STCG & LTCG

POSTED BY Pramod Yadav ON February 9, 2012 2:52 pm COMMENTS (6)

Dear All,
i m very weak at taxation part. I hav following queries

1) Is short term capital gain from equity/ equity MF clubbed with income or it is fixed @15 ?

2) A Person who does not fall under Tax Slab ( consider 50 k per anum ) if he earns short term capital gain ( Equity) Rs 10000 , is there any Tax liability ?
Should he pay Tax 1500 (@15) ?
or there is no tax liability as the income is still less than 1.8 lac.

3) Infra Bond with cumulative option sold after lock in period (5 yrs) in secondary mkt , what r d taxes applicable. is it the only LTCG @ 10% or @20 with indexation.

if the bond holder is payin tax on accrued interest yearly and then sell it in secondary mkt , can he claim his taxes paid.

4) Can anybody send me link to good Article on Taxation

6 replies on this article “STCG & LTCG”

  1. Pramod Yadav says:

    Thanx Ashal & Banyan

  2. BanyanFA says:

    Hi Ashal,
    I wish I was confused in this matter, but unfortunately as per the Income Tax Act, the priviledge of using the tax bracket for Short Term Capital Gain for Equity / Equity MF (15% tax) is only limited to Resident Indians / HUFs. NRI’s have no option but to pay 15% tax on STCG. However, if they have STCG from non Equity MF / Equity shares, they are eligible for same level of Tax slab rebates.

    This is specifically mentioned in the Proviso of Section 111A(1) – please concentrate on the words “Being a Resident”. I have pasted it below :

    ‘111A. Tax on short-term capital gains in certain cases.—(1) Where the total income of an assessee includes any income charge­able under the head “Capital gains”, arising from the transfer of a short-term capital asset, being an equity share in a company or a unit of an equity oriented fund and—

    (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and

    (b) such transaction is chargeable to securities transac­tion tax under that Chapter,

    the tax payable by the assessee on the total income shall be the aggregate of—

    (i) the amount of income-tax calculated on such short-term capital gains at the rate of ten per cent; and

    (ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee:

    Provided that in the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by such short-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such short-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not charge­able to income-tax and the tax on the balance of such short-term capital gains shall be computed at the rate of ten per cent.

    (2) Where the gross total income of an assessee includes any short-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains.

    (3) Where the total income of an assessee includes any short-term capital gains referred to in sub-section (1), the rebate under section 88 shall be allowed from the income-tax on the total income as reduced by such capital gains.

    Explanation.—For the purposes of this section, the expression “equity oriented fund” shall have the meaning assigned to it in the Explanation to clause (38) of section 10.’.

  3. Dear BanyanFA, I feel you are confusing yourself with the TDS liability. In case of an NRI investor, the TDS ‘ll be deducted by the MF but the NRI in question may claim back the same after filing his/her income tax return for the Indian income & please do note, the benefit of zero taxable limit is available to NRIs also, in this case.

    Thanks

    Ashal

  4. BanyanFA says:

    Hi Pramod,
    For point 1 & 2 of your query, I agree with Ashal. However, I would like to add that this is valid only for Resident Indians. For Non Resident Indians, you have to pay tax on Short Term Capital Gain irrespective of your level of Income.

    Regards
    BFA

  5. Dear Pramod Yadav, I’m trying to answer your queries.

    1. The STCG from Eq. & Eq. MFs are although added into your income but are taxed @ 15.45% for the condition – STT is paid at the time of sell/redemption.

    2. No. as the total income from sources, is falling less than the taxable limit, his tax liability is zero.

    3. The Infra binds under cumulative option sold at exchanges after completing the mandatory 5Y lock in period ‘ll be classified as LTCG & You have the option to pay Tax either @ 10.3% with out indexation or 20.6% with indexation. Option lies with you to opt whichever is favorable to you of the 2 tax rate.

    No, please do note the price of cumulative option & interest pay out option ‘ll be different & so do your LTCGs. So you can’t claim back your income Tax paid on received interest.

    Please read articles in jagoinvestor itself. A lot of stuff is here already in the main site as well as forum.

    Thanks

    Ashal

    1. http://www.finalaya.com/Calculator/Capital_Gain_Calculator.aspx

      you can use this calculator for LTCG calculation along with tax liability.

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