Do you invest or planning to invest in Equity shares? If Yes, then should have a understanding of the tax implications on sale of shares. For better understanding, first we need to know about the following two types of capital gains/losses on which taxes are levied.

1. Short-term capital gains and losses

If equity shares listed on a stock exchange are sold within 12 months of purchase, the seller make either short term capital gain* or incur short-term capital loss*.

2. Long-term capital gains and losses

If equity shares listed on a stock exchange are sold after 12 months of purchase, the seller make either long-term capital gain* or incur long-term capital loss*.

* If Purchase Price < Sale Price = Capital Gain

If Purchase Price > Sale Price = Capital Loss

Taxation of Gains from Equity Shares

Short term capital gains are taxable at 15% irrespective of your tax slab.

Long term capital gain on equity shares listed on a stock exchange are not taxable up to the limit of Rs 1 lakh. Long term capital gain of more than Rs 1 lakh on the sale of equity shares will attract a capital gains tax of 10% and the benefit of indexation will not be available.

It is important to note that above tax rates are applicable only when security transaction tax (STT) is paid on the transaction. 

Loss from Equity Shares

Any short term capital loss from sale of equity shares can be set off against short term or long term capital gain from any capital asset. If the loss is not set off entirely, it can be carried forward for a period of 8 years and adjusted against any short term or long term capital gains made during these 8 years.

The long term capital loss can be set-off against any other long term capital gain and unabsorbed long term capital loss can be carried forward to subsequent eight years for set-off against long term gains.

Summary :

Long Term Short Term
STT paid sale of shares listed on recognized stock exchanges NIL for gains upto c 1 Lakh and 10% for gains above > 1 Lakh; minimum holding period of 1 year 15% if held for less than 1 year
Non STT paid sale of  shares 10%; minimum holding period of 1 years At marginal tax rate (5% to 30%) plus 3% cess plus surcharge (if applicable)

Author Bio

Qualification: CA in Practice
Company: N/A
Location: Jaipur, Rajasthan, India
Member Since: 09 Apr 2021 | Total Posts: 4

My Published Posts

More Under CA, CS, CMA

One Comment

  1. Vipan kumar verma says:

    If individual tradeing in share market & long term capital Gain is less than Rs. One lac then which ITR he should file.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

May 2021
M T W T F S S
 12
3456789
10111213141516
17181920212223
24252627282930
31