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Capital Gain on sale of Shares and Mutual Funds:

Investments in shares and mutual funds is very common among most of us. On maturity/redemption/ sale of these shares & mutual funds either there will be profit or loss. Profits/loss in such cases is called as capital gain/loss.

The taxability of Capital Gains depends upon the holding period of such shares & mutual funds. If Shares/mutual funds are sold within 12 months of their holding the gain/loss will be Short Term and if Shares/mutual Funds are sold after holding them for 12 months the gain/loss will be Long Term.

Short Term Capital Gain(STCG):

  • If shares and mutual funds are sold within 12 months of their purchase, it will be Short Term capital asset and gain or loss on their sale will be Short Term Capital Gain/Loss. 
  • Short Term Capital Gain on Shares and Equity oriented mutual funds on which Security Transaction Tax(STT) is paid is taxable at a flat rate of 15%. Taxability issues of Short Term Capital Gain are explained in detail at the following link.
Read in detail about taxability of Short Term Capital Gain on shares & mutual funds.
  •  STCG on sale of shares and mutual funds is calculated as explained below:
Sale Value of the Shares/Mutual Funds xxxx
Less: Purchase price of such Shares/Mutual Funds xxxx
Short Term Capital Gain/Loss  xxxx
  • Though the calculation of Short Term Capital gain is very simple still it becomes difficult to calculate the same when shares were purchased on different dates or when Bonus shares are received. In such a case FIFO (First in First out) method shall be followed. Shares purchased first are considered to be sold first.
Some Important Points:
  • Its suggested to keep the sale/redemption note of the mutual fund as a proof of payment of Securities Transaction Tax. 
  • Similarly contract note for sale of equity shares shall also be kept for as a proof payment of Securities Transaction Tax. 
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Some Quick Links:
Taxability of STCG on shares & mutual funds
What is Capital Gain & how it is taxed?
Capital Gain Index for calculating LTCG
Capital Gain on sale of Bonus Shares
What are Equity Oriented Mutual Funds?




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