January 27, 2023
Jasmine John

What is Capital Gains Income and Why is it Taxable?

long termCapital gains income is the money that you earn from selling an investment. The capital gains tax in India is levied on the difference between the price at which an asset was bought and sold, or if it's held for more than a year. In other words, if you buy something for Rs 100 crore and sell it after a year at Rs 105 crore (or Rs 1/5 of its original cost), then as per tax law you would have made capital gains of Rs 5 crores (Rs 50 lakhs). These are called long-term capital gains since they remain locked up with your investments till they're sold off by either yourself or third parties like brokers etc.

What is Capital Gains Income?

Capital gains are the profit made from selling an asset such as property, shares, bonds, or a business. When you sell an asset like shares or a house for more than you bought it for then this is called capital gain. Capital gains may be short-term or long-term depending on how long it took you to get that amount of money and whether your assets were held for less than 12 months at the end of which they had been disposed of.

A capital gain can also occur if someone sells their home in India without having actually lived there for any period of time; this would mean that he/she has not yet paid income tax on any profits earned from breaking down his/her home into smaller pieces before selling those parts separately.

Why Capital Gains tax?

Capital Gains tax is a tax levied on the profit made from an asset sold within a certain period of time. The capital gains tax was introduced in India in 1972 to discourage people from making quick money by selling their assets for a profit and then leaving for greener pastures elsewhere. It also aims at encouraging people to invest in the long-term, instead of just liquidating their investments after earning some quick income.

Different Kinds Of Income From Capital Gains

Capital gains are the profit made when you buy something and sell it later. In India, there are several kinds of capital gains that can be earned on assets like property, shares, and mutual funds.

Sale of property: You can sell your house or other residential property to an owner in exchange for cash. The price paid will be considered a capital gain if you have owned this asset for more than one year before selling it out of your possession (i.e., after renting it out).

Sale of shares: The capital gain on shares is determined by the net profit earned by investors when they sell the asset.

Sale of mutual funds: Individuals' profits from selling mutual fund investments are also considered capital gains.

You may have to pay taxes on your invested money

Capital Gains Income is the amount of money you make on the sale or investment of your assets. It can be in the form of cash, property, or shares. You may have to pay taxes on your invested money and therefore it's important for you to know how much capital gains income you made in a particular year.

Calculation Of Capital Gains Income And Taxes On It

1. Calculate capital gains income.

Capital gains are the difference between the price at which you sell an asset and its cost basis, or the amount paid for an asset if purchased. To calculate your capital gains tax, add up all of your taxable investments in stocks or mutual funds since the beginning of 2014 (or earlier). If you have sold any shares during this period, list those sales as well so that they can be included in this total number.

2. Pay capital gains tax.

The credit part of Schedule I-B includes both long-term and short-term investments as well as other types of assets such as real estate.

All about capital gains tax exemption in India.

Capital gains tax exemption is applicable to the following:

Long-term capital gains on the sale of property, shares, and mutual fund units.


It is important that you are aware of your capital gains income and pay taxes on it. You can apply for tax-exempt status by filing your return in the Jan-Apr quarter or July-Sept quarter. The application process is simple and does not require any additional documentation.


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