Everyone in India invest in stock market. If people don’t invest then atleast they read about stock market. There are many full time investors and traders also in stock market. People earn, make losses have long term investments in market and many more. This blog comes with the intention of all the taxes applicable on buying, selling and investing shares.

So, lets deep dive in it and have sneak peak.

What is short term capital gain:

When you sell shares/mutual funds withing one year of its purchase, the difference between the purchase and sale price is short term gain.

If Securities transaction tax (STT) is paid on these shares, then the tax rate is 15%

If STT is not paid on these shares, bonds, debentures then tax rate is as per the slab rates applicable to individual and HUF

Also note that, if your total income is only from shares and that too below the basic exemption limit, then no tax is applicable. So, though the tax rate is 15%, you also get the cap of basic exemption limit.

What is long term capital gain:

When you sell shares/mutual funds after one year of its purchase, the difference between the purchase and sale price is long term gain.

As per the budget amendments, with effect from FY 2018-19, LTCG will be taxable @ 10% if the amount is more than 1 Lakh rupees on the difference.

For eg: If the LTCG earned is 250000, then Tax @ 10% would be applicable on (250000-100000) i.e 150000 @ 10%.

Set off of loss and carry forward of losses:

Short term capital loss can be setoff against short term and long term capital gain from any asset.

If you cannot setoff the entire loss, you can carry forward that entire loss. For that ensure that you have filed your income tax return on time.

Long term capital loss can be set off against long term capital gain of any asset.

Unabsorbed capital loss can be carried forward for 8 years.

Also, there has always been a dispute about whether income from shares should be considered as business income or Capital gains.

Here the Government came up with a circular to avoid the litigation.

Taxpaper can decide whether he want to treat the share as stock in trade or business income. Once the stand is taken, he must follow it for subsequent years also. Decision must not keep on changing.

Sale of unlisted shares will always be treated under the head capital gain only.

This amendment of budget to tax long term capital gain also @10% is a major change.

Author Bio

Qualification: CA in Practice
Company: Makwana Sweta & Associates
Location: Mumbai, Maharashtra, IN
Member Since: 20 Aug 2017 | Total Posts: 62
A qualified Chartered Accountant with over 4 years of rich experience in Company Law, Audits, Accounts & taxation. She is a writer at her own blog https://insights.caswetamakwana.com/. She is keen in streamlining business accounts of the Company and provide Startup consultancy. View Full Profile

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3 Comments

  1. ASHOK KUMAR PILLAI says:

    The first sentence written under “What is long term capital gain:” is wrong.
    This is that sentence
    When you sell shares/mutual funds within three year of its purchase, the difference between the purchase and sale price is short term gain.
    The correct sentence will be “When you sell shares/mutual funds in more than One Year it is Long Term Capital Gain.” Because the heading is about LongTerm Gain. The period mentioned is also wrong. It is One year for shares not three years.

  2. Venkata Devaraj Peraka says:

    Can long term capital loss from sale of shares be off set against short term capital Gain from sale of shares in the same year ?

  3. SANJEEV CHINTAL says:

    Very nice article & useful .I have question request to pl answer -I am retired person.I deal in share market.In the Fy 2019-20 I incurred STC loss Rs.40000 /-I cannot set off as no STCG .In ITR2 CG where to show this STC Loss ? Sanjeev

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