If you have started investing and creating assets to earn money out of it. It is important to know what is a capital gain tax (CGT). In India, the government wants a share on everything you make, be it a salary, investment, or anything you buy. The Government will take a share.
According to me, they are the best business consultants who get a share in anything to everything.
Any profit you make on your assets after selling it is called a capital gain, that is selling your land, property, shares, mutual funds, gold, vehicles, or anything.
Since you make a profit you have to pay tax, which is called a CGT. It is further classified into
This is how capital gain tax is calculated.
As the name suggests, any sale profit you obtain on your assets by holding it for 36 months or less is called short term capital gain (STCG).
These 36 months are not applicable to the land, property, or any immovable properties. For immovable properties its 24 months or less.
And for equity shares it is 12 months .
The profits obtained from short term capital gain minus the expense is calculated according to your income tax rate slab. For example,
If you bought a flat in January 2020 for 40 lakhs. And you decide to sell your flat in January 2021 for 43 lakhs with brokerage expense Rs 30,000. Since you held the flat only for 12 months it attracts short term capital gain STCG.
| Particulars | Amount In Rs |
| The amount for the Flat sold in Jan 2021 | 43,00,000 |
| Expense incurred | 30,000 |
| Net sale value | 42,70,000 |
| The purchase cost of the flat in Jan 2020 ( You can also add any additional cost incurred like interior work or extra painting ) | 40,00,000 |
| Total Profit on the sale ( STCG) | 2,70,000 |
So this profit obtained will be added to your income tax calculation under the heading STCG.
Any profits obtained by selling assets after holding it more than 12 months or 36 months ( depends on the type of assets) will attract long term capital gain tax (LTCG).
LTCG tax is usually calculated at 20% and for some special cases, it is 10%.
For example, if you have a capital gain of Rs 3,00,000 from a property you bought 5 years back you attract a 20% LTCG. So you end up paying Rs 60,000 as tax.
And that 10% of special cases come for stock and securities, which have a different calculation and conditions.
These tax conditions keep changing every year, so consult your personal financial advisor before you make any sale.
Yes, In India they give a certain exemption for senior citizens. If you come under the category of 60- 80 years old and few exemptions for Hindu undived family (HUF).
I am not including much on the conditions and slabs because it keeps changing according to the financial budgets of the government. This article is to keep you informed about these taxes when you obtain high profits.
