In this article I will be writing about the tax liability on capital gains. Here I mean capital gains is the profit which you are making from selling your fixed assets like land or houses. Most of the people think that the profit from selling the property doesn’t come under the tax liability. That is not the correct opinion, anything you sold and making profit you will be liable to pay the tax. In this article I will be writing about the capital gains from your houses. I would like to hear feedback from you after reading the article. Please post your comments in the comments section. Please subscribe to our future articles here.
What is Capital Gains?
- personal belongings
- agricultural land (subject to certain criteria)
- Special Bearer Bonds, 1991, Gold Deposit Bonds (1999 scheme), 6.5 per cent Gold Bonds, 7 per cent Gold Bonds, National Defence Gold Bonds issued by the Central Government and raw material held for the purpose of business is not termed as a capital asset.
- From the year 1973-74, jewellery is treated as a capital asset.
Types of Capital Gains
There is two types of capital gains.
Short Term Capital Gains
If you own the capital assets less than three years at the time of selling, then it is considered as the short term capital gains.
Long Term Capital Gains
If you own the capital assets more than three years at the time of selling, then it is considered as the short term capital gains.
Tax on Capital Gains
If you earn short term capital gains, then it will be added to your taxable income and will be calculated for the tax.
If you earn long term capital gains, then you will be liable for the 20% tax for your profit. But there is certain exemptions on the tax as follows:
- If you are buying new property with in next two years after selling your old property, you need to pay the tax.
- If you are started constructing new house within next three years after selling your old house, then you are not liable to pay the tax. Not that the value of the new house should be minimum of the capital gains.
In this article I have written about the capital gains and how you are liable to pay the tax for capital gains. This is only the basic knowledge on the capital gains. Still there is many place where the different scenario for calculating the capital gains. In my future articles I will be writing about those ideas. Thank you for reading this article. Please leave your comments in the comments section.