Capital Gains Tax
Tax on the profit made when you sell an asset for more than you paid.
Detailed explanation
The rate depends on the asset and on how long it was held. Listed equity and equity mutual funds held beyond twelve months attract long-term capital gains tax, with an annual exemption on part of the gain; shorter holdings are taxed at the short-term rate. Rules change with each Finance Act, so verify current rates before acting.
Formula
Capital gain = Sale value − (Cost of acquisition + Transfer expenses)
Example
Units bought for ₹4,00,000 and sold for ₹6,50,000 after two years produce a ₹2,50,000 long-term gain, taxed after the applicable exemption.
Why it matters
Tax decides your take-home return; two identical portfolios can differ materially after tax purely on holding period.
Key points
- Holding period thresholds differ across equity, debt and property.
- Losses can be set off and carried forward if the return is filed on time.
- Rates are revised by the Finance Act — always confirm the current year's rules.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.