| Definition |
Tax levied on profit from the sale of assets like stocks, property, or investments. |
Tax imposed on an individual’s or entity’s total earnings including salary, business income, and other income sources. |
| Taxable Event |
Occurs when an asset is sold or transferred for a profit. |
Applied annually on all taxable income earned during the financial year. |
| Types |
Short-term capital gains (STCG) and long-term capital gains (LTCG) based on holding period. |
Progressive tax slabs based on income levels. |
| Holding Period |
Short-term: typically assets held less than 1 year (varies by country); Long-term: held more than 1 year. |
No holding period concept; tax applies to income earned within the year. |
| Tax Rates |
Varies for STCG and LTCG; often LTCG taxed at a lower rate or exempt up to a limit. |
Tax rates vary progressively based on total income, with multiple tax brackets. |
| Calculation |
Capital Gains = Sale Price – Purchase Price – Allowable Expenses. |
Taxable Income = Total Income – Deductions/Exemptions. |
| Purpose |
Encourages long-term investment by taxing short-term gains higher. |
Funds government operations and public services through general income taxation. |
| Filing |
Declared under capital gains section in tax returns. |
Declared under income section, including salary, business, and other incomes. |
| Exemptions |
Some assets or gains may be exempt or have deductions (e.g., exemptions on LTCG up to certain limits). |
Standard deductions, exemptions, and rebates available based on laws. |
| Examples |
Profit from sale of shares, real estate, mutual funds. |
Salary income, business profits, rental income, interest income. |
| Impact on Investors |
Influences decisions on when to sell assets to minimize tax burden. |
Impacts overall disposable income and savings ability. |
Capital Gains Tax vs Income Tax