Have you ever heard about the concept of the Capital Gains Tax or CGT? Capital gains denote the profits earned by investors on capital asset sales. There are many types of taxes in India and Capital Gains Tax (CGT) is one of them.
As a result, such taxes are taxed under the head ‘income from capital gains. For it to be made taxable, the asset’s transfer must have been done in the previous financial year.
In other words, a capitals gain is the earnings that an investor is able to get when he/she sells the capital assets for a higher price than the buying price.
If you are unaware of this type of taxes in India, then this post will reveal some basic information about it. Let’s go ahead and know more:
What are the Forms of the Capital Gains?
A capital gain could be in any form of a property held by the holder except the following:
✓Stocks in trade
✓Raw materials or consumable stores kept for the use or purposes of profession or business
✓Movable personal effects except for archaeological collections, sculptures, jewellery, paintings or anything else held for personal use
✓Agricultural land – not to be located within 8 km from a municipality with a minimum population of up to 10,000
✓6.5% gold bonds, Special Bearer Bonds, National Defense Gold Bonds and gold deposits under the Gold Deposit Scheme
What are the Capital Gains Tax and versions in India?
Along with many taxes in India, the Capital Gains Tax the one that is computed on the received profits that one has earned by selling the capital asset. When it comes to taxation, they are classified under short-term and long-term capital assets. Read on:
● Short-Term Capital Assets
For all assets (shares and securities) that are held by the taxpayer for a period, not more than 3 years or 36 months preceding transfer date, it’s considered short-term capital assets.
● Long-Term Capital Assets
The long-term capital asset is easier to understand as well. Anyone holding shares and securities for more than 36 months before its transfer will be considered long-term capital assets. Instead of 36 months, some equity shares listed in a known stock exchange, listed debentures, UTI units, Government securities and Zero coupon bonds will be considered just for 12 months. Transfer means that you are giving up on your rights on an asset. It includes the exchange, sale and compulsory acquiring as per any law.
Capital Gains Tax in India
As per the Union Budget 2018, the long-term capital gains on listed securities’ sales exceeding Rs.1 lakh are taxed and are a part of taxes in India. On the other hand, the short-term capital gains in India are taxed at 15%. If you are selling debt mutual funds, in such cases, both short-term and long-term capital gains are taxed.
As per the Union Budget 2018, the long-term capital gains on listed shares and securities’ sales beyond Rs.1 lakh would be taxable at 10%. As a result, you won’t get the benefit of indexation here. All amounts gained after 31st January 2018 would be taxed.
There are various types of income tax calculators are available in India including Capital Gains Tax Calculator.
If you don’t know how to calculate taxes on your capital gains, you can easily use the income tax calculator made for computing CGT.
The Capital Gains Tax (CGT) may not apply to all and is basically for people who have invested in shares and securities of multiple types in India. If you have also invested in such assets, the discussed should have helped you understand more.