The profit earned from selling a capital asset (property, shares, mutual funds, etc.) for more than its purchase price, taxable under the Income Tax Act.
Capital Gains arise when a capital asset is transferred (sold, exchanged, or relinquished) at a price higher than its cost of acquisition. Under the Indian Income Tax Act, capital gains are classified as Short-Term (STCG) or Long-Term (LTCG) based on the holding period. For listed equity shares, LTCG applies after 12 months; for immovable property, after 24 months; for other assets, after 36 months. The cost of acquisition can be indexed using the Cost Inflation Index (CII) for LTCG calculation, reducing the taxable gain. Various exemptions are available under Sections 54, 54EC, and 54F for reinvestment in specified assets.
Property bought in 2016 for ₹40,00,000, sold in 2026 for ₹1,00,00,000. CII 2016: 264, CII 2026: 363 (assumed). Indexed cost: ₹40,00,000 × (363 ÷ 264) = ₹55,00,000. LTCG: ₹1,00,00,000 − ₹55,00,000 = ₹45,00,000. Tax @ 20% = ₹9,00,000.
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Listed equity/equity mutual funds: 12.5% above ₹1,25,000 (Budget 2024). Immovable property and other assets: 12.5% without indexation (from July 2024). Debt mutual funds: taxed at slab rates (no LTCG benefit since April 2023).
Invest in a new residential property (Section 54), invest in specified bonds like NHAI/REC within 6 months (Section 54EC, up to ₹50 lakh), invest sale proceeds in a new house (Section 54F), or deposit in Capital Gains Account Scheme if reinvestment is not immediate.
A tax paid directly by an individual or organization to the government, where the burden cannot be shifted to another person. Examples include income tax, corporate tax, and capital gains tax.
A 12-month period used by businesses and governments for financial reporting, budgeting, and tax purposes, which may differ from the calendar year.
The residual interest in the assets of a business after deducting all its liabilities. Also called owner's equity, net worth, or shareholders' equity.
A portion of a company's earnings distributed to shareholders as a return on their investment, typically paid quarterly or annually.
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