What is short term & Long term capital gain explain me detail?

More than one year is long term
Other than above are short term

short term, period for security hoding is less then 12 month.
in long term security holding period is more then 12 monts

Income From Capital Gains

Q. What are Capital Gains?

A. Any profits or gains arising from a transfer of a capital asset effected in the previous year, subject to certain exception, are chargeable to income tax under the head Capital Gains . Such profits or gains are deemed to be the income of the previous year in which the transfer takes place.

Q. What is a 'transfer' for the purposes of capital gains.

A. Section 2(47) of the Income Tax Act, defines transfer in relation to a capital asset, and it includes

* the sale, exchange or relinquishment of the asset; or
* the extinguishment of any rights therein ; or
* in a case where the asset is converted by the owner thereof into, or is treated by him as, stock-in-trade of a business carried on by him, such conversion or treatment ;
* any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882(4 of 1882) ; or
* any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, any immovable property.
* Explanation - For the purposes of sub-clauses (v) and (vi), "immovable property" shall have the same meaning as in clause (d) of section 269UA]

Q. Which transactions are not deemed to be transfer for the purposes of capital gains. Top

A. The Income Tax Act also exempts certain transactions from being covered under the definition of transfer. These are more specifically contained in section 46 & 47 of the Income Tax Act. In brief the transactions not regarded as transfer are as under :-

(a) where the assets of a company are distributed to its share holders upon its liquidation, the distribution is not regarded as transfer. However where a share holder receives any money or other assets on the date of distribution which exceeds the amount of dividend within the meaning of section 2(22)(c), the excess is chargeable under the head capital gains.

(b) any distribution of capital assets on the total or partial partition of a huf is not regarded as transfer

Â© where a capital asset is transferred under the gift or will or an irrevocable trust, the transaction is not of the nature of transfer as per the Income Tax Act.

(d) the transfer of a capital asset to an Indian subsidiary company by a parent company or its nominees who hold the entire share capital of the Indian subsidiary company is not regarded as transfer.

(e) any transfer of a capital asset by a wholly owned subsidiary company to its Indian holding company is also not regarded as transfer for the purposes of capital gains. TopHowever in respect of (d) & (e) above the transfer of a capital asset as stock in trade is covered by the provisions of capital gains.

(f) any transfer in a scheme of amalgamation of a capital asset by the amalgamating company to an Indian amalgamated company is also not a transfer for the purposes of capital gains.

(g) in the case where the amalgamating and the amalgamated companies are both foreign companies, the transfer of shares held in the Indian company by the foreign amalgamating company to the foreign amalgamated company is not regarded as a transfer for the purposes of capital gains if at least 25% of the share holders of the amalgamating foreign company continue to remain share holders of the amalgamated foreign company and if such transfer does not attract tax on capital gains in the country in which the amalgamating company is incorporated..

(h) any transfer by a share holder, in a scheme of amalgamation, of share or shares held by him in the amalgamating company in consideration of the allotment of any share or shares in the amalgamated Indian company is not regarded as a transfer for the purposes of capital gains.

(i) where a non resident transfers any bond or shares of an Indian company which were issued in accordance with any scheme notified by the Central Government for the purposes of section 115AC or where the non resident transfer any bonds or shares of a public sector company sold by the government and purchased by the non resident in foreign currency is not regarded as a transfer for the purposes of capital gains . However this is so only when the transfer of the capital asset is made outside India by the non resident to another non resident.

(j) where any assessee transfers any work of art, archaeological or art collection, book, manuscript, drawing , painting, photograph or print to a University, the National Museum, the National Art Gallery, the National Archives, to the Government or any other notified institution of national importance is not considered as transfer for the purposes of capital gains.

(k) any transfer by way of conversion of a company's bonds or debentures, debenture-stock or deposit certificates in any form into shares and debentures of that company is not regarded as transfer for the purpose of capital gains.

(l) where a non corporate person transfers its membership of a recognised stock exchangeTop in India to a company in exchange of shares allotted by that company is not regarded as a transfer for the purposes of capital gains provided that such transfer was made on or before 31st day of December, 1998.

(m) any transfer of a land of a sick industrial company which is being managed by it s Worker's Cooperative is not regarded as transfer for the purposes of capital gain if the transfer is made under a scheme prepared and sanctioned under section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985. This exemption is operative only in the period commencing from the previous year in which the said company became a sick industrial company under section 17(1) of that act and ending with the previous year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. The net worth is defined in the Sick Industrial Companies Act.

(n) with effect from 1-4-99 the process of sale or transfer of any capital or intangible asset of a firm is not regarded as a transfer for the purposes of capital gains where it is on account of the succession of the firm by a company in the business carried on by it. This exemption is dependent on the following conditions :-

(i) all the assets and liabilities of the firm before the succession and relating to the business should become the assets and liabilities of the company.

(ii) all the partners of the firm before the succession should become share holders of the company in the same proportion in which their capital accounts stood in the books of the firm on the date of succession.

(iii) the partners of the firm should not receive any consideration or benefit, directly or indirectly, in any form or manner, other than by allotment of shares in the company.

(iv) the aggregate share holding in the company by the partners should be more than 50% of the total voting power for a period of 5 years from the date of succession.

(o) with effect from 1-4-99 where a sole proprietary concern is succeeded by a company in the business carried on by it and as a result of which the sole proprietary concern sells or transfers any capital asset or intangible asset to the company, such transfer shall not be regarded as transfer for the purposes of capital gains. This exemption is available only if the following conditions are fulfilled:-

(i) all the assets and liabilities of the business of the sole proprietary concern should become the assets and liabilities of the company.

(ii) the share holding of the sole proprietor should be more than 50% of the total voting power in the company for a period of 5 years from the date of succession.

(iii) the sole proprietor should not receive any consideration or benefit, directly or Topindirectly, in any form or manner, other than by way of allotment of shares in the company.

(p) with effect from 1-4-99 any transfer in a scheme for lending of any securities under an agreement or arrangement which the assessee enters into with the borrower of such securities subject to the guidelines issued by the Securities and Exchange Board of India is not regarded as a transfer for the purposes of capital gains.

where in the transaction of lending shares of some distinctive numbers and receiving back shares of some other numbers is the result, the same would not be considered as exchange of asset within the definition of capital asset since the meaning of the word exchange necessarily involves exchange of two different assets. Thus where the asset received back is not different from what was lent in the above scheme of lending, no transfer is there for the purposes of capital gain as long as the assets received back represent the same fraction of the ownership of the company.

The exemptions referred above are not final and can be withdrawn under specified circumstances as mentioned in section 47A of the Income Tax Act.

Q. How many types of Capital Assets are there?

A. There are two types of Capital Assets. Short term Capital Assets and Long term Capital Assets. A short term Capital Asset held by an assessee could not more than 36 months immediately preceding the date of its transfer. A capital asset which is held by an assessee for more than 36 months is Long term Capital Asset.

Q. What is the cost of acquisition of bonus shares?

A. Section 55 of the Income Tax Act has been amended w.e.f. A.Y. 96-97 so that the cost of acquisition of bonus shares or security which is received without payment by the assesseee on the basis of its holding any financial asset is taken to be Nil.

Q. What is the rate at which the Long term Capital Gains are charged to tax?

A. Long term Capital Gains are taxable specified in section 112 from the A.Y. 1993-94 onwards. Long term Capital Gains are taxable at a flat rate of 20%. In case of Long term Capital Gains covered by sections 115AB, 115AC or 115AD the applicable rate is 10%. For details on these sections you are requested to see the relevant provisions of Income Tax Act,1961.

Q. What are the provisons of Section 54EA relating to investment in specified assets?

A. A long term asset when transferred by an assessee during the previous year results into receipt of consideration. Within six months from the date of transfer, the assessee should invest the whole or any part of the net consideration in specified bonds ,debentures, share of a public company or unit of mutual fund to be notified by the Board. Upon investment in such specified assets , of the entire sale proceeds , the whole of capital gains shall be exempt from tax. Top

hope this helps u :

Capital Gains Tax - What Is the Capital Gains Tax?

A capital gain is income derived from the sale of an investment. A capital investment can be a home, a farm, a ranch, a family business, or a work of art, for instance. In most years slightly less than half of taxable capital gains are realized on the sale of corporate stock. The capital gain is the difference between the money received from selling the asset and the price paid for it.

"Capital gains" tax is really a misnomer. It would be more appropriate to call it the "capital formation" tax. It is a tax penalty imposed on productivity, investment, and capital accumulation.

The capital gains tax is different from almost all other forms of taxation in that it is a voluntary tax. Since the tax is paid only when an asset is sold, taxpayers can legally avoid payment by holding on to their assets--a phenomenon known as the "lock-in effect."

There are many unfairnesses imbedded in the current tax treatment of capital gains. One is that capital gains are not indexed for inflation: the seller pays tax not only on the real gain in purchasing power but also on the illusory gain attributable to inflation. The inflation penalty is one reason that, historically, capital gains have been taxed at lower rates than ordinary income. In fact, "most capital gains were not gains of real purchasing power at all, but simply represented the maintenance of principal in an inflationary world."

Another unfairness of the tax is that individuals are permitted to deduct only a portion of the capital losses that they incur, whereas they must pay taxes on all of the gains. That introduces an unfriendly bias in the tax code against risk taking. When taxpayers undertake risky investments, the government taxes fully any gain that they realize if the investment has a positive return. But the government allows only partial tax deduction if the venture goes sour and results in a loss.

There is one other large inequity of the capital gains tax. It represents a form of double taxation on capital formation. This is how economists Victor Canto and Harvey Hirschorn explain the situation:

A government can choose to tax either the value of an asset or its yield, but it should not tax both. Capital gains are literally the appreciation in the value of an existing asset. Any appreciation reflects merely an increase in the after-tax rateof return on the asset. The taxes implicit in the asset's after-tax earnings are already fully reflected in the asset's price or change in price. Any additional tax is strictly double taxation.

Take, for example, the capital gains tax paid on a pharmaceutical stock. The value of that stock is based on the discounted present value of all of the future proceeds of the company. If the company is expected to earn Rs.100,000 a year for the next 20 years, the sales price of the stock will reflect those returns. The "gain" that the seller realizes from the sale of the stock will reflect those future returns and thus the seller will pay capital gains tax on the future stream of income. But the company's future Rs.100,000 annual returns will also be taxed when they are earned. So the Rs.100,000 in profits is taxed twice--when the owners sell their shares of stock and when the company actually earns the income. That is why many tax analysts argue that the most equitable rate of tax on capital gains is zero.

Short Term Capital Gains (STCG)

Short Term Capital Gains is computed as below :

Computation of short - term Capital Gains
Find out full value of consideration
Deduct the following :
expenditure incurred wholly and exclusively in connection with such transfer
cost of acquisition; and
cost of improvement
From the resulting sum deduct the exemption provided by sections 54B, 54D, 54G
4. The balancing amount is short-term capital gain
Long Term Capital Gains (LTCG)

Long Term Capital Gains is computed as below :

Computation of long - term Capital Gains
Find out full value of consideration
Deduct the following :
expenditure incurred wholly and exclusively in connection with such transfer
indexed cost of acquisition; and
indexed cost of improvement
From the resulting sum deduct the exemption provided by sections 54, 54B, 54D, 54EC, 54ED, 54F and 54G
The balancing amount is long-term capital gain
Full value of consideration

this is one of those questions that you should just save everyone time and do a web-search for it.

you'll get an answer quickly, and an accurate and thorough answer as well.

Short-term capital gain is taxed at the same rate as ordinary income (like wages and interest income), unless you have a capital loss that offsets it. If you are in the highest federal tax bracket and you pay state capital gains tax, it's possible to owe more than 40% of your investment gain in short-term capital gains taxes.

If the date of the sale is more than one year (366 days or more) after the date of the purchase, you have a long-term capital gain.

according to the IRS

short term cap gains are those accrued from investments held for less than one year

long term cap gains are those accrued from investments held for longer than one year

You bought stock in GE two years ago at $28.00...you sold the stock today at $34. The difference is a cap gain of $6; since you had the stock for longer than one year...it is a long term gain

If you had bought stock in GE in March of this year for $31 and sold it today at $34...you would have a short term cap gain of $3

The importance????? short term tax rates are significantly higher than long term rates..

One problem....if you own mutual funds, ETFs, closed-end funds...you don't control the buying and selling of stocks....
you'll get a fed tax form "1099" from the company...let's say...
Vanguard for instance...that delineates the long and short term gains....

Be advised though, if you buy and sell stocks yourself , the brokerage house will record your proceeds as "barter"...and will only have the amount that you received from the sale of the holdings...the cost basis is readily available from them for you to determine the long and short term cap gains

If you want to read about the terminology...

"investopedia.com" is a good start...as well as "investorwords.com"

I hope this helps

profit earn from selling security or other capital assets is called capital gain.

in short term, period for security hoding is less then 12 month.
in long term security holding period is more then 12 monts.

if u buy a share and sell it after 365 days of purchase the gain so made is long term capital gain. If the period of holding is less than 365 days it is short term capital gain.

The terms Short Term Capital Gain and Long Term Term Capital Gain are being defined in Income Tax Act, 1961. I hope that u understand the meaning of Capital Gain. Capital Gain is a gain which one makes by selling/disposing off a capital asset. Short Term Capital Gain is a gain made by selling/disposing off a capital asset which has been held for less than 36 months from the date of its acquisition and Long Term Capital Gain is a gain which has been made by selling/disposing off a capital asset which has been held for a period of more than 36 months from the date of its acquisition. There is, however, an exception in the case of sale of shares and securities where the above period of 36 months in case of a short term capital gain has been reduced to just 12 months. It means that if shares and securities are sold after a period of 12 months, it would be considered as a long term capital gain and if sold prior to that, it would be taken as short term capital gain. Short Term capital gain is taxed at normal rate of income tax except shares and securities which are taxed @ 10%.plus @% education cess The tax rate for long term capital gain is currently 20%plus 2% education cess.If u still have any doubt, u r welcome to ask any further question.Best wishes.

Long term capital gain-LT- when u sell a capital asset like land , building,car,jewellery etc

short term capital gain- ST- when u sell capital assets- like cars, land too, major- shares, stocke, debentures

major difference- LT is applicable when the property u sold is with u for more than 3(three) years- IMPORTANT

if the asset u sold is with u for less then 3 years - then it is STCG(short term)

for shares & bonds- period for short term is 1 yr, beyond that - considered as long term

why the difference ?

Income tax on LTGN is less compared to STCG

LTCG- tax is usually 10 %

STCG- tax is usually 20 %

how to calculate tax- long procedure- u have to find the current market value by INDEXTATION-
u have to find out- cost of holding etc

better to refer a book for all the procedure

refer a book used by CA or CS students- like Book by MANOHARAN etc

u can also go to CA for all the calculations- but he will charge

jay ;-)

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