[भारत-चिँतन:8646] Capital Gains Tax explained - economystified.blogspot.com

View full post at: http://economystified.blogspot.com/2011/11/capital-gains-taxes.html

The colloquial use of the word "income" typically signifies any
money that you have literally "incoming" to you. Anything that you
get to spend. But the technical/legal/accounting definitions are more
complex.

It's an over simplification, but for the most part you can think
of any money your employer pays you directly as "income."

But if you then take that pay and find a way of multiplying and
growing it, without working with it directly (e.g. entrusting it to
someone or something else), well, that's something entirely
different. That's a "capital gain."

Some common capital gains:
- Profits made on the sale of a house or piece of real estate
- Profits made on the sales of any non-inventory asset that
appreciates in value, like gold, silver, or heck, even collectors'
items
- Profits made from selling stocks, bonds, or any other stake in a
company

Basically, a capital gain is just any maneuver that grows the
money you have into more money. You're not working with your money.
You're letting it work for you.

Capital gains are not considered a part of an individual's
regular income. They're handled as their own separate, isolated
financial event. They are taxed without consideration of a person's
other economic behaviors, much like taxes on purchases (sales tax), or
excise taxes or a property tax.

For the most part, any time a person makes a capital gain, 15%
of it is surrendered directly to the government. This is the famous
"capital gain tax."

Why do we tax capital gains in their own unique space? And why
at that particular rate? The logic behind it is pretty similar to the
logic behind those "economic stimulus" packages that you keep hearing
about.

The theory goes like this: the lower the taxes people are
charged on profits made from investing, the higher the potential gains
from investing will be (since less of investor profit has to be
surrendered as taxes).

This in turn, should give people an incentive to invest more of
their own money in our economy, our industries and our entrepreneurs
than they would otherwise. This greases the wheels of our economy and
keeps the whole production moving along. Hopefully....

Continue reading at: http://economystified.blogspot.com/2011/11/capital-gains-taxes.html