
Capital Gains is the profit earned from selling a capital asset at a price higher than its purchase price. It is classified as Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG) based on the holding period.
Capital Gains refers to the profit realized when a capital asset is sold or transferred for a price higher than its cost of acquisition. Capital assets include property, shares, bonds, jewelry, mutual funds, and other investments.
Types of Capital Assets
- Land and Buildings: Residential, commercial properties
- Equity Shares: Listed and unlisted company shares
- Mutual Funds: Equity and debt mutual fund units
- Bonds and Debentures: Government and corporate
- Jewelry: Gold, precious stones (personal use)
- Machinery: If held as investment (not for business)
Classification of Capital Gains
| Asset Type | Short-Term (STCG) | Long-Term (LTCG) |
|---|---|---|
| Listed Equity Shares | Held ≤ 12 months | Held > 12 months |
| Equity Mutual Funds | Held ≤ 12 months | Held > 12 months |
| Unlisted Shares | Held ≤ 24 months | Held > 24 months |
| Debt Mutual Funds | Held ≤ 24 months (FY 2024-25) | Held > 24 months (till March 2024) |
| Immovable Property | Held ≤ 24 months | Held > 24 months |
| Other Assets | Held ≤ 36 months | Held > 36 months |
Tax Rates on Capital Gains
| Type of Gain | Tax Rate | Special Provisions |
|---|---|---|
| LTCG on Listed Equity (STT paid) | 10% above ₹1 lakh | Section 112A, grandfathering till Jan 31, 2018 |
| STCG on Listed Equity (STT paid) | 15% | Section 111A |
| LTCG on Other Assets | 20% with indexation | Section 112 |
| STCG on Other Assets | As per slab rates | Added to total income |
Exemptions from Capital Gains Tax
- Section 54: LTCG on house property reinvested in another house
- Section 54F: LTCG on other assets reinvested in house property
- Section 54EC: Investment in specified bonds (NHAI, REC) up to ₹50 lakh
- Section 54GB: Investment in startup by individuals/HUF
Key Points
- Profit from sale of capital assets
- STCG: Assets held for shorter period
- LTCG: Assets held for longer period
- Equity LTCG above ₹1 lakh taxed at 10%
- Property LTCG taxed at 20% with indexation
- Exemptions available under Sections 54, 54F, 54EC