Capital Gains Tax (CGT)

Finance Minister Nirmala Sitharaman has denied the reports that the Income Tax (I-T) Department is planning to introduce changes in the capital gains tax structure.

What is Capital Gains Tax (CGT)?

1. Definition: Capital gains refer to profits earned from selling capital assets.
2. Examples of Capital Assets: Land, buildings, vehicles, patents, trademarks, leasehold rights, machinery, and jewelry.
3. Duration: Capital gains can be classified as short-term or long-term based on the holding period.
4. Taxation: Capital gains are considered income and are subject to taxation.

Types of CGT:

1. Short-Term CGT:

   1. Assets held for less than 36 months (24 months for immovable properties).
   2. Profits from selling such assets are considered short-term capital gains and taxed accordingly.

2. Long-Term CGT:

   1. Assets held for over 36 months.
   2. Assets like preference shares, equities, UTI units, securities, equity-based Mutual Funds, and zero-coupon bonds are treated as long-term capital assets if held for over a year.
   3. Profits from selling such assets are considered long-term capital gains.

Conclusion:

Understanding Capital Gains Tax is crucial for individuals and businesses involved in the sale of capital assets.

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