Short Term Capital Gain is classified into two categories: Short-term capital gains covered under section 111A and Short-term capital gains not covered under section 111A.
STCG covered under section 111A
Examples of STCG covered under section 111A :
- Short term Gains arising on sale of equity shares listed in a recognised stock exchange, which is chargeable to Security Transaction Tax (STT).
- STCG arising on sale of units of a business trust.
- Short Term Capital Gains (STCG) arising on sale of units of equity oriented mutual fund sold through a recognised stock exchange which is chargeable to Security Transaction Tax(STT).
(Equity oriented mutual fund means a mutual fund specified under section 10(23D) and 65% of its investible funds, out of total proceeds are invested in equity shares of domestic companies)
Note: With effect from Assessment Year 2017-18, STCG arising on sale of equity shares, units of equity oriented mutual fund or units of a business trust through a recognised stock exchange located in any International Financial Services Center and consideration is paid or payable in foreign currency even if transaction of sale is not chargeable to Securities Transaction Tax (STT) will be covered under section 111A.
Note: Long term capital gain on transfer of above assets are covered under section 10(38) and exempted from tax (Conditions apply).
Deductions under section 80C to 80U and STCG:
No deduction under sections 80C to 80U is allowed on short-term capital gains covered u/s 111A.
Adjustment of Short Term Capital Gains covered under section 111A against the basic exemption limit :
Only a resident individual or resident HUF can adjust the exemption limit against Short Term Capital Gains covered u/s 111A but such adjustment is possible only after making adjustment of other income.
Tax rates of STCG :
Short Term Capital Gains covered under Section 111A is charged to tax @ 15% (plus surcharge and cess as applicable).
Praveen Kumar sold units of an equity oriented mutual fund in Bombay Stock Exchange after holding them for a period of 11 months. What will be the tax rate applicable on the STCG?
Ans: The STCG in this case is covered under section 111A and, hence, will be charged to tax @ 15% (plus surcharge and cess as applicable).
Computation of Tax if Short term capital gain covered u/s 111A:
Ashish Lehra (40yers of age) is a salaried employee of BPace Ltd earned a salary of Rs. 1,80,000 p.a during previous year. In the month of December, 2015 he purchased equity He purchased shares of SBI Ltd. in December, 2016 and sold the same in March, 2017 (sold in Bombay Stock Exchange and STT was levied). Taxable STCG amounted to Rs. 4,96,000.he also paid Rs. 6500 for mediclaim and 16500 as a premium toward Life Insurance policy. What is the amount of tax for AY 2017-18 ?
| Salary income|
Short-Term Capital Gains (covered u/s 111A)
Gross Total Income
Less: Deduction under section 80C to 80U (not allowed)
Total Income or Taxable Income
Tax on total income (see Note below)
Add: Education cess @ 2%
Add: Secondary and Higher Education cess @ 1%
Note: The basic exemption limit in this case is Rs.2,50,000, First salary income of Rs.1,80,000 will be adjusted against the exemption limit of Rs.2,50,000, Now balance of exemption limit will be Rs.70,000 (Rs.2,50,000 – Rs.1,80,000). The balance of Rs.70,000 will be adjusted against Short Term Capital Gains. The balance Short Term Capital Gains left after adjustment will be Rs.4,26,000(Rs.4,96,000 – Rs.70000). The gain of Rs.4,26,000 will be charged to tax @ 15% (Plus cess @ 2% and 1%). Thus, the total tax liability for AY2017-18 will be Rs.65820.
1) Short term capital gain can be adjusted against basic exemption limit but after making adjustment of other income.
2) Only a resident individual and resident HUF can adjust the exemption limit against STCG covered under section 111A.
3) In above example assume that if assessee is non resident. Then the whole short term capital gain of 4,96,000 will be taxed @15% (plus total cess @3% on income tax).
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