2 Sep 2020, 09:30 — 6 min read
Buying a house or property is a significant investment that requires a lot of capital and planning to achieve. When it comes to Income Tax, a house or property goes by the tag – ‘capital gains/asset’. As per this scheme, the buying or selling of houses come under India’s taxation system, enabling the individual to claim a deduction or pay extra tax. Along the same lines, capital gains and losses can arise as a result of several transactions. Here’s a look at everything you need to know about capital assets, types of capital assets and capital gains tax on property.
A capital gain is any profit or gains obtained as a result of the sale of a capital asset. Such profits come under the tag of income as per India’s taxation rules. Therefore, individuals have to pay tax for such gains in the fiscal year wherein they gained them. Such taxation goes by the name capital gains tax. However, these gains do not work on any inherited property, as such property transfers in ownership.
Meanwhile, a capital asset can be any building, property, land, trademarks, vehicles, patents, jewellery or machinery. However, certain assets do not come under the category of capital assets;
Short-term capital asset: Any asset held for a period lesser than 36 months becomes a short term capital asset. For immovable properties, including properties, buildings and land the term has been reduced to 24 months from 2017.
Long-term capital asset: Any asset that has been held for more than 36 months becomes a long term capital asset. However, the reduced term of 24 months does not extend to mutual funds, movable properties and jewellery.
Certain assets, such as equity, shares, securities, UTI units, equity-mutual funds, and coupon bonds, are a form of short-term capital assets if they are held for less than 12 months. However, this reduced term is applicable for transfers after July 2014. These assets, when held for longer than 12 months, directly become a long term capital asset.
If an asset comes as a gift, via a will, inheritance or succession, then the term for the whole also includes the period the older owner held it. For shares, the period of holding
starts from the date of allotment of the shares.
|Sl No||Tax Type||Condition||Tax Rate|
|1||Long-term capital gains||Everything except shares and equity-oriented mutual funds||20%|
|2||Long-term capital gains||For shares and equity-oriented mutual fund units||10% for INR 1lakh and above|
|3||Long-term capital gains||Debt funds||From 11/7/2014
20% with indexation
Lower of 10% without and 20% with indexation
|4||Long-term capital gains||Equity funds||Both before and after 11/7/2014
|5||Short-term capital gains||Not security transaction tax||Tax is a part of IT returns and tax rate depends on the IT slab.|
|6||Short-term capital gains||Security transaction tax applies||15%|
|7||Short-term capital gains||Debt funds||Both before and after 11/7/2014
As per the tax slab rates
|8||Short-term capital gains||Equity funds||Both before and after 11/7/2014
As per changes in taxation laws, income from debt mutual funds will be a short term capital asset unless held for 36 months. Therefore, people must hold them for longer than 36 months to gain benefits that long term capital assets provide. If not, the gains made become a part of your income, which will then be taxed as per your IT slab.
Short-term capital gains tax India
Deduct the following from the full value of consideration:
Long-term capital gains tax India
Deduct the following from the full value of consideration;
From this amount, deduct exemptions as per;
Also read: How to pay your Income Tax using Challan 280
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