Mandatory Compliances Services

Capital Gains

Capital gain is any profit or gain that comes from the sale of a “capital asset”, ie any kind of property held by an assessee, excluding goods held in the form of stock-in-trade, agricultural land, and personal effects. This gain is categorized as ‘income’, and hence is taxable under the law for the year in which the transfer of the capital asset takes place. Capital assets can include land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, and jewellery.

Assets received as gifts by way of an inheritance or will are exempted from Capital gains tax under The Income Tax Act. However capital gains tax will become applicable, once the person who inherited the asset sells it. Depending on the type of capital gains ITR -2, ITR-3, ITR-5, or ITR-6 forms are to be filed with the Income Tax Department.

Types of Capital Gains

Capital gains calculations varies for assets held for a longer period and for those held over a shorter period.

  • Short-term capital Gain- STCG Any asset that is only held for a period of 36 months or less is called a short-term capital asset. For immovable properties such as land, building and house property, the criteria is 24 months from FY 2017-18. Any gain obtained from selling such assets is considered as a short-term capital gain (STCG) and taxed accordingly.
  • Long-term capital Gain- LTCG Any asset that is held for more than 36 months is called a long-term capital asset. All movable properties such as jewellery, debt-oriented mutual funds etc will be classified as a long-term capital asset if held for more than 36 months. Any gain obtained from selling long-term capital assets is considered as a long-term capital gain (STCG) and taxed accordingly.

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