Type of Capital Asset: Short Term and Long Term
Type of Capital Asset |
Holding Period of the Asset |
|
Short Term |
Long Term |
|
Listed shares |
Less than 1 year |
1 year or more |
Equity-oriented mutual funds |
Less than 1 year |
1 year or more |
Debt-oriented mutual funds |
Less than 3 years |
3 years or more |
Unlisted shares |
Less than 2 yeras |
2 years or more |
Immovable properties |
Less than 2 years |
2 years or more |
Movable property |
Less than 3 years |
3 years or more |
Tax on Short Term Capital Gain (STCG):
Short-term capital gains are classified as follows:
- Short-term capital gains covered under section 111A.
- Short-term capital gains normal, other than covered under section 111A.
1. STCG covered under section 111A
(I) STCG arising on sale of equity shares listed in a recognized stock exchange, which is chargeable to STT (Security Transaction Tax).
(II) STCG arising on sale of units of equity oriented mutual fund sold through a recognized stock exchange which is chargeable to STT.
(III) STCG arising on sale of units of a business trust
(IV) STCG arising on sale of equity shares, units of equity oriented mutual fund or units of a business trust through are recognized stock exchange located in any
International Financial Services Centre (IFSC) and consideration is paid or payable in foreign currency even if transaction of sale is not chargeable to securities transaction tax (STT).
2. STCG normal, other than covered under section 111A
(I) STCG arising on sale of equity shares other than through a recognized stock exchange.
(II) STCG arising on sale of shares other than equity shares.
(III) STCG arising on debentures bond and government securities.
(IV) STCG arising on sale of assets other than shares is unit like STCG on sale of immovable property, gold, silver etc.
Tax rates of STCG
- STCG covered under section 111A is charged to tax at the rate of 15% (plus surcharge and cess as applicable).
- Normal STCG, i.e., STCG other than covered under section 111A is charged to tax at normal rate of tax which is determined on the basis of the total taxable income of the taxpayer.
Calculation of tax with example (AY 2023-2024 FY 2022-2023):
Ex1. Mr. X (resident and age 40 years salaried person) Annual Salary Rs. 850000. He purchased 10000 equity shares at Rs. 100/share in December 2022 and sold the same at Rs. 125/share (Brokerage Re. 1/share) in April 2023 through National Stock Exchange. What will be the tax of Mr. X?
Computation of STCG:
Full Value of Consideration: Rs. 125 x 10000 = Rs. 1250000
Cost of Acquisition : Rs. 100 x 10000 = Rs. 1000000
Brokerage : Re. 1 x 100000 = Rs. 10000
Short Term Capital Gain = Rs. 240000
Here STCG covered U/S 111A and hence, will be charged to tax @15% = RS. 240000 x 15% = Rs. 36000
Computation of tax on Salary Income (New): 0 – 2.5L = Rs. 0, 2.5L- 5L = Rs. 12500, 5L – 8.5L = Rs. 70000
Total tax liability is Rs. (36000+12500+70000) = Rs. 118500 + Health and Education Cess(4%) = Rs. 123400/-
Ex2. Mr. X (resident and age 40 years salaried person) Annual Salary Rs. 850000. He purchased a plot of land for Rs. 1000000 in December, 2022 and sold the same at in April, 2023 for Rs. 1210000 (Brokerage Rs. 100000). What will be the tax of Mr. X?
Computation of STCG:
Full Value of Consideration: Rs. 1210000
Cost of Acquisition : Rs. 1000000
Brokerage : Rs. 10000
Cost of Improvement (if any, i.e., post purchases capital expenses on improvement of capital asset) also be deducted.
Short Term Capital Gain = Rs. 200000
Here STCG is normal, i.e. not covered U/S 111A, hence STCG of Rs. 200000 will be added to the salary income and will be charged to tax at normal rates.
Total taxable income = Rs. (8500000+2000000) = Rs. 1050000
Computation of tax on Salary Income (New): 0 – 2.5L = Rs. 0, 2.5L- 5L = Rs. 12500, 5L -10L = Rs. 1000000, above 10L = Rs. 15000
Total tax liability is Rs. (12500+100000+15000) = Rs. 127500 + Health and Education Cess (4%) = Rs. 132600/-
Adjustment of STCG against the basic exemption limit:
The basic exemption limit applicable in case of an individual resident for the F.Y. 2022-2023 (A.Y. 2023-2024) as follows:
Below 60 years age is Rs. 250000/-, age of 60 years to 80 is Rs. 300000/-, above 80 years is Rs. 500000/-
A resident individual can adjust the STCG covered U/S 111A against the basic exemption limit but such adjustment is possible only after making adjustment of other income. And then the remaining limit (if any) can be adjusted against STCG covered U/S 111A.
Deduction U/S 80C to 80U and STCG:
No deduction U/S 80C to 80U is allowed on STCG referred to in section 111A. However, such deductions can be claimed from STCG other than covered U/S 111A.
Ex. Mr. A purchased a land worth Rs. 884000 in March, 2022 and sold the same in April, 2023 for Rs. 1284000. Can he claim U/S 80C?
Here deduction U/S 80C can be claimed from STCG other than covered U/S 111A. Mr. A can claim deduction of Rs. 150000 (80C) from STCG of Rs. 400000. Therefore, his taxable income is Rs.250000.