19 November 2010
Capital Gains Capital gains refer to gains arising out of sale or transfer of capital assets. Similarly, any loss arising out of sale or transfer of capital assets is known as a capital loss. Capital gains are subject to capital gains tax payable in the year in which such sale or transfer takes place.
Long Term Capital Gain Gain arising from sale of capital assets like shares after a period of one year is known as long-term capital gain.
Short Term Capital Gain Any profit/gain arising out of sale of capital assets (like shares etc.) before a period of one year is known as short-term capital gain.
Difference between short term and long-term capital assets Capital gains are classified into two types, namely, long term and short term. Capital assets which are held for a period more than 36 months are known as long-term capital assets, whereas capital assets held for a period less than 36 months are termed as short-term capital assets. Capital assets also include shares, debentures and units of mutual funds, but the period of holding in case of these assets is only 12 months and not 36 months. Profit on sale/transfer of long-term capital assets is tax-free whereas profit on short-term capital assets is taxable as regular income.
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