Write the difference between short term capital gain and long term capital gain.

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The major differences between short term capital gain and long term capital gain are as follows −

Short term capital gains

• Held for less than a year or a period and then sold off.
• Difference between consideration received and cost basis (short term asset).
• If the asset is owned for less than 24 months it is considered as immovable property and if it is owned for less than 36 months it is termed movable property.
• Easily tradable and liquid assets.
• Short term view of market.
• Lesser profits compared to long term gains.
• Less risk.
• Tax rates are same as income tax for individuals.
• Taxes may be reduced by including short term capital loss in the same year.

Short term capital gains = total value of sale consideration – (acquisition cost + improvement cost + total expenditure with transfer) – reinvestment is specific asset.

Long term capital gain

• Held more than a year of time and then sold off.
• Difference between considerations received and cost basis (long term asset).
• If the asset is owned for more than 24 months it is considered as immovable property and if an asset is owned for more than 36 months movable property.
• Includes all liquid and easily tradable and other long term assets (machinery, gold etc.).
• Long term view of market.
• Risk is higher compared to short term capital gains.
• Tax rate is 20% + cesses (if capital gain on sale of equity asset is more than 1 lac, then it is charged 10%).
• Different tax rates for different slabs (for 10% to 15% tax rate is 0%, for 20% to 35% tax rate is 15%, above 39.6% tax rate is 20%).

Long term capital gain = total value of sale consideration – (acquisition cost with indexation + improvement cost with indexation + total expenditure with transfer) – reinvestment is specific asset.

Mandalika

Updated on 25-Sep-2020 13:26:43

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