What is Capital Gains Tax In India: Types, Tax Rates, Calculation, Exemptions & Tax Saving
Any profit or gain that arises from the sale of a ‘capital asset’ is known as ‘income from capital gains’. Such capital gains are taxable in the year in which the transfer of the capital asset takes place. This is called capital gains tax. There are two types of Capital Gains: short-term capital gains(STCG) and long-term capital gains(LTCG).
Land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, and jewellery are a few examples of capital assets. This includes having rights in or in relation to an Indian company. It also includes the rights of management or control or any other legal right.
Terms You Need to Know:
Full value consideration: The consideration received or to be received by the seller as a result of transfer of his capital assets. Capital gains are chargeable to tax in the year of transfer, even if no consideration has been received.
Cost of acquisition: The value for which the capital asset was acquired by the seller.
Cost of improvement: Expenses of a capital nature incurred in making any additions or alterations to the capital asset by the seller.
Note:
- In certain cases where the capital asset becomes the property of the taxpayer otherwise than by an outright purchase by the taxpayer, the cost of acquisition and cost of improvement incurred by the previous owner would also be included.
- Improvements made before April 1, 2001, is never taken into consideration.