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STCG u/s 111A

Junoon (Business) (68 Points)

16 March 2010

Hon'ble F.M. in Finance Bill 2008 had raised special rate of tax on Short Term Capital Gain on sale of shares etc. on RSE from 10 % to 15 %.
Now, the problem is that, if any individual's taxable income fall within 10% slab, is he required to pay tax on STCG @ 15%. And if so, then its no longer special tax rate. Because, if i would not sell share on stock exchange, I will fall in 10% Slab. Please discuss...

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9 Replies

Amit Bajaj (Tax Attorney) (9085 Points)
Replied 16 March 2010

Section 111A of the Income tax Act provides that those equity shares or equity oriented funds which have been sold in a stock exchange and securities transaction tax is chargeable on such transaction of sale then the short term capital gain arising from such transaction will be chargeable to tax @ 10% upto assessment year 2008-09 and 15% from assessment year 2009-10 onwards.

Thus in above case rate of tax on STCG will be @ 15% wef A.Y 2009-10 irrespective of the fact under what slab the assessee is covered. However if the shares are sold outside the stock exchange and no STT is chargeable on its sale section 111A will not be applicable and such STCG will be added to the other normal income of the assessee and resulting in taxable at the slab rates applicable to the assessee.

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Max Payne (employed) (2574 Points)
Replied 16 March 2010

Yes sir,

it was done with that intention only....

The remedy available is to hold on to the shares for 12 months and sell them to make exempt LTCG... however, that also puts assessee at risk of making loss, which u could not claim since that is exempt..... u have to evaluate the math of each option...

(However, by oversight the proviso was left out, which provided the basic exemption-limit-set-off-option for resident assessees....

U can see a foot note in the act that the words "ten" need by be substituted by "fifteen"... But the finance bill completely missed it out....

- Pointed out by a friend Juzer....)

Junoon (Business) (68 Points)
Replied 16 March 2010

So, it means that if i fall in 10% Slab, then I should sell my short term shares outside the wall of stock exchange and pay tax at slab rate....thats only will save me from 5% excess burden. Thats fine ha..dont pay brokerage, STT and still gainer

nilesh dube (Service ) (74 Points)
Replied 17 March 2010

what if someone is also assessable in higher slab rate of 30%. Then in that case Sec 111A wlll be beneficial for the assesse, as the STCG will be chargeable to tax at 15% instead of 30%.

The intention behind this might be that they want minimum of 15% tax on the sale of shares.

C.Balaji (Learner) (1867 Points)
Replied 18 March 2010

Dear Friend......

The rate has been raised with a view to increase the period of holding the shares........

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VARUN TYAGI (,,,,) (21 Points)
Replied 26 July 2010

if an assessee doesnt hs his normal income bt he has a income u/s 111A...then what will b the treatment for that...?

Amit Bajaj (Tax Attorney) (9085 Points)
Replied 26 July 2010

If assessee has no income other than income u/s 111A then basic exemption limit shall be first exhausted out of such stcg then on remaining, tax @ 15% will be payable.

DT Fundas - Tarun rustagi ( Author) (1150 Points)
Replied 27 July 2010

dear junoon

suppose is one have normal income of rs.60000 only and he have some stcg u/s 111A then he can cliam basic exemption limit for stcg and only the remaining amount is taxable @ 15%.so it is not required to sell the stock always boutside the stock exchange.

every thing is having two aspect positive and negative.fin minister is not so fool as u think.if it is positive for one it will be nagative for two.

sajjan ropiya (tranee) (60 Points)
Replied 05 October 2012

trading in shares -- speculation or nonspeculation business gain.

clearify this point

can a same day settled transactions called to be a speculative transaction instead of nonspeculation transcation & c/f for set-off with another speculative transaction in future.

give me a suitable guidlines to light this matter.