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Only income is capital gain

22 May 2021

Hello,

My only major income is the capital gain from equities (both short and long term).
I understand that capital gains in equities are taxable irrespective of my income tax slab.

So, let's say, If I have gained Rs 3 lacks from short term capital gain (from listed equity shares) and I have no other income, do I go ahead and pay advance tax for Rs 3 lack gained ( @ 15%, so in this case Rs. 45K)?

Please help me understand the right approach, appreciate it.

Thanks, Pradeep

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9 Replies

Sivaramaraju G (Learner) (2398 Points)
Replied 22 May 2021

Short capital gain will be taxed as per your slab rates and you are saying you major income is capital gain that to an Amount of 3L. and you no need to pay tax till 5L income(including rebate 87A). hence your return will be nil return.

and advance tax liability arises only when you have tax liability is 10,000. here you no need pay advance tax due to nil tax liability.

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CMA Poornima Madhava (CMA) (13112 Points)
Replied 22 May 2021

In case of listed shares, LTCG up to Rs.1 lac is exempt and STCG is taxable @ 15%. No tax liability considering rebate u/s 87A if the taxable income is <=5 lacs

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Pradeep Kumar (24 Points)
Replied 22 May 2021

Thank you for your response.

I have a follow-up question.

Let's say my income from short term capital gain (equities) is 10 lacks. And I don't have any other income.

Hence, in this case, rebate 87A is not applicable to me.

Now, how do I consider my income tax, should I go according the income tax slabs that applicable for me? But then, how and when do I factor the @ 15 percent short term capital gain tax?

Appreciate your help.

Thanks, Pradeep

Sivaramaraju G (Learner) (2398 Points)
Replied 22 May 2021

Basic exemption limit will be applicable for all types short term capital gains even for short term capital gain arised due to sale of listed equity shares.

and here if your gain is 10 lakhs means tax will be

0-2.5 Nil

2.5-10 1.125 Lakhs (7.5 Lakhs*15%)

Note: You should not go with slab wise rates. if you try slab rates tax will be same in both ways for net income up to 10,00,000.

Sorry first one is wrongly advised you can follow this.

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CA Raj Doshi (Practising CA) (8924 Points)
Replied 22 May 2021

Out of 10 lakhs, reduce it by basic exemption limit of 2.5 lakhs. Apply 15% at 7.5 lakhs = 112500 tax + 4% cess 4500 = Total dues 117000

Now you need to pay advance tax at 15% of 117000 before June 15

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veerendar singh (tax consultant) (3301 Points)
Replied 22 May 2021

Since you are majorly earning from stock market it is advisable to treat the shares trading as a business.

in that case the slab rates of income tax will apply.
the benefit here is that in order to arrive at net income from business you are allowed to deduct expenses(like mobile and laptop depreciation, recharge/broadband, room rent etc.). this might reduce the net income and the tax liability thereon.

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SUSHANT BIDAYE (597 Points)
Replied 22 May 2021

I agree with Mr. Virendar Singh.

but just check the tax audit requirement

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Pradeep Kumar (24 Points)
Replied 23 May 2021

Thank you for your response.

I have a follow-up clarification.

Out of 10 lacks capital gain, 6 lacks is long term gain (taxable @ 10 %) and 4 lacks is short term gain (taxable @ 15 %).

For long term, 1 lack is exempted, so net long term capital gain taxable is 5 lacks.

Now I have the basic exemption of 2.5 lacks. My question is from where do I deduct this basic exemption (short term gain or long term gain)? Or is there some other way? This confusion arises due to difference in tax rates for long and short terms.

Appreciate all your responses.

Thanks, Pradeep