Should I pay taxes for capital gains?
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Introduction
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 propety 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?
Any profit from selling the capital assets considered as the capital gains. So it can be shares, units of UTI, debentures and land. Also the following materials considered as the capital assets:
- furniture
- 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.
Summary
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.
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8 Comments on this post
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Sandeep said:
Hello, I like this article. Can you please clarify my doubts
1. If I purchase a agricultural land within 2 years of sell of my old office building. Do I need to pay the tax again?
2. If I purchase a flat(under construction) within 2 years of sell of my old office building, do I need to pay capital gain tax?
3. If I sold my office building in Dec 2008 and if I need to pay capital gain tax, then what is the time limit.
November 21st, 2009 at 6:18 pm -
Sunil said:
If i sold sell shares worth Rs 10 lacs,how much tax i have to pay?but long term cap gain tax is free after 1 year 7 days,iam right?
December 22nd, 2009 at 12:38 am -
Sunil said:
Does long term capital gain tax from shares is exempted,if we sell the shares within 1 year 7 day we are liable for short term cap gain tax 15%, after 1 year 7 days it is exempted?is it true?
December 22nd, 2009 at 1:03 am -
Kishore said:
Hi Krishna,
My father puchased a land 20 year ago and it was registered on my name. Now it gave for development. Developer agreed to give 4 flats. I want to know how to calculate the Capital gain and how much tax should pay.
February 24th, 2010 at 3:22 am -
Vinay said:
hi
I have sold a flat in feb 2010. In sept 2009 I have invested in a flat which is still under construction. The LTCG that i have made from selling the flat is around 23 lakhs.
The new under construction house is costing me 32 lakhs. I have already made a payment of 11 lakhs for the new house in Sep 2009-Feb 2010. Rest payment would be done by dec 2010.
How do i save tax against the long term capital gains against the new property thats under construction. Can I show the entire cost of 32 lakhs in my tax returns when i file it by 31st July 2010 or can i just show 11 lakhs till july 2010 as the rest of the payment against the new house is yet to be given.March 26th, 2010 at 6:51 pm -
Usha said:
In case of post office RD contiued for 10 yrs, are we liable to pay any tax. If yes then how much considering Rs. 2000/- monthly suscription.
May 5th, 2010 at 11:23 pm
[...] As we know the capital gains are applicable only when you are selling the capital assets. When you are selling the agricultural land, first you have to decide if it is falling under the capital assets, if it is capital assets then you have to pay the tax for the capital gains as we mentioned in this article. [...]
[...] What is Capital Gains? [...]