Profits earned on the sale of assets like stock, bonds or real estate is known as capital gains. When the selling price exceeds the purchase prices, it is known as capital gains and when the cost price is higher than the selling price it is known as a capital loss.
The profit earned on the sale of a security or any other capital asset which has been held for less than one year in case of equity and three years in case of debt is known as short-term capital gains tax.
On a short-term asset, the holding period could be confusing for a few but the usual period for considering an asset as short-term is anywhere from 36 months to 3 years. A mutual fund, listed equity shares or securities held for less than a year is known as a short-term asset, whereas an immovable property or real estate held for less than two years is also termed short-term asset. An unlisted equity share held for less than two years is also categorised as a short-term asset.
Short-term capital gains are generally taxed as per slab rates for an individual with the exception of equity mutual funds and listed equity shares which are taxed at 15 percent. Short-term capital gains do not get the benefit of indexation, nor does it get an exemption from capital gains which are available to long-term capital gains.
Having said that, the short-term capital losses can be carried forward for eight years and can be adjusted against long-term capital gains as well as short-term capital gains in the same year as well as in subsequent years.The rate for taxation on equity investments is 15 percent whereas taxation on debt investments would depend on your tax slab. Short-term capital gains are easy to calculate, however holding your capital for a longer period of time to save on tax is a good way to go about investing.