Taxation On Capital Gain

by | Apr 5, 2024 | TAX

What is Capital Gain

Any profit or gain that arises from the sale of a ‘capital asset’ is known ‘income from capital gains’. Such capital gains are taxable in the year in which the transfer of the capital asset takes place. This is called capital gains tax. There are two types of Capital Gains: short-term capital gains (STCG) and long-term capital gains(LTCG).

What is Capital Asset

Any kind of property owned by an assessee is known as a capital asset. It may or may not be connected to business or profession. Capital Assets includesMovable/Immovable assets like land, building, house property or tangible/intangible assets like patent, trademark etc

Type of Capital Asset

Types of capital assets

Short Term Capital Asset

Capital asset held by assessee for not more than 36 months are called short-term capital assets. The gains from selling these assets are called short-term capital gains.

However, following assets shall be treated as short term capital asset if they are held for:

Not more than 12 monthsNot more than 24 months
(a) Securities (other than unit) listed on a recognized stock exchange in India,
(a) Unlisted shares and
(b) Units of UTI,
(b) Immovable property, being land or building or both.
(c) Units of an equity oriented mutual fund,
(d) Equity oriented ULIP which are treated as capital asset u/s 2(14)
(e) Zero Coupon bond.

Long term Capital Asset

It means a capital asset which is not a short-term capital asset.

Long term capital gain and Short term capital gain

  • Short Term Capital Gain [Sec. 2(42B)]: Capital gain arising on the transfer of shortterm capital asset.
  • Long Term Capital Gain [Sec. 2(29B)]: Capital gain arising on the transfer of long term capital asset.

Tax Rates – Long-Term Capital Gains and Short-Term Capital Gains

Applicable Tax

Long-term capital gains tax (LTCG) 

Sale of:
– Listed Equity shares (If STT has been paid on purchase and sale of such shares) 
– units of equity oriented mutual fund (If STT has been paid on sale of such units)

10% over and above Rs 1 lakh 



Short-term capital gains tax (STCG)

When Securities Transaction Tax (STT) is not applicable

Normal slab rates

When STT is applicable


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