Gains that arise from the transfer of any capital asset such as stocks, bonds, investments and properties are capital gains. The classification of these gains into short and long-term will depend on the asset and how long do you hold it. “Listed equity shares or units of equity-oriented mutual fund, held for a year or more, are regarded as long-term capital assets. For unlisted equity shares and units of debt-oriented mutual fund, the holding period should be 24 months and 36 months or more, respectively, to be considered as long-term capital assets," said Punit Shah, partner at Dhruva Advisors LLP, a tax consultancy firm.
Long-term capital gains (LTCG) in stocks and equity mutual funds are considered free of taxation if the gains are less than ?1 lakh. “LTCG tax at 10% will only apply to equity LTCG beyond ?1 lakh," said Ankur Choudhary, co-founder and CIO, Goalwise.com, a mutual fund advisory platform. This comes without any inflation benefits. Last year’s budget allowed for exemptions on LTCG arising prior to February 1, 2018. Investments held for less than a year attract a short-term capital gain (STCG) of 15% with surcharge and cess extra for taxes, said Choudhary.
UNLISTED EQUITIES,DEBT FUNDS
Gains made on unlisted equity shares are also taxed. “In case of LTCG, unlisted equity shares are taxable at 20%. STCG is taxable at slab rates or 30% (as the case maybe)," said Shah. In case of debt funds, LTCG tax is at 20%, and STCG is taxable at slab rates or 30% (as the case maybe), he added. All taxes come with indexation benefits, applicable surcharges and cess. “If you are an Indian resident, taxes are not deducted by the fund house and have to be paid before the financial year ends. If you are an NRI, the AMC will charge you the TDS when you withdraw the fund," said Choudhary.