LONG TERM CAPITAL GAINS TAX

About:

• Capital Gain: Any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain.
  
  
• Capital Gains Tax: This gain or profit is considered as income and hence charged to tax in the year in which the transfer of the capital asset takes place. This is called capital gains tax, which can be short-term or long-term.
  
  
• Examples of capital assets: Land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, and jewellery.
  
  
• The following are not considered capital asset:
  • Any stock, consumables or raw material, held for the purpose of business or profession
    
    
  • Personal goods such as clothes and furniture held for personal use
    
    
  • Agricultural land in rural India
    
    
  • 6½% gold bonds (1977) or 7% gold bonds (1980) or national defence gold bonds (1980) issued by the central government
    
    
  • Special bearer bonds (1991)
    
    
  • Gold deposit bond issued under the gold deposit scheme (1999)
    
    
  
  
  

Types of Capital Assets:

• Short-term capital asset: An asset which is held for not more than 36 months or less is a short-term capital asset. The criteria of 36 months have been reduced to 24 months in the case of immovable property being land, building, and house property, from FY 2017-18.
  
  
• Long-term capital asset: An asset that is held for more than 36 months is a long-term capital asset. The reduced period of aforementioned 24 months is not applicable to movable property such as jewellery, debt-oriented mutual funds etc. The assets are:
  • Equity or preference shares in a company listed on a recognized stock exchange in India
    
    
  • Securities (like debentures, bonds, govt securities etc.) listed on a recognized stock exchange in India
    
    
  • Units of UTI, whether quoted or not
    
    
  • Units of equity oriented mutual fund, whether quoted or not
    
    
  • Zero coupon bonds, whether quoted or not
    
    
  
  
  
• Tax on long-term capital gain: Long-term capital gain is taxable at 20% + surcharge and education cess.