Understanding LTCG and STCG tax

 Time to file ITR , if you are in equity or any other asset investments , you need to know about Long and Short term capital gains and how they are taxed 

Any profit or gain that arises from the sale of a ‘capital asset’ is a capital gain. This gain or profit is comes under the category ‘income’, and hence you will need to pay tax for that amount in the year in which the transfer of the capital asset takes place. This is called capital gains tax, which can be short-term or long-term .


Short term capital asset : Any asset hold for less than 36 months (other than listed equity) is a short term capital asset .

Long term capital asset : An asset that is held for more than 36 months is a long-term capital asset


How taxes are calculated 

Tax Type

Condition

Tax applicable

Long-term capital gains tax

Except on sale of equity shares/ units of equity oriented fund

20%

Long-term capital gains tax

On sale of Equity shares/ units of equity oriented fund

10% over and above Rs 1 lakh

Short-term capital gains tax

When securities transaction tax is not applicable

The short-term capital gain is added to your income tax return and the taxpayer is taxed according to his income tax slab.

Short-term capital gains tax

When securities transaction tax is applicable

15%.

 

Tax on equity and debt funds 

Any fund which invests above 65% in stocks comes under equity fund and it is taxed 15% in short term and 10% for long term . Below table explains clearly 

Funds

Effective 11 July 2014

On or before 10 July 2014

Short-Term Gains

Long-Term Gains

Short-Term Gains

Long-Term Gains

         Debt Funds

At tax slab rates of the individual

At 20% with indexation

At tax slab rates of the individual

10% without indexation or 20% with indexation whichever is lower

EquiEquity Funds

15%

Nil

15%

Nil

 

capital gains/loss  setoff rules 

Long Term Capital Loss can be set off only against Long Term Capital Gains. Short Term Capital Losses are allowed to be set off against both Long Term Gains and Short Term Gains. If you are not able to set off your entire capital loss in the same year, both Short Term and Long Term loss can be carried forward for 8 Assessment Years . 

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Comments

  1. NarenDecember 6, 2020 at 12:07 PM

    Supered explanation. Thanks for your thorough analysis...👌

    ReplyDelete

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