Understanding the Short Term and Long Term Capital Gains Tax Difference: Why Every Investor Should Know

Understanding the difference between short term and long term capital gains tax is vital for effective tax planning and maximizing investment returns. Every investor must know about the difference.

STCG (Short Term Capital Gain) applies to profits from selling assets like stocks, bonds or real estate that you have owned for one year or less.

The key takeaway here is that these gains are not treated as investment income for tax purposes but rather as ordinary income.

LTCG applies to profits from selling assets you have owned for more than one year. If you are selling a property that you have owned for more than one year, then you have to file the tax.

In India, the tax rate for long term capital gains on stocks and equity mutual funds held for more than a year is 12.5%. Units held for more than 36 months are subject to a 12.5% LTCG tax on debt funds. (Disclaimer: Given the input is on an information basis, please seek professional advice.)