What is Capital Gains Tax in India and what the rates of Tax - An overview

What is Capital Gains Tax in India and what the rates of Tax - An overview

Before understanding the tax on Capital gains and its impact; lets first understand what is a Capital Asset as per Income Tax Act, 1961.

What is Capital Asset?

As per section 2 (14) of the Income Tax Act, 1961, a capital asset is defined as property of any kind held by an assessee, whether or not connected with his business or profession, but does not include the following–

(i)                  any stock-in-trade, consumable stores or raw materials held for the purposes of his business or profession;

(ii)                personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use with certain exclusions ( likejewellary, drawings,archaeological collections,etc.);

(iii)               specified agricultural land; and

(iv)              various gold bonds issued by government.

What is Capital Gain?

Capital gains refer to the gain arising out of sale of a capital asset at profit.

What are the tax implications of a Capital Gains?

As per section 45 of Income tax Act,1961 - Any profits or gains arising from the transfer of a capital asset. The term transfer is defined to include everything except the specified transactions excluded by section 47.

What are the rates of taxes for Capital Gains?

The rates of taxes depend on the fact whether the asset transferred is a short term capital assets or a long term capital assets. Short Term Capital Gains arises on the transfer of short term capital assets and long term capital gains arises on transfer of long term capital assets.

Let us take a look at what are the definition of long term capital assets and short term capital assets. 

Rates of taxes for Capital Gains Tax for Short Term Capital Gains and Long Term Capital Gains?

Disclaimer:

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