financial services

Capital Gains and Sale of Residential Property


In terms of investment, the gain does not accrue until the asset is actually sold/ transferred. Increases in value without transfer do not trigger a tax event.

Consider a mutual fund, which is a cheap vehicle for a large pool of investors to put their collected money into various securities such as stocks, bonds or money market components. A tax-savvy investor will first determine the fund’s unrealized capital gains over the years, usually given as a percentage of the net value of underlying assets, before investing in it. This is also called the mutual fund’s capital gains exposure. When the fund’s management decides to distribute these capital gains, they also become a tax liability for the investors.


Short Term and Long Term Capital Gains

A capital gain may be short term or long term. In India, for the fiscal year 2017-18, the short term is anything equal to or less than 24 months. Any period of holding of the asset for longer than this makes the gains received on it a long-term capital gain. To be taxed in the current financial year, the transfer of capital assets should have been made in the previous financial year.

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