Income earned by the sale of shares and mutual funds is covered under the heading ‘Income from Capital Gain’. The capital gain can be of the following types –
i. Long Term Capital Gain (LTCG) : If equity shares listed on a stock exchange are held and sold after 12 months of purchase, the seller may make a long-term capital gain (LTCG) or incur a Long-term capital loss (LTCL).
ii. Short Term Capital Gain (STCG) : If equity shares listed on a stock exchange are held and sold within 12 months of purchase, the seller may make a short-term capital gain (STCG) or incur a short-term capital loss (STCL).
Tax on LTCG :
Long-term Capital Gain on equity shares listed on the recognized stock exchange or equity-oriented Mutual Funds on which Security transaction tax (STT) is paid is taxed at 10% if the gain is above Rs 1 Lakh during the financial year. STT is applicable on all equity shares sold or bought on a stock exchange.
If a seller makes a long-term capital gain of more than Rs.1 lakh on the sale of equity shares or equity-oriented units of a mutual fund, the gain made will attract a long-term capital gains tax of 10% (plus applicable cess). Also, the benefit of indexation will not be available to the seller.
Tax on STCG
Short-term Capital Gain on equity shares or equity-oriented Mutual Funds are taxed at 15.6%. Short-term Capital Gain on shares other than equity shares listed on the recognized stock exchange or Mutual Funds other than equity-oriented Mutual Funds is taxed as per normal slab rates. The seller makes short-term capital gains when shares are sold at a price higher than the purchase price. Short-term capital gains are taxable at 15%.
Tax Rates
Long-term Capital Gain: LTCG are added to the taxable income of the person and are taxed as per the slabs on which the taxable income of the person falls. Thus, it can be said that the income from long term capital gain is taxed as per income tax slabs applicable to the assessee.
Short-term Capital Gain: STCG are taxable at a flat rate of 15% irrespective of one’s income or tax slab he falls into.
Calculation of Tax
Long term Capital Gain = The gain is added to the total taxable income of the assessee and the tax is calculated on the total taxable income as per income tax slabs.
Short-term capital gain = Sale price – Expenses on Sale minus the Purchase price
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is it for LTCG or STCG, If i recall, STCG is taxed like you mentioned, but LTCG gain/loss will be added to one’s total income and tax will be applicable as per tax bracket on that slab.. pls correct my understanding, if rule is otherwise.
Tx
As per Section 112A (1) & (2), the LTCG on Transfer of shares, the amount of income-tax calculated on such long-term capital gains exceeding one lakh rupees at the rate of ten per cent.
Further, As per 112 (1)(a) for LTCG on assets (other than shares), the amount of income-tax calculated on such long-term capital gains at the rate of twenty per cent for an individual or a Hindu undivided family.
Does the information in this article applies only to the stocks sold on Indian Stock markets?
Or does it also applies to the stocks sold on US stock markets?
For eg, those who are buying and selling US shares though Indian stock brokers like INDMoney etc.
No, these rates and sections are not applicable for the international stocks. These are only applicable on on shares of domestic companies of India.
Sir,
If one gains or incurs losses by sale of shares listed in Stock Exchange a Security transaction tax is deducted 15.36%.
But whether the income or losses to be added or deducted from total income
The income/loss earned from sale of securities is actually added/deducted to/from your total income. However, the tax is not calculated as per slab rate but as per the specified rate prescribed for such income. For example – if you have taxable income from other heads 600000 and income form sale of shares (capital gain) – 50000. Your total taxable income will be 650000. However, the tax calculated on the income shall be – on 600000 – as per tax slabs and on 50000- flat @15 %. Tax liability will be the collective tax that will be from both these incomes.