Short Term Capital Gain
Short Term Capital Gain
- What is Short term Capital Asset?
- What are the rates of income tax on short term Capital Gain?
- If basic exemption limits are available in case of short-term capital gain?
- If we can avail deduction u/s 80C to 80U (Chapter VIA) from short term capital gains?
- How we can calculate short-term capital gain?
1. What is Short term Capital Asset?
Short Term Capital Assets: -
When a capital asset is held upto 36 months in general is classified as short term capital asset. However for few categories a period shorter than 36 months have been classified as short term capital asset, which are as follows:-
- In case of equity shares of a company, units of an equity oriented mutual fund or units of business trust, which are recognised in stock exchange & securities transaction tax is applicable, the holding period upto 12 months is considered as short-term for capital gain/loss.
- In case of unlisted equity shares, period of holding of upto 24 months is considered as short term for capital gain/loss.
- In case of Immovable property being land or building or both, the period of holding upto 24 is considered as short-term for capital gain/loss.
- In case of all other capital assets, the period of holding upto 36 months is treated as short term for capital gain/ loss.
Following are the rates of income tax on short term capital gain:
- Short term capital gain on sale of immovable property or land is taxable at the slab rate of applicable to assessee.
- Short term capital gain on shares or securities (Assets falling u/s 111A) where securities transaction tax is applicable is 15%, note that in this type of securities the holding period upto 12 months is considered as short term capital gain/ loss.
- Short term capital gain an any other movable or immovable asset is the normal tax rate at applicable to the assessee according to his slab or otherwise.
Yes, since short term capital gain are the added as part of other heads income while computing total taxable income of an assessee, the basic exemption limits i.e. 250000 in case of resident individua or HUF (3 lacs in case of resident senior citizen, 5 lacs in case of resident super senior citizen) is available to deduct also in case of short term capital gain on assets.
This limit is also available for short term capital gain on shares & securities on which section 111A applies provided this capital gain would be adjusted only after reducing the basic exemption limit against the other head’s income other than this capital gain.
For example If Mr. Dinesh has short term capital on listed equity shares of Rs. 200000 and has interest income of 150000 then while computing his taxable income, we will first deduct his interest income from his basic exemption limit of 250000 and then balance 100000 basic exemption limit is left to get adjust against short term capital gain of 200000. So after adjusting this 100000 of balance exemption limit, we are left with the short term capital gain of 100000, which would be taxable at 15%. So his total tax liability would be 15000.
Yes we can avail deductions u/s 80C to 80U from the short term capital gains. But we cannot avail deduction u/s 80 C to 80U for the short-term capital gain on shares, securities or units on which section 111A applies.
Following are the steps to calculate short term capital gain:
Step 1: Take the sale proceeds of short-term capital asset
Step 2: Deduct the cost of purchase ( Base price & GST if input has not been taken of that GST)
Step 3 : Deduct any expenditure incurred for the purpose of that transfer only
Step 4: Deduct cost of improvement if any
Balance amount will the amount of short-term capital gain / loss.