Tax Implications of Capital Gains

What is Capital Gain: The difference between the sale consideration (selling price) and the cost of acquisition (purchase price) of the asset is called capital gain. If the investor sells his units and earns capital gains, he is liable to pay capital gains tax. Capital gains are of two types:

1. Short Term Capital Gain
2. Long Term Capital Gain

Short Term Capital Gains: The holding period of the Stocks or Mutual Fund units for less than or equal to 12 months from the date of allotment of units then short term capital gains is applicable. On Short Term capital gains no Indexation benefit is applicable.

Tax and TDS Rate (excluding surcharge)

Resident Indians:The Gain will be added to the total income of the Investor and taxed at the marginal rate of tax. No TDS.
NRIs: 30 per cent TDS from the gain.

Long Term Capital Gains:
The holding period of the Stocks and Mutual Fund units is more than 12 months from the date of allotment of units. On Long Term capital gains Indexation benefit is applicable.

Tax and TDS Rate (excluding surcharge)

Resident Indians:The Gain will be taxed at
A) 20 per cent with indexation benefit or
B) 10 per cent without indexation benefit, whichever is lower. no TDS.

NRIs: 20 per cent TDS from the Gain


Surcharge

Resident Indians: If the Gain exceeds Rs. 8.5 lakhs, surcharge is payable by investors @ 10 per cent.

NRIs: If the Gain from the Fund exceeds Rs. 8.5 lakhs, surcharge is deducted at source @ 2.5 per cent.