For starters, it is important to understand what is implied by capital gains. In India, if the sale of any capital asset such as immovable property, listed/unlisted shares, equity, jewelry, mutual funds, etc. results in an income, such income is liable to be taxed under the head if capital gain as per the provisions of the Income Tax Act in India.
There are two types of capital gains – Long-term capital gains and short-term capital gains, which are taxable in the hands of assessee at different rates. The short-term capital gains arise on account of sale of short-term capital assets.
For the purpose of determining whether the assets are short-term capital assets or long-term capital assets, we are required to verify the period of holding of such capital assets. The holding period for a capital asset to be qualified as a short-term capital gain ranges from a period of 1 year to 3 years, based on the kind of capital asset you’re holding. The same along with rates of taxes applicable on such sale of assets are discussed below:
– Securities (other than units) listed on a recognized stock exchange, units of equity-oriented funds/units of UTI, zero coupon bonds, etc. if held for less than or equal to 12 months qualify as short-term capital gains and are liable to be taxed at 15%
– Unlisted shares, land or building or both, if held for less than or equal to 24 months qualify as short-term capital gains and are taxed as per slab rates
– Units of debt-oriented funds, unlisted securities (other than shares), and other capital assets if held for less than or equal to 36 months qualify as short-term capital gains and are taxed as per slab rates
There are also some exceptions to the above rule viz, where the gain arising on account of transfer of assets, which forming a part of block of assets on which depreciation has been allowed under the Income Tax Act, then irrespective of period of holding, such gain is taxable as short-term capital gain. Also, the capital gains arising on account of transfer of an undertaking under slump sale are deemed to be short term capital gains when the undertaking is ‘owned and held’ for less than or equal to 36 months immediately before the date of transfer.