Free Consultation by Expert

Many thanks to Setbharatbiz. We had an excellent experience working with its expert. They have a strong sense of professionalism when dealing with clients.

Mudassir CEO, Twinfinty DigiTech Solutions

We would recommend Setbharatbiz incorporation services to any founder without a second doubt. The process was beyond efficient and shows Setbharatbiz founder's vision

Nagasrinivas Director,Prakash Nagasrinivas & Saradhy Associates

I was searching for a company for assistance in the incorporation services. Then one of my friend tell me about Setbharatbiz and definitely the Setbharatbiz is the best.

Prakash Kakani Director, PNS EV Hub

Overview

Capital Gains Tax

Capital Gains Tax is a tax levied on the profit earned from the sale of capital assets such as property, stocks, bonds, or gold. The tax is categorized into short-term capital gains (STCG) and long-term capital gains (LTCG) depending on the holding period of the asset. It is governed by the Income Tax Act, 1961, and requires careful planning to minimize tax liability while ensuring compliance.

Importance

1. Compliance with Tax Laws : Ensures adherence to legal requirements under the Income Tax Act.

2. Revenue for the Government : Contributes to the national treasury through taxation on asset sales.

3. Transparency in Transactions : Mandates reporting of capital gains in Income Tax Returns (ITR).

4. Planning Opportunities : Allows for optimization through exemptions and deductions under specific sections.

5. Impact on Investment Decisions : Influences investment strategies by considering tax implications.

Types of Capital Gains

1. Short-Term Capital Gains (STCG) :

  • Gain earned on the sale of assets held for a short period :
    • Equity Shares/Mutual Funds : Less than 12 months.
    • Other Assets (Property, Gold) : Less than 36 months.
  • Tax Rate :
    • Equity-Oriented Investments : 15% (if STT is paid).
    • Other Assets : As per the applicable income tax slab.

2. Long-Term Capital Gains (LTCG) :

  • Gain earned on the sale of assets held for a longer period :
    • Equity Shares/Mutual Funds : More than 12 months.
    • Other Assets (Property, Gold) : More than 36 months.
  • Tax Rate :
    • Equity-Oriented Investments : 10% (above ₹1 lakh, without indexation).
    • Other Assets : 20% (with indexation).


Documents Required



Features

Features & Benefits of Capital Gains Tax

Differentiated Tax Rates
Separate rates for short-term and long-term capital gains.
Prev Next
Indexation Benefit
LTCG on non-equity assets allows indexation to adjust for inflation.
Prev Next
Investment-Based Exemptions
Opportunities to save tax by investing in specified options under Section 54, 54EC, etc.
Prev Next
Applicability Across Assets
Covers a wide range of assets, including property, stocks, and gold.
Prev Next
TDS on Property Sales
Mandates TDS deduction by the buyer for property transactions above ₹50 lakh.
Prev Next

Capital Gains Tax

Compliance Through ITR Filing
Capital gains must be reported in the annual income tax return.
Prev Next
Impact on Portfolio Planning
Encourages long-term investments to benefit from lower LTCG tax rates.
Prev Next
Loss Carry Forward
Capital losses can be set off against capital gains and carried forward for 8 years.
Prev Next


Comparison of STCG vs LTCG

Feature Short-Term Capital Gains (STCG) Long-Term Capital Gains (LTCG)
Holding Period <12 months (equity) or <36 months (others) 12 months (equity) or >36 months (others)
Tax Rate 15% (equity), slab rate (others) 10% (equity above ₹1 lakh), 20% (others with indexation)
Indexation Benefit Not Applicable Applicable for non-equity assets
Exemptions Limited Available under Sections 54, 54F, 54EC


Frequently Asked Questions

What is Capital Gains Tax?

It is the tax levied on profits earned from the sale of capital assets like property, stocks, or gold.

What is the holding period for long-term capital gains?

12 months for equity-oriented investments and 36 months for other assets like property and gold.

How is STCG on equity taxed?

Short-term capital gains on equity are taxed at 15% if STT (Securities Transaction Tax) is paid.

Can I save Capital Gains Tax?

Yes, you can save LTCG tax by investing in options like residential property (Section 54), NHAI/REC bonds (Section 54EC), or agricultural land (Section 54B).

What is indexation, and how does it help?

Indexation adjusts the purchase price for inflation, reducing LTCG tax liability for non-equity assets.

Is TDS applicable on property sales?

Yes, the buyer must deduct 1% TDS for property transactions exceeding ₹50 lakh.

Can I carry forward capital losses?

Yes, capital losses can be carried forward for 8 years and set off against future capital gains.

What is the tax rate for LTCG on equity above ₹1 lakh?

LTCG on equity above ₹1 lakh is taxed at 10% without indexation.

How is capital gains tax reported?

Capital gains must be reported in Schedule CG of the Income Tax Return form.

What is the penalty for not reporting capital gains?

Non-reporting may attract penalties, interest, or scrutiny from the Income Tax Department.

Capital Gains Tax

Overview

Capital Gains Tax

Capital Gains Tax is a tax levied on the profit earned from the sale of capital assets such as property, stocks, bonds, or gold. The tax is categorized into short-term capital gains (STCG) and long-term capital gains (LTCG) depending on the holding period of the asset. It is governed by the Income Tax Act, 1961, and requires careful planning to minimize tax liability while ensuring compliance.

Importance

1. Compliance with Tax Laws : Ensures adherence to legal requirements under the Income Tax Act.

2. Revenue for the Government : Contributes to the national treasury through taxation on asset sales.

3. Transparency in Transactions : Mandates reporting of capital gains in Income Tax Returns (ITR).

4. Planning Opportunities : Allows for optimization through exemptions and deductions under specific sections.

5. Impact on Investment Decisions : Influences investment strategies by considering tax implications.

Types of Capital Gains

1. Short-Term Capital Gains (STCG) :

  • Gain earned on the sale of assets held for a short period :
    • Equity Shares/Mutual Funds : Less than 12 months.
    • Other Assets (Property, Gold) : Less than 36 months.
  • Tax Rate :
    • Equity-Oriented Investments : 15% (if STT is paid).
    • Other Assets : As per the applicable income tax slab.

2. Long-Term Capital Gains (LTCG) :

  • Gain earned on the sale of assets held for a longer period :
    • Equity Shares/Mutual Funds : More than 12 months.
    • Other Assets (Property, Gold) : More than 36 months.
  • Tax Rate :
    • Equity-Oriented Investments : 10% (above ₹1 lakh, without indexation).
    • Other Assets : 20% (with indexation).


Documents Required

For Tax Advisory Services



Features

Features & Benefits of Capital Gains Tax

Differentiated Tax Rates

Separate rates for short-term and long-term capital gains.

Indexation Benefit

LTCG on non-equity assets allows indexation to adjust for inflation.

Investment-Based Exemptions

Opportunities to save tax by investing in specified options under Section 54, 54EC, etc.

Applicability Across Assets

Covers a wide range of assets, including property, stocks, and gold.

TDS on Property Sales

Mandates TDS deduction by the buyer for property transactions above ₹50 lakh.

Compliance Through ITR Filing

Capital gains must be reported in the annual income tax return.

Impact on Portfolio Planning

Encourages long-term investments to benefit from lower LTCG tax rates.

Loss Carry Forward

Capital losses can be set off against capital gains and carried forward for 8 years.



Comparison of STCG vs LTCG

Feature Short-Term Capital Gains (STCG) Long-Term Capital Gains (LTCG)
Holding Period <12 months (equity) or <36 months (others) 12 months (equity) or >36 months (others)
Tax Rate 15% (equity), slab rate (others) 10% (equity above ₹1 lakh), 20% (others with indexation)
Indexation Benefit Not Applicable Applicable for non-equity assets
Exemptions Limited Available under Sections 54, 54F, 54EC


Frequently Asked Questions

What is Capital Gains Tax?

It is the tax levied on profits earned from the sale of capital assets like property, stocks, or gold.

What is the holding period for long-term capital gains?

12 months for equity-oriented investments and 36 months for other assets like property and gold.

How is STCG on equity taxed?

Short-term capital gains on equity are taxed at 15% if STT (Securities Transaction Tax) is paid.

Can I save Capital Gains Tax?

Yes, you can save LTCG tax by investing in options like residential property (Section 54), NHAI/REC bonds (Section 54EC), or agricultural land (Section 54B).

What is indexation, and how does it help?

Indexation adjusts the purchase price for inflation, reducing LTCG tax liability for non-equity assets.

Is TDS applicable on property sales?

Yes, the buyer must deduct 1% TDS for property transactions exceeding ₹50 lakh.

Can I carry forward capital losses?

Yes, capital losses can be carried forward for 8 years and set off against future capital gains.

What is the tax rate for LTCG on equity above ₹1 lakh?

LTCG on equity above ₹1 lakh is taxed at 10% without indexation.

How is capital gains tax reported?

Capital gains must be reported in Schedule CG of the Income Tax Return form.

What is the penalty for not reporting capital gains?

Non-reporting may attract penalties, interest, or scrutiny from the Income Tax Department.

Related Services