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What are Capital Gains?
Capital gains refer to the profit you make from selling a capital asset, such as stocks, mutual funds, real estate, or gold, for a price higher than its purchase price. These gains are considered income and are taxable in India.
Gains are classified as:
- Short-Term Capital Gains (STCG): Profit from assets held for a shorter duration (varies by asset type).
- Long-Term Capital Gains (LTCG): Profit from assets held for a longer duration. LTCG often receives preferential tax treatment, sometimes including indexation benefits.
Key Tax Rules Overview (Illustrative)
- Holding Period: Crucial for STCG vs. LTCG. Equity: 1 yr, Property: 2 yrs, Debt MFs (old regime) & Gold: 3 yrs.
- Indexation: For LTCG on property, gold, and old-regime debt MFs, purchase cost is inflation-adjusted using CII.
- Equity STCG: Taxed at 20% (if STT paid).
- Equity LTCG: Gains over ₹1.25 lakh/FY taxed at 12.5% (no indexation, STT paid).
- Debt MFs (New Regime - Post Apr 1, 2023): All gains taxed at your income slab rate.
- Other Cases: Many STCG (property, gold, debt) and some LTCG are taxed at slab rates or specific rates (e.g., 20% with indexation).
Tax laws are complex and subject to change. Consult a tax advisor.
Frequently Asked Questions (FAQ)
Capital gains tax is a tax levied on the profit (capital gain) realized from the sale of a capital asset. The tax rate and calculation method depend on whether the gain is short-term or long-term, and the type of asset sold.
The holding period is the duration for which you held an asset before selling it.
- For listed equity shares & equity MFs: More than 12 months is Long-Term.
- For immovable property (land/building): More than 24 months is Long-Term.
- For debt MFs (invested before 01/04/2023), gold, unlisted shares: More than 36 months is Long-Term.
- For debt MFs (invested on/after 01/04/2023): Gains are always treated as Short-Term for determining tax rate (slab rate applied).
Indexation adjusts the purchase price of an asset for inflation using the Cost Inflation Index (CII). This increases the cost base, thereby reducing the taxable Long-Term Capital Gain (LTCG). It typically applies to LTCG from assets like real estate, gold, and debt mutual funds under the old tax regime (investments made before April 1, 2023). It does not apply to LTCG from listed equity/equity MFs or new regime debt MFs.
Long-Term Capital Gains (LTCG) from the sale of listed equity shares and equity-oriented mutual funds (where Securities Transaction Tax - STT is paid) are exempt up to ₹1.25 lakh in a financial year. Gains exceeding this threshold are taxed at 12.5% (plus applicable surcharge and cess) without any indexation benefit. (Rates as per recent discussions, subject to official notifications).
For investments made in specified mutual funds (where Indian equity exposure is not more than 35%, i.e., most debt funds) on or after April 1, 2023, all capital gains are treated as Short-Term Capital Gains and taxed at the investor's applicable income tax slab rate, regardless of the holding period. Indexation benefit is not available. Investments made before April 1, 2023, follow the old rules: STCG (held ≤ 36 months) at slab rate, LTCG (held > 36 months) at 20% with indexation.
Capital losses can usually be set off against capital gains. Short-term capital losses (STCL) can be set off against both STCG and LTCG. Long-term capital losses (LTCL) can only be set off against LTCG. Unused losses can typically be carried forward for up to 8 assessment years to be set off in future years. It's advisable to consult a tax professional for specific rules on loss set-off and carry-forward.
Disclaimer
This Capital Gains Tax Calculator is for informational and illustrative purposes only and does not constitute financial or tax advice. Tax laws are subject to change and interpretation. Calculations are estimates based on the inputs provided and common understanding of tax rules (reflecting discussions around Budget 2024 changes for equity where STCG is 20% and LTCG is 12.5% over ₹1.25L; other rates as per prevailing laws). The calculator may not cover all specific scenarios, exemptions (like Section 54 for property), or surcharge implications for very high incomes. Always consult with a qualified tax advisor or chartered accountant for personalized advice before making financial decisions. CII for FY 2025-26 is assumed based on the latest available if not yet officially notified for sales in that year.