What is capital gain?
The capital gain represents the increase in an asset’s value from the time you acquired it to the time you sold it. Profits from the sale of an asset such as a business, shares of stock, a piece of land are taxable income. A capital gain can be calculated when we subtract the original cost of an asset from the total sale price.

You may have wondered about different types of terms associated with finances and investment. Often you may have heard of gains in your capital. For this, we need to understand some basic concepts around the capital gain. Firstly, we need to know what capital is. You may have different types of assets that you have accumulated over a period of time. This can be in prize bonds, cash, jewelry, property, land, and gold. There can be other forms of keeping your capital too. All of these are known as capital assets.

After a period of time, you may believe that these assets should be sold. You generally compare the price of selling and the price at which you bought your asset. There can be an excellent deal in which the price of selling would be higher than the price you bought. When you typically sell your possession at a higher price than that of buying, it means that you have achieved capital gain.

Taxes are an important factor that should be kept in mind before starting to sell a possession. You are, however, required to pay some amount of tax on the capital gain, and it depends on different factors such as how long you have kept the possession for. It is generally known that the taxes on the sold possessions are far higher than others; however, it may not be the case every time and can differ.

What is the capital gain tax?
Capital gain tax represents government fees on the profit made from selling assets. In the US, there are long-term gain tax and short-term gain tax.

There are two concepts known as a long-term gain and short-term gain when we speak about capital gain. Both of these gains generally depend on how long you have kept the possession; in general, it is the period of time that determines it.

What is long-term capital gain tax?
The long-term capital gain tax represents government fees from the sale of an asset held for more than a year. The long-term capital gains tax rate can be 0%, 15%, or 20%, depending on your taxable income and filing status. Usually, long-term capital gains tax rates are lower than short-term capital gains tax rates.

2021 Long-term capital gain tax rates are:

What is short-term capital gain tax?

The short-term capital gain or short sale tax represents government fees from the sale of an asset held for less than a year. The short-term capital gains tax rate can be 10%, 12%, 22%, 24%, 32%, 35%, and 37%, depending on your taxable income and filing status.

2021 short-term capital gain tax rates are:

Capital gain facts:

• Capital gain means when you sell your possession such as bonds, jewelry, gold, property, or any other asset at a higher price than the price you acquired.
• The taxes on the capital gain will be affected by the time period until you kept the possession with you. Depending on this, you will either get a short-term gain or a long-term gain. This is an important point, and this is the depending factor on how much tax will be applied on the possession and the gain that you get from it.
• Short-term gain occurs when you have kept the possession for a year or less than that. The tax that occurs on that is the normal one. There will be no additional tax applied on it, and it is ideal.
• Long term gain occurs when you have kept the possession for more than a year. The tax rate may vary from zero percent to twenty percent and in between.

Long term gain versus short term gain
When you sell the product or possession that you have held for a long time, it means you are likely to get again on it. This can be either a long-term gain or a short-term gain. This depends on different factors as to how long you have acquired the possession. If it is only under a year, then this means that you will acquire short-term gain, whereas if it is acquired for more than a year, then it means that you are likely to get a long-term gain. Short-term gains are not subjected to additional taxes, and the tax applied on it would be the normal one.

You are also required to calculate the net gain as well. This is basically the amount that it took you to buy the possession, the costs that were meant to maintain it, and how much you paid for the sale of the possession as well cost. All of these factors contribute to the net gain calculation. If, however, the possession you got was a gift from someone, then the net gain is equal to the donor’s basis.

In general, the taxes applied on the long-term gains are much favorable and lower than when the possession is only kept for a year or less that. As a principle, you should keep the possession for more than a year and consequently add in more years so that you get a favorable long-term gain on your possession.

The taxes applied on the short-term capital gain are the regular ones. This means that generally, you may have to pay the tax a bit higher as compared to the fact that if you would have held the possession for much longer years. All of this must be considered when you are weighing the opportunities made while selling the product. You can have a tax at a higher bracket than the amount for which you bought the possession. You must also understand that the tax rates will vary depending on the years as the rate for each year differs depending on the country’s budget. The filing status is also considered when you are making a tax return; for example, are you filing as a single candidate, married, or married but filing separately.
Does location matter when you are filing for tax?
Apparently yes!
As other factors impinge on how much tax you are going to pay, one factor also includes where you are currently living. Some states do not put taxes on capital gains, whereas some states apply taxes on them.
States in the USA such as Florida, Texas, Washington, and others do not apply any taxes, whereas other states will apply taxes on the capital gain. Therefore, this must also be researched well before getting a capital gain.

Does the possession affect the capital gain?
Yes,  the capital gain tax rates are different for different types of possessions:
• Jewellery/Art pieces: No matter which income slab you belong to, having possession of articles such as coins, stamps, jewelry, or even art pieces means that you will be taxed at around twenty-eight percent.
• Businesses: If you are an owner of a small or medium business, you should note that it again depends on how long you or your family member had held the business.
• Property/Estate: For the property, if you are selling for the first time, then you are liable to be exempted by a considerable amount. You should also check for the maintenance cost and other costs to be covered.
• Owner of real estate: Those who own real estate generally apply the principle of reducing the costs because of the depreciation in the cost and amount. This also means that the cost is generally lower than what it was in the first place.

Is there any advantage in having a long-term investment versus a short-term one?
Yes, there is a good advantage when you have a long-term investment compared to a short-term one. This is because you would be required to pay less if you have the possession for more than a year. The tax which would be applied on a product that was kept for more than a year will always be lower; therefore, most taxpayers are asked to sell their possessions after keeping it for a long time, such as after a year.

In general, we all know that one year has, overall, twelve months. Some companies release their reports after every three months. This is generally known as the quarterly reports and as the name suggests, having a performance report out once in three months means that the three-month trio is a quarter. Other companies release their reports twice a month, which is normally after every six months. These are known as biannual reports, which contribute to discussing the performance that had happened in the past six months with possible reflections for the future.

What is the fiscal year?

The fiscal year represents a 12-month or 52 weeks period that an organization uses to report its finances. However, the fiscal year does not always start at the beginning of the year. Usually, the fiscal year starts at the beginning of a quarter, such as January 1, April 1, July 1,  etc.

How long is a fiscal year? The fiscal year is 12-month or 52 weeks period long.

However, what happens when the company decides to release its reports once a year. When a company releases a report once a year suggesting how the performance was and future perspectives, this is known as the annual report, and the year for which the report was released is referred to as a fiscal year. The companies often release the report in December or the following January; however, there is no hard and fast rule related to it, and it can be changed as well. For example, a fiscal year may run from March of one year till March of next year.

When does the fiscal year start?

Usually, the fiscal year starts beginning of a quarter, such as January 1, April 1, July 1, etc. Each country or sector has a different fiscal year starting date. For example, the fiscal year for the US federal government begins on October 1 and ends on September 30. The fiscal year 2021 begins on October 1, 2020, and ends on September 30, 2021.

As established above, a fiscal year consists of a company’s performance from one month to the same month in the next year. Most companies adhere to the traditional calendar period of having a fiscal year from January till December. However, many companies do not follow the conventional calendar and run their fiscal year differently.

If a fiscal year starting from July 2019 and ends in June 2020, then the report would be for the fiscal year of 2020, and it would be denoted by FY20.

There is another terminology known as fiscal year-end, which means the fiscal year’s date would be ceasing. In America, the government has a fiscal year that runs from first October and ends on 30th September. Therefore, every government or company changes the fiscal year according to their profits and which months are more suited to them. On the contrary, Facebook has a fiscal year that adheres with the conventional character that runs from January till December. It is also much easier to remember and does not hold confusion; however, you should know about the different companies and their fiscal years when working for one.

What fiscal year is it now in the US?
It is the 2021 fiscal year or FY21 in the US because the fiscal year 2021 begins on October 1, 2020, and ends on September 30, 2021.

What is the meaning of FY?

FY is the abbreviation that is used for a fiscal year. In general, when you speak of a particular year and how the fiscal year report would be, you use some numbers in two digits after the abbreviation of FY. For example, if you speak of a fiscal year that starts in the year April 2020 and ends on 31 March 2021, you would be speaking about the fiscal year of 2021, which would be denoted by FY21.

When does the fiscal year end?

There is another term which is known as a fiscal year-end. As the term denotes, it is that date at which the fiscal year is coming to an end or is ceasing. It is usually the last date of the month, especially the last date of a quarter. For example, it can be March 31, June 30, September 30, or most commonly used, December 31. It varies and depends on the companies’ profits, their working, and vision, impacting the fiscal year.

Why are fiscal years not the same running as the conventional calendar?
It is effortless to align your fiscal year with the conventional calendar; however, there are many factors that the companies have to consider to see what the fiscal year would be. Some of these factors are listed below:

1. Their business: The business spendings and profits are different for each company, and in general, it is not very wise to align the calendar’s fiscal year. Sure it is much easier to do so; however, in general, it is not recommended. This is because the company has different strategies and different sales viewpoints as well. For example, a company like Apple or H & M has much higher profits when there is a holiday season. Therefore, when they compile a report, they are likely to put the higher numbers at the end of the report, leaving a lasting impact on the reader’s mind. Therefore business people are also more likely to invest in their stocks at the last minute as well. Thus, this is a strategy used in the business world and is adjusted according to the business seasonality as the term is used.

2. Savings: When writing a fiscal year report, you have to write an audit report. In this, you have to hire a specific accountant that may generally be busier at the end of the year in December. They are also likely to charge a higher fee at the end of the year because they know their demand. This is why some companies choose a fiscal year to run from mid of one year to mid another to be free and conduct their audit reports effectively.
3. Starting date: Many companies begin their activities in the middle of the year or from the second quarter. The starting dates of the company also effectively have an impact on what the fiscal year would be. The expenses should be reflected when the company has started working effectively. The revenues and profits would also be written in the report effectively; however, if a company does not have a starting date, then its report would leave no impact as there would not be any well-known facts to be written.

Can a fiscal year be changed as per the company’s demands?

Yes, a company can change the fiscal year as per their own need and as per their own schedule. A lot of factors affect what the fiscal year can be. These can be affected by forecasts, profits, and holiday seasons. Overall, a company needs to assess the quarter where the highest sales and profit made to make the ending year numbers the highest. This will have a lasting impact on the company’s fiscal year report as well. If a company makes the highest profit in August, it can change its fiscal year accordingly as there is no hard and fast rule applied to it.

Is a tax year different from a fiscal year?

A tax year is specifically known to have the returns and taxes accounted into a single document. The tax year can also run from January to December or from year one to the month of year two. It is up to the company to choose between a fiscal year or a tax year, but if you choose the tax year, you have to calculate all of the taxes and file them before the closing.

What is the government fiscal year?
The government fiscal year is annually reflected in the budget. It does not necessarily start from January and is different for different countries. For example, in the United States of America, the fiscal year starts from the first day of October.

What is the meaning of a quarter?

When the company decides to release its reports after every three months in a year, this is known as a quarterly report. This is generally known as the quarterly reports and as the name suggests, having a performance report out once in three months means that the three-month trio is a quarter.
In general, the year which has twelve months has four quarters. A certain abbreviation designates each quarter; for example, quarter one is written as Q1, quarter two is written as Q2, quarter three is written as Q3, and quarter four is written as Q4.

Quarters are also written in such a form that designates that it belongs to a certain year. For example, if you see Q1/21 written, you refer to quarter one of 2021. You can write different quarters with years to grasp the concept as well.

When we speak about the companies, there are generally two types of terms that are used widely. One is known as the fiscal year, and the other is the fiscal quarter. As discussed in the article, the fiscal year refers to a whole year. Although it can differ from the calendar in terms of not necessarily starting in January, most companies adhere to the conventional calendar practice and begin the fiscal year in January that runs till December 31. However, fiscal quarters refer to four quarters as discussed, and mostly they adhere to the calendar. In this term, you can see that the quarters are as follows:
1. January, February, March- Quarter One- Q1
2. April, May, June- Quarter Two-Q2
3. July, August, September- Quarter Three- Q3
4. October, November, December- Quarter Four- Q4
It is important to understand that a fiscal quarter is aligned or in line with the fiscal year.

Do quarters in every company go by the conventional calendar system?

The quarters of the different companies may mean different things. For example, it is never a hard and fast rule that quarter one would be the busiest and quarter two and three would be slow for every company. The first quarter doesn’t need to start from January till March. Many companies such as Walmart start their quarter one in February, and then the cycle continues as it is. This is because each company and their dynamic differ from one another, and there is no hard and fast rule applied to the quarters. They have to consider different factors as well, such as their sales and business growth. Many companies also do not consider the starting of the month as the beginning of a quarter. They may begin with a specific date, for example, the fifteenth of a month.