What is short and long term capital gain tax – Investment in residential properties is among the highly sought-after assets. The main motive is to own a home, whilst others are investing in finding a return mostly on the selling of immovable property. Household property is indeed a capital asset for tax purposes. The deficit or surplus on the sale of the property is taxable or approved as a deduction on the income tax return. In the same way, capital gains or losses occur from various types of assets. We’re going to address the chapter on ‘Capital Gains’ here.
What is short term capital gain tax?
An asset retained for a duration of 3 years or less shall be a short-term capital asset. The conditions of 3 years were decreased to 2 years in respect of fixed assets, like land, building, and home, since the 2017-2018 fiscal year.
Let’s take an example, if you sell the land after owning it for a duration of 2 years, all income that occurs would be viewed as long-term capital gain given that the land is sold after 31 March 2017.
Tax on Short-Term Gains
| Tax Type | Condition | Tax applicable |
| Short-term capital gains tax | When securities transaction tax is not applicable | The short-term capital gain is credited to the income tax return and the taxpayer is charged on the basis of his income tax slab. |
| Short-term capital gains tax | When securities transaction tax is applicable | 15% |
What is long term capital gain tax?
An asset that has been owned for any further than 3 years is a long-term capital asset. The shortened duration of the 2 years referred to above is not extend to movable property like gold, mutual funds, etc. If kept for further than 3 years as before, it would be treated as a long-term capital asset.
Any assets are called short-term capital assets if kept for 12 months or less. This situation applies if the period of conversion is after 10 July 2014 (regardless of the date of acquisition).
The assets are as follows:
- Securities (such as shares, bonds, government securities, etc.) listed on a registered Indian stock exchange
- Equity or preference shares in a firm registered on an Indian stock exchange
- Zero-coupon bonds, if or not quoted
- Units of an equity-oriented mutual fund, if or not quoted
- Units of UTI, if or not quoted
If the assets mentioned above are kept for a duration of further than 12 months, these are deemed to be long-term capital assets.
In the event that an asset is purchased by donation, estate, or inheritance, the time during which the asset was owned by the former owner is often shown in the calculation if it is a short or long term capital asset. In the situation of bonus shares or rights shares, the retention duration shall be calculated since the day upon which bonus shares or rights shares are distributed.
Tax on Long-Term Gains
| Tax Type | Condition | Tax applicable |
| Long-term capital gains tax | Excluding the sale of equity shares / equity-oriented units of the fund | 20% |
| Long-term capital gains tax | On the sale of Equity shares/ units of equity oriented fund | 10% above and beyond Rs 1 lakh |
