{"id":26429,"date":"2019-11-07T19:06:47","date_gmt":"2019-11-07T13:36:47","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=26429"},"modified":"2019-11-07T18:07:19","modified_gmt":"2019-11-07T12:37:19","slug":"definition-difference-between-long-term-short-term-capital-gain","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/definition-difference-between-long-term-short-term-capital-gain\/","title":{"rendered":"What is Capital Gain Tax and How Long – Term Capital Gain is Different from Short Term Capital Gain?"},"content":{"rendered":"

Capital gain is a gain or profit that arises from the sale of a ‘capital asset’<\/strong> and comes under the category of ‘income’<\/strong>, therefore a person is required to pay Capital gain tax for the amount in the year in which the transfer of the capital asset takes place. Capital gains tax is divided into two categories i.e. Short-term Capital Gain<\/strong> or Long-term Capital Gain<\/strong>. A Capital Gain is a gain that occurs on the property<\/a>\/security which has been sold higher than the price on which it has been purchased i.e. Purchase Price<\/strong>[1]<\/a><\/sup>.<\/strong><\/p>\n\n\n\n

Key points of the Capital Gain<\/h2>\n\n\n\n
  1. Any profit or gain arises from the sale of the capital asset is termed as Capital Gain.<\/li>
  2. The Inherited property is not covered under the Capital gain as there is no sale. The inherited property represents a transfer of ownership.<\/li>
  3. Capital Gain is calculated based on the Full value consideration, Cost of Acquisition and cost of the improvement.<\/li>
  4. Capital Gain is categorized into 2 parts-Long term Capital Gain and short-term Capital Gain.<\/li><\/ol>\n\n\n\n

    The Terminology used in the Capital Gain Tax Topic<\/h2>\n\n\n\n

    Capital Asset<\/h3>\n\n\n\n

    Capital assets include Land, Building, House property, Vehicles, IPRs (Trademark and patents). It also includes machinery and jewelry. The assets include having rights in relation to an Indian Company. A Capital asset is of two types-Short-term Capital Assets and Long-term Capital Assets.<\/strong><\/p>\n\n\n\n

    An asset held for a period of 36 months\nor less than 36 months is termed as Short-term Capital Assets<\/strong>.<\/p>\n\n\n\n

    Exception<\/strong>–<\/p>\n\n\n\n

    1. In the\ncase of immovable property, the criteria are of 24 months<\/strong> instead of 36\nmonths<\/strong>.<\/li>
    2. Any\nincome arising out of the immovable property sold after 31st<\/sup> March\n2017, will be treated as Long -term Capital Gain<\/strong>.<\/li><\/ol>\n\n\n\n

      Whereas, Long-term Asset is an asset\nthat is held for more than 36 months<\/strong><\/p>\n\n\n\n

      The above-mentioned exception does not apply to the movable property such as jewelry, debt-oriented mutual funds<\/a>, etc. and will be classified as a long-term capital asset if held for more than 36 months as earlier.<\/strong><\/p>\n\n\n\n

      Exception<\/strong><\/p>\n\n\n\n

      Some assets are considered as Long-term\ncapital assets if are held for a period of more than12 months – <\/strong><\/p>\n\n\n\n