Introduction
Capital gains are the profits that an investor makes from selling an asset at a price higher than its purchase price. Capital assets can be products like stocks, bonds, mutual funds, real estate, etc. The term capital gain refers to the higher value realised at the time of sale of the asset. Similarly, a capital loss indicates a reduction in the value of an asset as compared to its original cost.
Capital gains can involve lengthy manual calculations. However, with the availability of Fisdom’s online capital gains calculator,
investors can easily calculate this tax liability within a matter of a few seconds. Read on to find out how
Table of Contents
- 1 – Categories of capital gains
- 2 – About long term capital gains tax
- 3 – About short term capital gains tax
- 4 – What is Fisdom’s capital gains
calculator? - 5 – What are the steps to use Fisdom’s capital
gains calculator?
- 6 – How does Fisdom’s capital gains calculator
work? - 7 – Why should you use Fisdom’s capital gains
calculator?
concept? - 8 – Conclusion
Categories of capital gains
There are two main categories of capital gains:
- Long-term capital gains (LTCG):
As the name says, long term capital gains are those gains
when an asset is held for a long time. But the time period
varies between assets. For ex: For equities and equity
oriented mutual funds, a holding period of over twelve
months - Short-term capital gains (STCG):
Short term capital are those gains made when the asset is
sold after a short holding period. The holding period varies
between assets.
About long term capital gains tax
Long-term capital gains tax in India is
to be looked at as pre-2018 budget and post-2018 budget. That is
because the Union Budget 2018 declared long-term capital gains
tax applicability on equity mutual funds, which were not taxable
for investors until then. As per this announcement, a flat 10%
long-term capital gains tax applies to all equity and equity
mutual fund investments.
Definition of LTCG
LTCG or long-term capital gains tax is payable on
profits generated from such capital assets that are held for a
long term. The total period of holding,
either ‘short term’ or ‘long term’, can differ across asset
categories. Mentioned below are the periods for which the
respective asset’s returns are considered as long-term:
- Stocks: Sold after a holding period of over 1 year – long
term - Equity mutual funds: Sold after a holding period of over 1
year – long term - Debt mutual funds: Sold after a holding period of over 3
years – long-term - Gold ETF: Sold after a holding period of over 3 years – long
term
Long-term capital gains tax is applicable at 10% on capital
gains over Rs. 1 lakh that are generated from stocks or
equity-oriented mutual funds held for over one year.
About short term capital gains tax
Returns generated from capital assets that are held
for a shorter duration are known as short-term capital gains.
Short-term capital gains tax is levied at 15% plus surcharge and
cess as applicable. Short-term capital gains other than such
that is covered under section 111A of the Income Tax act
attracts tax at normal tax as per the taxable income of the
individual.
Mentioned below are the periods for which the
respective asset’s returns are considered as short-term:
- Stocks: Sold after a holding period of less than 1 year –
short term - Equity mutual funds: Sold after a holding period of less
than 1 year – short-term - Debt mutual funds: Sold after a holding period of less than
3 years – short-term - Gold ETF: Sold after a holding period of less than 3 years –
short-term
What is Fisdom’s capital gains calculator?
Fisdom’s capital gains calculator is a free online
tool that helps investors in estimating their capital
gains tax liability for the below-mentioned investment
options:
- Listed stocks
- Equity-oriented mutual funds
- Debt-oriented mutual funds
- Gold ETFs
The calculator comes with different input categories
like the type of asset, selling price, asset sold date, buying
price and asset bought date. Once the user inputs all these
values, the calculator will show, on the right-hand side, the
total asset holding period, type of capital gain, capital
gains/losses, effective tax rate, and tax amount.
What are the steps to use Fisdom’s capital
gains calculator?
Here are the important steps to be followed for using
Fisdom’s capital gains calculator to get accurate tax liability
details:
- In the ‘type of asset’ dropdown, select the appropriate
asset type. For example, stocks. - In the buying price and date boxes, enter the relevant
purchase price of the asset and the date that the asset was
bought. - Enter the net sale price or sale value of the asset.
- Select the date when you had sold the asset.
- For assets that have been bought before 31 March 2018, no
long-term capital gains tax will be applicable on the
investment. Assets bought after 01 April 2018 will attract
long-term capital gains tax depending on when they were
sold. - Depending on the purchase date and sale date, the calculator
will automatically calculate the holding period, which will
be displayed on the right side section of the calculator.
This will determine whether long-term or short-term capital
gains tax will be applicable. - Fisdom’s capital gains calculator will then show the type of
capital gain that is applicable. - The calculator will estimate the total capital gain or loss
and, as per the effective tax rate, it will show the total
tax amount or liability that you must pay in the financial
year.
How does Fisdom’s capital gains calculator
work?
The functionality of Fisdom’s capital gains
calculator can be easily understood with the help of an example.
Scenario 1: long-term capital gains
Suppose you bought or invested in 100 stocks of Infosys Ltd at
Rs. 1,000 per share in June 2018 and sold them at Rs. 1,500 per
share in February 2020.
Scenario 2: long-term capital gains
However, if you had bought 500 shares on the same date and at
the same price, the LTCG would be = 2,50,000 (500*1500 –
500*1000)
Thus, the tax will be applied on: (Rs. 2,50,000 – Rs 1,00,000)
at 10%. LTCG tax will therefore be Rs. 15,000. (Rs
1,50,000@10%).
Scenario 3: short-term capital gains
Suppose you had bought 100 stocks of Infosys Ltd at Rs. 1,000
per share in June 2020 and sold them at Rs. 1,500 per share in
December 2020.
Thus, the holding period of the stocks is less than one year.
The short-term capital gains will be applied on Rs. 50,000
(100*1500–100*1000), which is the profit made from the sale.
Since these returns are generated from equities and the same
falls under Section 111A of the Income-tax Act, the applicable
tax rate will be 15%.
Thus, short-term capital gains tax will be = 50,000*15% = 7,500.
The net proceeds have to be adjusted for brokerage or other
purchase-related expenses.
Why should you use Fisdom’s capital gains
calculator?
Fisdom’s capital gains calculator calculates short
term or long-term capital gains tax as applicable on returns
generated from certain asset categories. Here is how this
calculator can benefit investors:
- The calculator provides the result of an otherwise lengthy
LTCG tax calculation within a few seconds. - It offers investors a glance at the actual or net returns to
be availed from an investment after deducting taxes. - With the help of the data provided by this calculator,
investors can plan the investment duration for stocks,
equity mutual funds, debt funds, and gold ETFs to attain
maximum tax efficiency. - Since investors can use this calculator even before
investing, they can plan their investments depending on tax
for various holding periods.
Conclusion
While capital gains tax liability can be estimated
through manual calculations, it can be time-consuming and prone
to errors. With a free-to-use online tool like Fisdom’s capital
gains calculator, investors can save considerable time and
effort in estimating their annual tax liabilities on returns
generated from multiple assets.
FAQs
As per current tax laws, the short-term capital gains are taxable at 15%
on returns from assets held for a maximum tenure of 36 months. The
holding period criteria can differ across asset categories.
investment?
As per current tax policy, long-term investments offer higher tax
efficiency as compared to short-term investments. However, this depends
on the asset category and also on an investor’s financial planning.
You can save LTCG tax on returns generated from equity mutual fund
investments by offsetting any capital losses incurred from these. A
long-term capital loss can be only adjusted against long-term capital
gains.
No, there is currently no deduction on LTCG tax except for tax exemption
on gains of up to Rs. 1 lakh.
investments?
Yes, you can reduce the overall tax liability on LTCG from stock
investments by planning the amount and duration of the investment.
