Budget in A Minute: What is Capital Gains Tax? Anil Singhvi explains in short and simple terms

Budget in A Minute: After explaining the meaning of Union Budget, Fiscal Deficit, Economic Survey Indirect and Direct tax, Zee Business Managing Editor Anil Singhvi now explains yet another important term. This is Capital Gains Tax. The Market Guru has been educating the channel viewers about the most talked about aspects of the budget, yet many do not know about them. His explanations are short and simple and can be understood in just one minute.

What is Capital Gains Tax?

People with high incomes are required to give this tax to the government, the Market Guru says. The people with high incomes often invest in equities and equity mutual funds. In such a scenario, the returns earned by the investors from these investments is also taxed by the government, he explained. This is called capital gains tax.

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Capital Gains Tax is of two types – short term and long term.

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1 मिनट में अनिल सिंघवी से समझिए क्या होता है कैपिटल गेन टैक्स (Capital Gains Tax)?#BudgetOnZee #Budget2021 #UnionBudget2021 @AnilSinghvi_ pic.twitter.com/j8mFF7esMX

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Short term Capital Gains tax is applicable when an investor sells his shares or mutual funds within an year of the purchase and earns some profits. The profits are now taxed at a rate of 15 per cent. This is not dependent upon your tax slabs whether you fall under the zero per cent tax slab or the 30 per cent tax slab. You will be required to pay 15 per cent tax, Singhvi said.

As for Long Term Capital Gains Tax, the situation is slightly different. This has come into effect only from the last year. Before that, it was completely free, he further said. This means that if you have not sold anything for one year, there will be no tax applied on your income.

Since the last year, the government under this tax, is taxing the income generated on shares that have been held for more than one year. There is no tax if the profits made is up to Rs 1 lakh. Any income amount above Rs 1 lakh is taxed at 10 per cent.

The investors have been urging the government to take Capital Gains Tax back. It is up to the government to decide what to do with this now, the Managing Editor said.

The Finance Minister Nirmala Sitharaman will be presenting her second full budget on 1 February 2021.