What is capital gain?

• Any profit/gain that arises from selling of capital asset.
  
• Example: Financial investments, real estate, personal property.
  
• Any profit which an individual receive from the sale of capital asset will be treated as “Income”, and hence, you will have to pay taxes on that income.
  
  
• Capital gains are not applicable to an inherited property as there is no sale of property, but only a transfer of ownership.
   
• However, if the person who inherited the asset decides to sell it, capital gains tax will be applicable. 

• Examples of capital gains: Land, building, house property, vehicles, patents, trademarks.

Types of capital gains : 1.Short term capital gains

                                    2.Long term capital gains.

Short term Capital gains:

• If the holding period of a capital asset is less than 36 months, then it is treated Short term Capital Asset.

• And the profit earned by selling the short term capital asset is treated as short term capital gain.

• For example: If an asset is sold within 25 months from the date of purchase, then will be calculated under short term capital gain.

Long term capital gains:

• If the holding period of a capital asset is more than 36 months, then it is treated as Long term capital asset.

• The profit earned by selling the Long term capital asset is called as LTCG.

• For example if a capital asset is sold after 36 months from the date of acquisition, the profit earned out of that, will be treated as Long term capital gain.

Major difference between Short term and Long term capital gains: