Long term capital gain

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 November 2014 I want to sell my shares then what is the provision for tax i.e capital gain?(long term and short term)

Nikhil Kaushik

Nikhil Kaushik (Expert)
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02 November 2014 these shares are listed or unlisted?

Querist : Anonymous

Querist : Anonymous (Querist)

06 November 2014 Both listed and unlisted

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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03 August 2024 Certainly! The taxation of capital gains on the sale of shares depends on whether the shares are listed or unlisted, and whether they are held for the long term or short term. Here’s a detailed overview:

### **1. **Long-Term vs. Short-Term Capital Gains

**Long-Term Capital Gains (LTCG)**:
- **Listed Shares**: Shares held for more than 12 months are considered long-term.
- **Unlisted Shares**: Shares held for more than 24 months are considered long-term.

**Short-Term Capital Gains (STCG)**:
- **Listed Shares**: Shares held for 12 months or less.
- **Unlisted Shares**: Shares held for 24 months or less.

### **2. **Tax Provisions for Capital Gains

#### **Listed Shares**

**Short-Term Capital Gains (STCG)**:
- **Tax Rate**: Taxed at 15% (plus applicable cess and surcharge).
- **Section**: Taxed under Section 111A of the Income Tax Act.

**Long-Term Capital Gains (LTCG)**:
- **Tax Rate**: Taxed at 10% without the benefit of indexation or 20% with indexation (whichever is beneficial). However, under Section 112A, LTCG exceeding ₹1 lakh in a financial year is taxed at 10% without indexation benefit.
- **Section**: Taxed under Section 112A.

**Exemption**:
- **Section 54EC**: LTCG on listed shares can be exempted if invested in specified bonds (such as bonds issued by NHAI, REC) within six months of the transfer.

#### **Unlisted Shares**

**Short-Term Capital Gains (STCG)**:
- **Tax Rate**: Taxed as per the individual’s applicable income tax slab rate.
- **Section**: Taxed under Section 111A (for listed) or as per individual slab rates (for unlisted).

**Long-Term Capital Gains (LTCG)**:
- **Tax Rate**: Taxed at 20% with indexation benefit.
- **Section**: Taxed under Section 112.

**Exemption**:
- **Section 54EC**: Similar to listed shares, LTCG on unlisted shares can also be exempted if invested in specified bonds.

### **3. **Indexation**

**Indexation** helps adjust the purchase price of an asset to account for inflation, which reduces the capital gains tax. This is available for LTCG on unlisted shares and for listed shares if opting for the 20% tax rate under Section 112.

### **4. **Reporting and Filing**

- **Tax Return**: Report capital gains in your Income Tax Return under the respective sections for STCG and LTCG.
- **Form 26AS**: Ensure that the transaction details are correctly reflected in Form 26AS.
- **Documents**: Keep records of purchase and sale transactions, including brokerage statements, to support your capital gain calculations.

### **5. **Important Points**

- **Securities Transaction Tax (STT)**: For listed shares, STT is applicable at the time of purchase and sale. It is deductible at the time of computing capital gains.
- **Tax Deducted at Source (TDS)**: Generally not applicable for capital gains unless specified otherwise.

**Summary**

- **Listed Shares**:
- **STCG**: 15% (plus cess and surcharge).
- **LTCG**: 10% (without indexation) or 20% (with indexation).
- **Unlisted Shares**:
- **STCG**: Taxed as per slab rates.
- **LTCG**: 20% with indexation.

For precise tax planning and compliance, it's advisable to consult a tax professional or a chartered accountant who can provide guidance tailored to your specific situation.