InvestorQ : Why we retailer faces Tax while our capital gain is less than 5lac...
Akshay paliwal made post

Why we retailer faces Tax while our capital gain is less than 5lac...

Isha Tharwani answered.
1 year ago
This is because, for the Capital Gain tax, there is no exemption limit. Any capital gain whether short-term gain or long-term gain shall be added to your total income, and shall be taxable at the special rate applicable to capital gain (short-term or long-term).

Let me quote this with an example:

Suppose you are a retailer having a capital gain of 2 lakh Rs in a financial year and other income of Rs 4 lakh. In this case, your total income will become Rs 6,00,000, and even after deductions, it may go below Rs 5,00,000. However, you still have to pay tax on Rs 100,000 (as up to 1,00,000 there is no capital gain tax). If this gain is a long-term gain, you will have to pay tax at the applicable, and otherwise for the short-term.

So, what I’m trying to say here is that capital gain is considered as special income because it is generally not the regular income of an assessee. Considering this, on this income, taxes are to be charged at special rates. This is the major reason this income becomes taxable even if one does not have any regular income. It is considered that such income is purely again for the assessee which he has made from holding of assets, so all of it should become taxable, as there are very few related expenses to that income and since it is not regular, and one is not dependant on that income.

Capital gains are levied on the sale of assets, and any gain on such assets is considered to be the income of the assessee. An exemption of Rs 1,00,000 has been given for income on the sale of equity instruments. So, any income above that shall become taxable.