CAPITAL GAIN INCOME

What is Capital Gains Tax In India?

Capital gain is the profit arising from the sales of “capital asset”. It comes under the income category and an individual has to pay the tax for the gain amount in which the transfer of the capital assets takes place. This type of tax is called a capital gain tax, it can be both short and long term. Capital gains are not for the inherited property (no sale), it is for only the transfer of ownership. The Income Tax Department excluded assets acquired as gifts or rewards. The capital tax gain is applicable when a person decides to sell the gifted assets.

Defining Capital Assets

Capital Assets are defined as the property held by the assesse. It includes all kinds of property movable or immovable, tangible or intangible properties whether it is related to their business/profession or not. Land, building, house property, vehicles, patents, trademarks, leasehold rights, machinery, and jewellery are a few examples of capital assets.

Types of Capital Assets?

STCG (Short-term capital asset) is an asset held for up to 36 months. For immovable properties like building, land, or house property, time criteria are reduced to 24 months. As per the rule of March 2017, if you raise any income by selling any property after owning it for 24 months, it will be considered as a long-term capital gain.

LTCG (Long-term capital asset) is an asset that is held up for more than 36 months. The reduced period rule of 24 months is not valid here for a movable property like jewellery, debt-oriented mutual funds, etc. However, all the movable property is considered as a long-term capital asset, if it is held up for more than 36 months.

Capital gains on Shares & Securities:

Special provision for non-residents


  • Convert the full value of consideration, in the original currency of acquisition of shares or debentures, using the exchange rate on the date of transfer.
  • Convert the cost of acquisition in the original currency of acquisition of the shares or debentures at the exchange rate on the date of acquisition of shares.
  • Convert the expense incurred in connection with the transfer, in the original currency of acquisition of the shares or debentures at the exchange rate on the date of incurring the expense.

Frequently Asked Questions

Is the benefit of indexation available for computing capital gains arising on sale of a short term capital asset?

Capital gains is determined by reducing the purchase price from the sale price. However, for an asset that has been held for a long time, it would not be appropriate to determine gains by merely reducing purchase price from sale price without giving any effect to the inflation. Hence, the concept of indexing the purchase price has been brought in. This way, the indexed purchase price can be reduced from sale price to determine gains. So, indexation applies only to assets held for long-term.

Are all assets held for less than 36 months short term and those held for more than 36 months long term capital assets?

Different assets have different periods of holding to be called short term and long term. Here is a table that defines period of holding for different classes of asset in order to be classified as short term or long term.

Asset Period of holding Short Term / Long Term
Immovable property < 24 months Short Term

>24 months Long Term
Listed equity shares <12 months Short Term

>12 Months Long Term
Unlisted shares <24 months Short Term

>24 months Long Term
Equity Mutual funds <12 months Short Term

>12 months Long Term
Debt mutual funds <36 months Short Term
>36 months Long Term
Other assets <36 months Short Term
>36 months Long Term

Should an NRI pay taxes on gains made on the sale of property in India?

Property sold in India is generally subject to tax deduction. The person buying the property must deduct taxes at the rate applicable to the NRI’s income slab, if the property is a short term asset. If the property is a long term asset, 20% LTCG tax applies. Further, it is important for the NRI to ensure that taxes are deducted on the gains made and not on the sale proceeds. A jurisdictional Assessing Officer can help to determine the gains on which taxes should be deducted by the purchaser.

What is the rate of tax on long term capital gains on sale of house property?

Long Term Capital Gains on sale of house property is taxable at the rate of 20% flat on the quantum of gains made