How does the Income Tax Act actually define long term and short term capital gains?

The profit or gain (if any) that you make on your Capital Assets when you redeem or sell them is referred to as Capital Gains. It can be a Short Term Capital Gain (STCG) or a Long Term Capital Gain (LTCG) depending upon the ‘Period of Holding’. The definition of this holding period also varies widely across asset classes as we shall see later. The tax that is applicable on these profits/gains is known as “Capital Gains Tax”.

Conversely, the losses (if any) that you make on your Capital Assets when you redeem or sell them is referred to as Capital losses. For example, if you sell an asset at Rs.500 and sell at Rs.450, then the loss of Rs.50 will rank as a Capital Loss. It can be a Short Term Capital Loss (STCL) or a Long Term Capital Loss (LTCL) depending upon the ‘Period of Holding’.