Capital Gain

Tax

Quick Definition

Capital Gain is the profit earned from selling a capital asset such as stocks, property, or mutual funds at a price higher than its purchase cost.

Detailed Explanation

Capital Gain arises when the selling price of an asset exceeds its purchase price. It is a key concept in investments and taxation, as profits from asset sales are subject to tax.

Types of Capital Gains (India)

  • Short-Term Capital Gain (STCG):
    Profit from assets held for a short duration (e.g., less than 1 year for equities)
  • Long-Term Capital Gain (LTCG):
    Profit from assets held for a longer period (e.g., more than 1 year for equities)

Common Assets for Capital Gains

  • Stocks and mutual funds
  • Real estate/property
  • Gold and other investments

Taxation in India

Capital gains are taxed as per rules of the Income Tax Department of India. Tax rates differ based on asset type and holding period.

Why Capital Gains Matter

  • Major source of wealth creation
  • Important for investment planning
  • Affects tax liability and returns

Example

"If you buy shares for ₹50,000 and sell them for ₹70,000, your capital gain is ₹20,000."

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