short term gain

Hi Dhaval,

If you are selling the IPO shares or shares traded otherwise within 1 year of its purchase, you have to pay the short-term capital gain by applying the provisions of Section 111A.

You have to pay 15% tax on the short-term capital gain amount. On other income, you have to pay the tax as per applicable slab rate.

Suppose,

Total Income (After All Deductions) From Other Sources = Rs. 5,00,000

Income From Short-Term Sale Of IPO Shares/ Other Shares = Rs. 1,00,000

The tax has to be paid as follows -

Tax on Short-Term Capital Gain = 1,00,000 x 15% = Rs. 15,000

Tax on Other Income = 2,50,000 x 5% = Rs. 12,500

But, in case of an individual or HUF, if the total income after reducing the short-term capital gains (Total Income from all other sources - STCG on the sale of shares) is less than Rs. 2,50,000, then STCG will be reduced by the amount by which total income falls short of Rs. 2,50,000.

Example

Income from all sources including STCG on the sale of shares = Rs. 3,00,000

STCG on the sale of shares = Rs. 80,000

Thus,

Income after reducing STCG is Rs. 2,20,000 which is less than Rs. 2,50,000.

So STCG will be reduced by (2,50,000 - 2,20,000) = Rs. 30,000

Hence, taxable STCG = Rs. 80,000 - Rs. 30,000 = Rs. 50,000 x 15% = Rs. 7,500

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