Capital Asset
Property of any kind held by a person, whether or not connected with business, excluding stock‑in‑trade and specified personal effects; transfer may trigger capital gains tax.
Capital Gains
Holding period, rates and common exemptions
Short‑Term vs Long‑Term
Classification depends on holding period and asset type. Listed equity and equity MF typically become long‑term after 12 months; land/building after 24/36 months as per prevailing rules.
Short‑Term Capital Gain (STCG)
Gain arising when a capital asset is sold within its short‑term holding period; taxed at slab or specified special rates depending on the asset.
Long‑Term Capital Gain (LTCG)
Gain on assets held beyond prescribed periods; may be eligible for indexation (where permitted) and taxed at special rates with possible exemptions.
Indexation
For eligible long‑term assets, cost is adjusted using notified indices to account for inflation, reducing taxable gains.
Indexed Cost of Acquisition
Original acquisition cost adjusted using Cost Inflation Index (CII) where permitted to reflect inflation for long‑term capital gains computation.
Cost Inflation Index (CII)
Notified index published annually and used to compute indexed cost for eligible long‑term assets, moderating gains for inflation.
Equity Shares
Listed equity shares have distinct holding periods and special tax rates; STT and other conditions may apply for concessional treatment.
Mutual Funds
Taxation varies by equity‑oriented vs debt‑oriented funds with different holding periods, rates and indexation eligibility.
Debt Funds
Non‑equity oriented mutual funds with capital gains taxed per current rules; indexation and rates differ from equity‑oriented funds.
Property Sale
Gains on sale of land/building depend on holding period; computation considers purchase/improvement costs and stamp‑duty valuation rules.
Exemptions (54 series)
Subject to conditions, reinvestment in specified assets (e.g., residential house, bonds) can allow exemption of long‑term capital gains.
Section 54
Allows exemption on LTCG from sale of a residential house when reinvested in another residential property within prescribed timelines and limits.
Section 54F
Provides exemption on LTCG from sale of assets other than a residential house when net consideration is invested in a residential house under conditions.
Section 54EC
Exemption on specified LTCG when invested within time in notified bonds (e.g., NHAI/REC) subject to lock‑in and investment cap.
Exempt Long‑Term Gains Limit
Under specified provisions (e.g., on certain listed equity), LTCG up to the statutory threshold may be exempt, subject to prevailing limits and conditions.
STT (Securities Transaction Tax)
Tax levied on specified securities transactions; payment of STT is often a condition for concessional capital gains treatment on listed equity.
Grandfathering Clause
Provision to protect accrued gains up to a notified cut‑off date (e.g., for listed equity) by substituting fair market value for cost in computations.
Special Rates
Certain gains are taxed at special rates (e.g., sections 111A/112A for equity). Surcharge and cess apply over such tax per law.