Capital
Gains
Types
of capital gains
Under
the Indian Income Tax Act there are two category of capital gains
namely - long term capital gains and short term capital gains. The
difference from the point of view of the assessee is the difference
in the incidence of tax on these two types of capital gains. Ordinarily
a capital asset held for 36 months or less is called a ' short term
capital asset' and if the holding period of an asset increases to
more than 36 months, the asset is known 'long term capital asset
'. However, in relation to shares of a company, the units of Unit
Trust of India or any specified Mutual Fund or any security traded
in any recognised Indian stock exchange, the holding period for
being considered as short term capital asset is twelve months or
less. The capital gains on the transfer of the long term capital
asset is termed Long Term Capital Gains and the capital gains on
the transfer of short term capital asset is termed Short Term Capital
Gains.
The
short-term capital gain are included in the total income of an assessee
and charged to tax along with the other incomes at the normal rates
in force. A notified Foreign Institutional Investor however is required
to pay tax at the rate of 30% on short term capital gains . For
and from the assessment year 1993-94 the scheme of taxation of long
term capital gains has been recast. There were a few modification
in the provisions in subsequent years and the mode of computation
of tax on long term capital gains and the rates of tax valid with
effect from the assessment year 1997-98 are as described hereunder.
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