Capital gains

A capital gain arises only when you actually sell. Until then a rise in value is on paper and is not taxed; you book the gain, and the tax on it, at the moment you sell for more than you paid.

Short-term versus long-term

Gains are split into short-term and long-term by how long you held the asset, and the two are taxed differently, usually with long-term treated more kindly to reward holding. The dividing line depends on the asset: for listed shares and equity mutual funds it is twelve months, while for many other assets it is longer. Knowing which bucket a sale falls into is the first step in working out the tax. See long-term capital gain and short-term capital gain.

It differs by asset, and it changes

The holding periods, the rates, and reliefs like indexation differ across shares, mutual funds, property and gold, and they are revised from time to time, often at Budget. That is why a figure you remember from a few years ago may no longer apply. The current rates for each asset are in the questions above and on incometax.gov.in; always check the position for the specific asset and date before planning around it.

Losses, and where it shows up

A capital loss is the same thing in reverse, and it is useful: a loss can usually be set off against gains, and carried forward for a few years if it cannot be used now, which lowers the tax on future gains. Capital gains are also why the tax on a mutual fund depends on how long you held it, explained in how mutual funds are taxed.