InvestorQ : What is the concept of capital assets in the calculation of capital gains?
Aashna Tripathi made post

What is the concept of capital assets in the calculation of capital gains?

Answer
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Moii Chavate answered.
1 year ago


A capital asset can be anything which you own as an asset or property and not as stock in trade. To give a simple example, your shares in the demat account is capital asset but shares as your stock-in-trade in the stock trading business is not a capital asset. That is a business asset and hence it generates business income. Even before we get into the definition of capital asset, we need to understand that any capital asset has to be owned. Ownership is the key to an asset being defined as a capital asset.

Ownership can either be real or financial and can be held in physical form or even in dematerialized form. This can be in the form or property, gold, bonds, mutual funds or equity. Shares in your demat account are also an example of capital asset. A capital gain arises when the capital asset is sold at a price higher than the purchase price. Therefore, any profits arising on transfer of capital asset is charged to tax under the head “Capital Gains”. Income from capital gains is classified as “Short Term Capital Gains” (STCG) and “Long Term Capital Gains” (LTCG). This is the most basic concept that we need to understand even before we embark on understanding capital assets with specific focus on capital gains on Short Term Capital assets; which are referred to as STCG.