Benefit of capital gains

Querist : Anonymous (Querist) 16 August 2010 This query is : Resolved
Dear Experts

Please advise, one A person has sell out one property and after 25 months he has purchased another property with B person in joint name, whether he will get the benefit of capital gains, kindly guide the diff.between short term and long term capital gain.
If A retained the sale amount in his SB A/c and after 25 months he made the purchse, what would be the treatement at the time of filing his IT yrly. returns.
thanks and regd.

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A V Vishal (Expert) 16 August 2010
As per Income Tax Act,1961, a capital gain tax is a voluntary tax payable on the sale of assets.

A Capital Gain can be defined as an any income generated by selling a capital investment. A capital investment can be anything from business stocks, paintings, and houses to family businesses and farmhouses. The 'gain' here, refers essentially to the difference between the price originally paid for the investment and money received upon selling it. A capital gain can be categorized under the following heads, depending on how long the investment has been under your possession:

Short-term: If you sell an investment within three years from the date of its purchase, it will be defined as a short-term capital gain. But if the investment is in the form of mutual funds/company shares, the allowed time duration is one year.

Long-term: If you sell an investment after three years from the date of its purchase, it will be defined as a long-term capital gain. However, selling mutual funds and company shares after one year will also constitute a long-term capital gain.

In case of a short-term capital gain related to sale of property, the gained amount needs to be added to your total annual income. Then you'll be need to pay capital gain tax, depending on the total taxable amount.

In case of a long-term capital gain related to sale of property, factors such as inflation are usually taken into consideration. The seller of the property needs to pay a tax not just on the real capital gain, but also on the projected gain as a result of inflation.

You need to pay a capital gain tax on all your capital gains, though the government will allow you only a partial tax deduction in case you suffer a loss as a result of selling your investment. Further, incase of long term gains certains deductions in the form of investments can be availed.