Capital Gains

What is capital gains?

Capital gains refer to the financial gain that results from the sale of a capital asset, such as real estate or stocks. The amount of the gain is determined by subtracting the original purchase price from the selling price. If the selling price is higher than the original purchase price, then the difference is considered a capital gain.

Types of capital gains

Long term capital gain

A long-term capital gain is realized when an investor sells an asset that they have held for over a year for a profit. The length of time that the asset is held affects the tax rate on the gain, with longer-held assets being taxed at a lower rate.

Short term capital gain

Short-term capital gains are realized when an investor sells an asset that they have held for one year or less. In order to qualify as a short-term capital gain, the asset must have been sold for more than its original purchase price. Short-term capital gains are subject to taxation at the investor's marginal tax rate.

How to save capital gains tax?

There are a few ways to save on capital gains taxes in India. One way is to include expenses incurred during the sale of the asset. These expenses can include brokerage fees, stamp duty, and legal fees. Another way to save on capital gains taxes is to reinvest the proceeds from the sale into another eligible asset. This is known as a rollover and can be used for both short-term and long-term investments. Finally, taxpayers can also avail of certain exemptions and deductions. For example, long-term capital gains on the sale of shares and mutual funds are exempt from taxes.