Unlocking Short-Term Capital Gain on Shares: Understanding short-term capital gains is crucial for investors in the stock market. Grasping the taxation aspects is essential for both quick turnovers and strategic investments.

What is Short-Term Capital Gain on Shares?

Short-term capital gains occur when shares held for less than 12 months are sold at a profit.

Taxation Overview:

Short-term capital gains are taxed at higher rates than long-term gains. Under Section 111A, the rate is 15%, plus any applicable surcharge.

Categories of Gains:

• STCG Under Section 111A: 15% tax on gains from listed equity shares or equity-oriented mutual funds.
• STCG Not Under Section 111A: Taxed according to individual tax slabs, including gains from unlisted equity shares or debt-oriented mutual funds.

Real-World Examples:

• Section 111A: Ms. Smriti sells equity funds after eight months, incurs 15% tax with surcharge and cess.
• Not Under Section 111A: Mr. Singh sells debt funds held for eight months, taxed per income slab.

Calculating STCG

Short-term capital gain is derived by subtracting purchase cost from selling price.

Example: Selling Price: Rs. 12,000; Purchase Price: Rs. 10,000; Gain: Rs. 2,000

Formula: STCG = (Sale Value) - ((Cost of Acquisition) + (Expenses))

Components of Calculation:

• Sale Value: Gross selling price minus brokerage and Securities Transaction Tax.
• Cost of Acquisition: Based on fair market value for shares bought before Feb 1, 2018, or purchase cost thereafter.
• Cost Improvement: Not applicable for shares.
• Expenses: Registration, brokerage excluded from Securities Transaction Tax.

Holding Period & Indexation:

• Holding Period: Time from acquisition to one day before sale.
• Indexation: Not applicable for short-term capital gains.

Empowering Investors: Understanding computation, tax liabilities, and profitability is crucial for short-term gains. Clarity on cost components ensures accurate calculations.

Disclaimer: This information is for insight; consult a professional advisor for personalized advice.