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) 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, and 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 more than 36 months immediately preceding the date of its transfer will be treated as a long-term capital asset.
However, in respect of certain assets like shares (equity or preference) 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, and 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.
