What is Capital Gains Tax: Definition & Meaning Explained

Definition of Capital Gains Tax

Capital gains are profits, which means they can be taxed. The rate of taxation is based on the type of asset (debt/equity) and holding period. Here is the list of ways capital gains are taxed in India:

Asset Type	Gains Type	Holding Period	Tax Rate
Equity	Short Term Capital Gains	< 1 year	15%
Equity	Long Term Capital Gains	> 1 year	10%
Debt	Short Term Capital Gains	< 3 years	As per I-T slab
Debt	Long Term Capital Gains	> 3 years	20%

High Volatility Stocks

High volatility stocks are shares that fluctuate based on market conditions, typically more than others. The volatility could be a result of inherent fundamentals or other factors like the industry or domain. Identifying high volatility stocks is possible through indicators like Average True Range and Bollinger Bands.

Commodity Exchange

A commodity exchange is a marketplace where commodities and related derivative contracts are standardized and traded. The commodity exchange can be split into these sub-markets:

Derivatives market: this is where commodity exchanges allow futures, options, forwards, and other derivatives to be traded
Spot market: this is where commodity exchanges allow buying and selling of commodities in real-time (on the spot), including cash contracts

In India, there are 4 commodity exchanges that are popular and widely turned to:

Indian Commodity Exchange (ICEX)
Multi Commodity Exchange of India (MCX)
National Commodity & Derivatives Exchange Limited (NCDEX)
National Multi Commodity Exchange of India (NMCX)

Within these exchanges, the most commonly traded commodities include:

Crude oil
Coffee
Corn
Cotton
Gold
Natural gas
Silver
Sugar
Wheat

Equity Shares

Equity shares is a term used to describe stock of a company that’s issued via an Initial Public Offer (IPO), already issued and traded on the stock market, or freshly available through a Follow on Public Offer (FPO).

For a company, the goal of issuing equity shares is to raise money while investors who buy these equity shares get perks like voting rights, dividends, and even a share of the assets in case the company is liquidated.

Follow On Public Offer

A Follow On Public Offer or FPO allows a publicly traded company to issue more stock to public investors. FPOs are similar to IPOs because FPOs allow companies to raise additional capital through the public market.

For an FPO to be possible, a company must have already done an IPO. FPO shares are typically issued at a discount by a company whose track record is already clear because they are publicly traded.

Equity Share Capital

The total amount of money that is raised by a company through the issuance of shares is known as equity share capital. Shares issued could be classified as common or preferred shares, both of which are a part of the equity share capital.

In general, share capital is known to be the money raised by issuing shares. Companies have the option of raising more equity share capital by issuing additional shares through a Follow on Public Offer (FPO) or other financing methods.

*All securities mentioned on this website are exemplary and not recommendatory.

We are bullish on India, we are bullish on India's prospects to be one of the largest economies in the world. We believe that the stock market provides a unique opportunity for all of India's traders and investors to participate in the growth story of the country.

Yet, most investing & trading platforms in India have remained more or less the same over the past decade. Times have changed and retail traders and investors have become smarter about managing their trades and money. Modern traders & investors require an online trading platform that helps them keep up with the technological advancements of our time.

That's why we're building Dhan - to help you trade, to help you invest, and to help you participate in India's growth stock via the stock market with awesome features and an incredible experience.

We are doing so by giving you access to not just one but 6 products within the Dhan ecosystem:

Dhan App: The only online trading app you need for buying and selling equity, futures, options, commodity, and currency.
Dhan Web: Trade on the big screen across segments with our web trading platform.
Options Trader App: A dedicated option trading app built for India's F&O traders.
Options Trader Web: Love big screens and F&O trading? Use our web option trading platform.
Dhan + TradingView: The magic of Tradingview charts for free with the Lightning-Fast experience of Dhan on tv.dhan.co.
Connect to TradingView: Our Tradingview broker integration allows you to trade in Stocks, Futures, and Commodities directly from tradingview.com via Dhan.

This means that with Dhan, you'll be able to start:

Lakhs of users already trust Dhan for their online stock trading and investing needs. Dhan is growing rapidly because of the love we receive from SuperTraders and Long-Term Investors who acknowledge that the platform is innovating for them, building super useful features that help them do everything from investing in stock market to trading F&O like a pro on the Tradingview charts and much more.

While we are growing, we will always remember why we started building in the first place - you. Our user-first approach will always be at the heart of our philosophy. Come join us on this incredible journey!

Try it out, you can close your account at anytime using this link.

SEBI Stock Broker Registration No: INZ000006031 | Depository Participant (CDSL) ID: IN-DP-289-2016
Exchange Membership No. : NSE: 90133 | BSE: 6593 | MCX: 56320
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Attention investors:

Stock brokers can accept securities as margins from clients only by way of pledge in the depository system w.e.f September 01, 2020.
Update your e-mail and phone number with your stock broker / depository participant and receive OTP directly from depository on your e-mail and/or mobile number to create pledge.
Check your securities / MF / bonds in the consolidated account statement issued by NSDL/CDSL every month.

Note: As a policy we do not give stock tips or recommendations and have not authorized anyone to give this on behalf of us. If you know anyone claiming to be a part of Dhan / Moneylicious / Raise or our associate companies or partners and offering such services, please report us on help@dhan.co. Important Information for Investors: To prevent unauthorized transactions in your trading / demat account, do not share your account details, credentials or any personal details with anyone. Keep your mobile number updated with your Stock Broker, Depository Participant and ensure that the same is registered with Stock Exchanges, Depository and KRAs. You will receive alerts and information on your registered mobile number / email for debit and other important transactions in your demat account directly from CDSL / Exchange on the same day. KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (Stock Broker, DP, Mutual Fund, etc.), you need not undergo the same process again when you approach another intermediary. No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account. This is issued in the interest of investors.

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Capital Gains Tax