Long Term VS Short Term Capital Gains for Equity, Debt, Gold & Real Estate

We all invest in equity, debt, gold, & real estate according to our risk profile and time horizon. The gains from these investments are treated as capital gains and are taxed differently. As tax liability impacts your net returns, so it’s imperative that you should know about them.

Capital gains are classified as long term and short term depending on asset class and investment time horizon. For e.g. If you sell your real estate investment after three years the gains you make is Long term capital gain while in case of equities, you need to hold the investment for at least a year to be classified as long term capital gains.

Let’s see both types of capital gains one by one:

Long Term Capital Gains:

The table below shows the holding period for long term gains in various asset classes and the applicable tax rate:

Asset Minimum holding period for Long Term Capital Gains Taxation
Equity 1 Year No Tax
Debt 1 Year Minimum of following two

  • 10% without indexation
  • 20% with indexation
Bonds/ NCDs 1 Year
Gold ETF & Gold Mutual Fund 1 Year
Gold (Physical) 3 Years 20% with indexation benefit
Real Estate 3 Years
Education Cess of 3% is applicable on all taxes above

As you can see from the table above equities enjoy zero taxability on long term capital gains while in real estate or physical gold investment you have to pay a flat rate. Further there are provisions in income tax through which you can reduce your long term capital gains tax liability which would be covered in other post.

Short Term Capital Gains:

The table below shows the holding period for long term gains in various asset classes and the applicable tax rate:

Asset Minimum holding period for Short Term Capital Gains Taxation
Equity Less than 1 Year 15%
Debt Less than 1 Year Added to income and taxed at marginal income tax rate
Bonds/ NCDs Less than 1 Year
Gold (Physical) Less than 3 Years
Gold ETF & Gold Mutual Fund Less than 1 Year
Real Estate Less than 3 Years
Education Cess of 3% is applicable on all taxes above

As you can see from the table above in case of equities you need to pay flat 15% of your gains as tax while the gains in case of real estate or physical gold, the gain is added to your income and taxed at marginal personal income tax rate.

Next time when you plan to invest in Equity, Debt, Gold or Real Estate – keep in mind the taxation part!

2 thoughts on “Long Term VS Short Term Capital Gains for Equity, Debt, Gold & Real Estate

  1. I think this is one of the most important info for me.

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