Capital gain is an increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short-term (one year or less) or long-term (more than one year) and must be claimed on income taxes.
Short-term Capital Asset
Any capital asset held by the taxpayer for a period of not more than 36 months immediately preceding the date of its transfer will be treated as a short-term capital asset.
However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.
Long-term Capital Asset
Any capital asset held by the taxpayer for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset.
However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India (listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014), units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months.
Short-term capital gain and Long-term Capital Gains
Capital gain arising on the sale of short-term capital assets is termed short-term capital gain, and capital gain arising on the transfer of long-term capital assets is termed long-term capital gain. However, there are a few exceptions to this rule, like the fact that gain on depreciable assets is always taxed as short-term capital gains.
