Short-term
Assets like shares that are listed on a recognised stock exchange and has been held for less than 12 months, are treated as short-term capitals. The proceeds earned through them are treated as short-term capital gains.
Whether Short-term capital gains made on shares attract tax ?: Yes
Types of Short-term Capital Gain
| Short-term Capital Gain under section 111A | Such gain is charged to tax at15% (plus surcharge and cess as applicable) |
| Short-term Capital Gain other than covered under section 111A | Such gain attract a standard rate of tax. |
Computation of Tax on STCG on shares
| Particulars | Amount |
| Sale Value | XXX |
| Cost of Acquisition | (XXX) |
| Expense during sale | (XXX) |
| Short Term Capital Gain | XXX |
Exemptions
Following Individuals are exempted from paying income tax on short-term capital gains on shares:
| Resident Individual | Age 80 Years or Above | Annual Income Upto 5 Lakhs |
| Resident Individual | Age 60 Years or Above but less than 80 Years | Annual Income Upto 3 Lakhs |
| Resident Individual | Age less than 60 Years | Annual Income Upto 2.5 Lakhs |
| HUF | - | Annual Income Upto 2.5 Lakhs |
Deductions
No deduction is made available to individuals under Sections 80C on their tax on STCG on shares that covered under Section 111A.
Advise: There is not much scope for share investors to save on their burden of tax on STCG on shares. Individuals can always opt for tax-saving Mutual funds scheme to improve their scope of earnings and to lower their tax burden.
Long Term
Gain arising on transfer of long-term capital asset is termed as long-term capital gain.
Computation
| Particulars | Amount |
| Sales consideration of asset | XXX |
| Expenditure incurred | (XXX) |
| Net sale consideration | XXX |
| Indexed cost of acquisition | (XXX) |
| Indexed cost of improvement | (XXX) |
| Long-Term Capital Gains | XXX |
Tax Rate
| Long term capital asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust | 10% (plus surcharge and cess as applicable) of such capital gains exceeding Rs. 1,00,000. |
| Long-term capital gains from transfer of any listed security or any unit of UTI or mutual fund (whether listed or not), not being covered under Section 112A, and Zero coupon bonds shall have the following two options: |
Avail of the benefit of indexation: tax at normal rate of 20% (plus surcharge and cess as applicable) Do not avail of the benefit of indexation: Tax@10% (plus surcharge and cess as applicable) |
| Other Assets | 20% |
Adjustment of LTCG against the basic exemption limit
Only a resident individual/HUF can adjust the exemption limit against LTCG. Thus, a non-resident individual and non-resident HUF cannot adjust the exemption limit against LTCG.
Deductions
No deduction under sections 80C to 80U is allowed from long-term capital gains.
Exemption
Individuals can avail long term capital gain tax exemption on shares under Section 54F.
If an individual wants to avail exemption on the entire capital gain amount, they must reinvest the entire net consideration value in maximum two real state properties. In case that is not possible, exemption on capital gain will be based on the portion of consideration amount invested. The calculation for that would be –
Exemption on capital gain = (Capital gains x cost of a new house)/net consideration value
However, exemption on long-term capital gain would be revoked if the individual decides to sell the new property within 3 years of its purchase.
Provisions Regarding Disclosure of LTCG in ITR filing
- If you are a resident individual who has LTCG from equity, use Form ITR-2. HUFs that do not have income from profits and gains through a profession can also use this form. LTCG should be disclosed in Section B4 of the form.
- If you are an individual/HUF with income from profits through a profession, use Form ITR-3. LTCG should be disclosed in Section B5 of the form.
- If you are a non-resident assessee, LTCG should be disclosed in Section B7 and B8 of Forms ITR-2 and ITR-3.
- If you are not an individual, HUF, company or file your returns through Form ITR-7, use Form 5 to disclose LTCG.
The author is a highly skilled financial professional with a strong understanding of accounting principles, tax laws, and auditing standards. My expertise in financial reporting, budgeting, and taxation has allowed me to help clients optimise their financial operations, maximise profits, and minimise tax liabilities.
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