Gains from equity shares listed on a recognized stock exchange having a holding period of less than 12 months are considered as short term capital gains.
Section 111A is applicable in the case of STCG on the purchase or sale of
- Equity shares or equity _oriented mutual fund units
- Transferred through a recognized stock exchange
- Such transaction is liable to securities transaction tax(STT)
Tax rate applicable for STCG on shares
This section provides for a concessional rate of tax (i.e 15%) on the short term capital gain.
Clients benefits:-
In the case of resident individuals or HUF, if the basic exemption is not fully exhausted by any other income, then such short term capital gain will be reduced by the unexhausted basic exemption limit and only the balance would be taxed at 15%.
*However this benefit is not available for non-residents.
Let us understand this by an illustration.
Kunn has a taxable salary income of 1.5 lakhs and short term capital gain on the sale of equity shares of Rs.3 lakhs. He also has Rs.40000 as income from Other sources. Calculate STCG tax applicable.
Solution:- You have to add income from other sources of Rs.40000 to the total taxable salary there by making 1.90 lakhs. As there is a short fall on the absorption of the basic exemption limit of kunn by 60000, short term capital gain can be adjusted to the extent of 60000. Tax will be applicable on a short term capital gain of (300000-60000) i.e 240000 at a flat rate of 15%.
Notes:
- If your total income including STCG after applicable tax deduction is below Rs.2,50,000, then your total tax liability is nil and also no liability will araise u/s 111A.
- However, if your total income including STCG is more than Rs.2.5 lakhs, then a flat rate 15% on STCG will be levied.(However rebate u/s 87a will be available if total income is than 5 lakhs i.e. upto 12500 of tax liability as per current income tax regimes).
No deductions under chapter VI-A Against short term capital gain under section 111A:
Deductions under chapter VI –A cannot be availed in respect of such short term capital gains on equity shares of a company or units of an equity oriented mutual fund or unit of a business trust included in the total income of the assessee.
