Question 1

What is capital gains tax?

Accepted Answer

Capital gains tax is a tax on the profit you earn when you sell a capital asset — such as property, shares, mutual funds, or gold — for more than its purchase price.

Question 2

How is capital gains tax calculated?

Accepted Answer

The formula is: Capital Gain = Selling Price – (Purchase Price + Improvement Costs + Selling Expenses). The resulting gain is then taxed at the applicable short-term or long-term rate depending on the holding period.

Question 3

What is a capital gains tax calculator?

Accepted Answer

A capital gains tax calculator is an online tool that automates the calculation of your taxable gain and the estimated tax owed. You input the purchase price, sale price, dates, and costs — and it instantly shows your tax liability.

Question 4

What is the difference between STCG and LTCG?

Accepted Answer

STCG (Short-Term Capital Gains) applies when assets are sold within a short holding period (e.g., within 12 months for equity). LTCG (Long-Term Capital Gains) applies when assets are held longer. LTCG typically has lower tax rates and additional benefits like indexation.

Question 5

How can I reduce capital gains tax legally?

Accepted Answer

You can reduce capital gains tax by holding assets longer to qualify for LTCG rates, reinvesting gains in property (Section 54) or government bonds (Section 54EC), and offsetting gains with capital losses from other investments.