Rate of tax on Short-Term Capital Gains Section 111A

Rate of tax on Short-Term Capital Gains Section 111A

 

Where there are capital gains arising from the transfer of short-term capital asset, being an:

  • Equity share listed in a recognized stock exchange;
  • Units of equity-oriented funds or;
  • A unit of a business trust.
  • The transaction of sale is chargeable to securities transaction tax (STT).

Such Short-term capital gains are taxable at 15% on transfer of listed equity shares, units of equity-oriented fund.

 

  • Short term capital gain arising from transactions undertaken in foreign currency on recognized stock exchange located in an International Financial Service Centre (IFSC) would also be taxable at 15%. In this case, no STT has to be paid on sale transaction.

 

  • The cases where the transaction of transfer is not subject to securities transaction tax, short-term capital gain is added to your computation of Income and the taxpayer is taxed according to the slab rates applicable in his case.

 

NOTE:

  • Securities such as preference shares, debentures, deeply discounted bonds, units of debt mutual funds etc. are not covered under section 111A.
  • Benefit of slab rate is available on such short-term capital gains a in case of resident or HUF.

 

Meaning of Equity-oriented funds: It is a fund where investable funds are invested by way of equity shares in domestic company for more than 65% of total proceedings of such funds.

 

Meaning of Business trust: (Real Estates + Infrastructure Investment Trust) These trusts raise resources from many investors to be directly invested in real estate or infrastructure projects.

 

Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in whatsoever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.

 

 

Here’s an example:

Mr. Prakash sold equity shares of SBI Ltd. through Bombay Stock Exchange after holding them for a period of 8 months. What will be the tax rate applicable on the STCG?

Solution:

The STCG in this case is covered under section 111A and, hence, will be charged to tax @ 15%.

 

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