CAPITAL GAINS TAX

This is a direct tax and applies on the sales of all ‘assets’ if a profit (gain) has been made by the owner of the asset—a tax on the ‘gains’ one gets by selling assets. The tax has been classified into two—

(i) Short Term Capital Gain (STCG): It applies ‘if the Asset has been sold within 36 months of owning it’. In this case the ‘rate’ of this tax is similar to the normal income tax slab. But the period becomes ‘12 months’ in cases of shares, mutual funds, units of the UTI and ‘zero coupon bond’—in this case the ‘rate’ of this tax is 15 per cent.

(ii) Long Term Capital Gain (LTCG): It applies ‘if the asset has been sold after 36 months of owning it’. In this case the ‘rate’ of this tax is 20 per cent. In cases of shares, mutual funds, units of the UTI and ‘zero coupon bond’ there is ‘exemption’ (zero tax) from this tax (provided that such transaction is subject to ‘Securities Transaction Tax’).