{"id":22125,"date":"2023-08-02T04:05:19","date_gmt":"2023-08-02T04:05:19","guid":{"rendered":"https:\/\/blog.researchandranking.com\/?p=22125"},"modified":"2024-06-18T10:45:34","modified_gmt":"2024-06-18T05:15:34","slug":"capital-gains-tax-a-step-by-step-guide","status":"publish","type":"post","link":"https:\/\/www.equentis.com\/blog\/capital-gains-tax-a-step-by-step-guide\/","title":{"rendered":"Capital Gains Tax: A Step-By-Step Guide"},"content":{"rendered":"
<\/div>\n

Introduction<\/h2>\n\n\n\n

Capital gains<\/a> are an essential aspect of personal finance, involving the profits earned from selling assets like stocks, real estate, or mutual funds<\/a>. Understanding the definition and significance of capital gains and the associated tax implications is crucial. <\/p>\n\n\n\n

What is Capital Gain?<\/h2>\n\n\n\n

Capital gain refers to an investor’s net profit by selling a capital asset at a price higher than its purchase cost. The entire value of selling a capital asset is taxable income<\/a>. For taxation in a specific financial year, the transfer of the capital asset must occur in the previous fiscal year.<\/p>\n\n\n\n

Financial gains from selling an asset do not apply to inherited property unless there is a change in ownership. The Income Tax<\/a> Act exempts assets received as gifts or through inheritance from being included in an individual’s income calculation.<\/p>\n\n\n\n

Also Read: What is Paid Up Capital?<\/a><\/p>\n\n\n\n

What are Capital Assets?<\/h3>\n\n\n\n

Capital assets include buildings, lands, houses, vehicles, Mutual Funds, and jewelry. The rights of management or legal rights over a company are also considered capital assets.<\/p>\n\n\n\n

What are the types of Capital Assets?<\/h3>\n\n\n\n

The two types of Capital Assets are:<\/p>\n\n\n\n

Short-Term Capital Assets (STCA):<\/strong> These assets are held for 36 months or less, except for immovable properties like land and buildings, where the criteria changed to 24 months from the fiscal year 2017-18. Selling a house property after holding it for 24 months qualifies any income generated as long-term capital gain if sold after March 31, 2017. <\/p>\n\n\n\n

The reduced period does not affect movable assets like jewelry and debt-oriented mutual funds. Regardless of the purchase date, certain assets are considered short-term if held for 12 months or less, including equity\/preference shares, securities, UTI units, equity-oriented mutual funds, and zero coupon bonds.<\/p>\n\n\n\n

Long-Term Capital Assets (LTCA):<\/strong> These assets are held for more than 36 months or 24 months or more (from fiscal year 2017-18) for land, buildings, and house property. Equity\/preference shares, securities, UTI units, equity-oriented mutual funds, and zero coupon bonds qualify as long-term capital assets for over 12 months.<\/p>\n\n\n\n

How are Inherited Capital Assets Classified?<\/h3>\n\n\n\n

When an asset is obtained through gift, will, succession, or inheritance, the duration the previous owner held the asset determines whether it qualifies as a short-term or long-term capital asset. Additionally, for bonus or rights shares, the holding period is calculated from the date of allotment.<\/p>\n\n\n\n

Tax Type<\/strong><\/td>Condition<\/strong><\/td>Applicable Tax<\/strong><\/td><\/tr>
Tax on Long-Term Capital Gains<\/a><\/td>When selling equity shares or equity-oriented fund units<\/td>10% on amount exceeding \u20b91,00,000<\/td><\/tr>
Tax on Long-Term Capital Gains<\/td>For other cases not involving equity-oriented fund units or equity shares<\/td>20%<\/td><\/tr>
Tax on Short-Term Capital Gains<\/td>In cases where Securities Transaction Tax (STT) is not levied<\/td>Added to your Income Tax Return (ITR<\/a>) and taxed according to income tax slab rates<\/a><\/td><\/tr>
Tax on Short-Term Capital Gains<\/td>When Securities Transaction Tax (STT) is applicable<\/td>15%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

What are the Exclusions from Capital Assets?<\/h3>\n\n\n\n

Items excluded from capital assets are:<\/p>\n\n\n\n