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Profits or gains arising from transfer of a capital asset are called "Capital Gains" and are charged to tax under the head "Capital Gains".
Gain arising on transfer of capital asset is charged to tax under the head "Capital Gains". Income from capital gains is classified as "Short Term Capital Gains" and "Long Term Capital Gains".
Following points should be kept in mind:
The property being capital asset may or may not be connected with the business or profession of the taxpayer.
E.g. Bus used to carry passenger by a person engaged in the business of passenger transport will be his capital asset.
Any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 will always be treated as capital asset, hence, such securities cannot be treated as stock-in-trade.
Difference between Short term and Long term capital asset
| Short-Term Capital Asset | Long-Term Capital Asset |
Any capital asset held by the taxpayer for a period of not more than 36 months immediately preceding the date of its transfer will be treated as short-term capital asset. However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months | Any capital asset held by the taxpayer for a period of more than 36 months immediately preceding the date of its transfer will be treated as long-term capital asset. However, in respect of certain assets like shares (equity or preference) which are listed in a recognised stock exchange in India, units of equity oriented mutual funds, listed securities like debentures and Government securities, Units of UTI and Zero Coupon Bonds, the period of holding to be considered is 12 months instead of 36 months |
Note that listing of shares is not mandatory if transfer of such shares took place on or before July 10, 2014.
Source: IncomeTax
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