Short Term Capital Gains

Gain arising from a capital asset held for less than 36 months is known as a Short Term Capital Gain (STCG). However in cases of certain assets like immovable properties and unlisted securities, the duration of holding can be upto 24 months. Also in case of listed securities, equity oriented Mutual Funds and zero coupon bonds only, duration of less than 12 months of holding will qualify as short term capital gain. This is for tax purposes under Indian Income Tax Act, 1961.

In order to calculate the short term capital gain on shares we can calculate the gain by subtracting the brokerage or expenditure incurred to sell the asset and purchase price of the asset from the sale value.

For example: A trader bought 1,000 shares of Wipro for Rs.320 on 29th November 2017 and sold it at Rs.350 on 20th August 2018. The brokerage involved was 0.3%. No other expenses were incurred by the trader.

In this case the sale value would be 350*1000= 3,50,000

Purchase Price would be 320*1000 = 3,20,000

Brokerage Fees will be (3,20,000+3,50,000)*0.3% = 2,010

Therefore STCG will be applicable on the gain amount of Rs.27,990

For listed securities in India, the STCG currently applicable is 15% on the gains. Therefore the tax amount in the above scenario will be Rs. 4,198.50.

This concessional rate of tax is for listed stocks alone, with a view to encourage equity culture among the domestic investors. Unlisted stocks, land and property, other capital assets are governed by other provisions of the Act and are taxed at different rates.