InvestorQ : Is the benefit of indexation available to short term capital gains and also to long term capital gains?
Bhavika Nehru made post

Is the benefit of indexation available to short term capital gains and also to long term capital gains?

Answer
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Abhisha Yadav answered.
1 year ago


There is no indexation benefit available for short term capital gains. By default, this benefit is only available for long term capital gains. When it comes to all non-equity asset classes, the definition of long term for capital gains purpose is 3 years. Only for equities, it is 1 year. In the case of sale of property if you have held the property for more than 3 years then it will be treated as LTCG. Otherwise, it will be treated as STCG. In case of STCG your tax rate will be your peak tax rate (20% or 30% as the case may be). That is the rate that is applied to short term gains. There is no benefit of indexation available in case of STCG. However, the benefit of cost inflation indexation will be available in case of LTCG. Let us now understand Capital Gains index calculation and the impact of cost inflation index on capital gains tax. Let us also see with a practical example how cost inflation index affects capital gains tax India.