on Short Term Capital Gain
(STCG) on Equity Shares & Mutual Funds
(Section 111A of The Income Tax Act)
When shares & mutual
funds are sold/redeemed within 12 months
of their holding, the gain on such sale/redemption is known as Short
Term Capital Gain. The
provisions relating to tax on Short Term Capital Gain on equity shares
equity oriented mutual funds are covered by Section 111A of The Income
Tax Act. Accordingly Short Term Capital
Gain on equity shares
& equity oriented mutual funds is chargeable to tax at a
concessional rate of 15%. Detailed provisions of the section 111A:
- Section 111A is applicable when
there is Short Term Capital Gain on sale/redemption of
Equity Shares & Equity Oriented
Mutual Funds. Here clear emphasis is on Equity Shares & Equity
Oriented Mutual Funds. Other Mutual funds like debt funds, Gilt funds,
FMPs etc. are not covered by this section.
- The transaction shall be chargeable to
Securities Transaction Tax(STT). One can check the
details of STT from the mutual fund transaction/redemption document.
- If the above two
conditions are met, short term capital gain will be taxable at
a flat rate of 15%.
to Calculate income tax when total income includes Short Term Capital
Gain on Shares &/or Mutual Funds?
total income of a person is taxable as per the applicable slab rate but
STCG on equity shares & equity oriented mutual funds is
taxable at a flat rate of 15%. Sometimes it creates a confusion in the
mind of taxpayers.
The methodology to calculate tax when
total income of a person includes STCG on shares & mutual
funds is explained below:
- Calculate tax on Short Term Capital Gain on
Equity Shares & Equity Oriented Mutual Funds @ 15%.
- Now calculate tax on balance income as per
normal tax slab rate applicable as if it is the total income.
- Add both the taxes calculated as above,
& this is the total tax liability.
- Benefit of Chapter VI A
deductions(ie. Section 80C deductions relating to investments in PPF,
LIC, PF etc.) is
not available from STCG on Equity Shares & Equity
Oriented Mutual Funds. Means if your only income is short term capital
gain from shares, you will not be eligible for ny deduction under
Section 80C fortax savings investments.
- In cases where total income(excluding STCG) is
less than the exemption limit, STCG will be reduced by the amount by
which total income falls short of exemption limit.
the benefit of setting off STCG to the exemption limit is given,
but the STCG remaining after exausting the exemption limit will be
taxable @ 15% & not @ 5% which is the applicable tax slab rate for
AY 2018-19. Option (B) in the example below explains this situation.
try to understand the taxability in different situations with the help
|When total income is below
|When total income is slightly
more than the exemption limit
|When total income is reasonably
higher than the exemption limit
|When only STCG is the total Income
Gross Total Income excluding STCG is
|STCG taxable u/s 111A
|Investment U/s 80C
|Net Total Income including STCG
|Exemption limit(for AY 2018-19 for
|Tax calculation will be
15% on STCG of Rs. 100000
on STCG of Rs. 200000 & at applicable slab rates on balance
income of Rs. 600000
|@ 15% on STCG of Rs. 50000
(No benefit of 80C investments is available from STCG on Shares &
Have a query or a feedback! Write to us at email@example.com
or through Contact us.
to calculate STCG on shares & mutual funds?
Gain on sale of Bonus Shares
are Equity Oriented Mutual Funds?
Cost Inflation index for
to calculate LTCG & Indexed Cost of Acquisition
term capital gain on sale of house property-how to save
exemptions under Income Tax Act from LTCG