Short-Term Capital Gains on Shares: Calculation & Examples
Opportunities for wealth building are presented by share investments, but it's also critical to comprehend the tax ramifications of these ventures. The Short-Term Capital Gain (STCG) on shares is a similar important idea. Profits from the sale of listed equity shares within a year of purchase are evaluated as short-term capital returns in India and are taxable under the Income Tax Act. The conception, calculation, examples, applicable tax rates, and frequently asked issues about short-term capital earnings on shares will all be covered in this article.
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What is Short-Term Capital Gain on Shares?
A short-term capital income, or STCG, occurs when a listed equity share( or equity-oriented mutual fund) is traded for a profit within a year after acquisition. The difference between the purchase and selling prices is the gain after subtracting any transfer-related charges. Indeed, though they might be relatively profitable, short-term capital earnings on shares have a certain duty obligation. To effectively plan your taxes, you must understand the holding ages, appropriate rates, and how to calculate STCG. Knowing STCG guarantees compliance and more intelligent financial planning, regardless of whether you favor mutual funds or direct stock investing.
Conditions for STCG on Shares
To determine whether a transaction qualifies as a short-term capital gain, certain criteria must be met:
Criteria
STCG Applies When…
Type of Asset
Listed Equity Shares or Equity-Oriented Mutual Funds
Holding Period
Held for less than 12 months from the purchase date
Transaction Type
Sale made via a recognised stock exchange
Securities Transaction Tax (STT)
STT must be paid on both the purchase and sale of the shares
Calculation of Short-Term Capital Gain on Shares
The formula to compute Short-Term Capital Gain (STCG) on equity shares is:
STCG = Full Value of Consideration (Sale Price) – (Cost of Acquisition + Transfer Expenses)
Note: Indexation benefit is not available for STCG on listed equity shares or equity-oriented mutual funds.
Example of STCG Calculation
Particulars
Details
Amount (₹)
Number of Shares Purchased
–
100 shares
Purchase Price per Share
–
₹200
Total Cost of Acquisition
100 shares × ₹200
₹20,000
Selling Price per Share
–
₹250
Total Sale Value (Full Value of Consideration)
100 shares × ₹250
₹25,000
Brokerage / Transfer Expenses
Includes brokerage, STT, etc.
₹500
STCG Calculation
₹25,000 – (₹20,000 + ₹500)
₹4,500
Short-Term Capital Gain (STCG) = ₹4,500
How to calculate Short-Term Capital Gain on assets?
Here's a simplified table that shows how STCG is calculated on various types of assets, including shares:
Asset Type
Holding Period for STCG
Formula for STCG
Listed Equity Shares
< 12 months
Sale Price – (Purchase Price + Expenses)
Equity Mutual Funds
< 12 months
Sale NAV – (Purchase NAV + Exit Load, if any)
Debt Mutual Funds
< 36 months
Sale NAV – (Purchase NAV + Exit Load)
Property/Gold
< 24/36 months
Sale Price – (Purchase Price + Transfer Expenses)
Short-Term Capital Gain Example
Below is an example showing the STCG on a listed share transaction:
Particulars
Details
Amount (₹)
No. of Shares Purchased
100 shares
–
Purchase Price per Share
₹200
–
Total Purchase Cost
100 × ₹200
₹20,000
Sale Price per Share
₹250
–
Total Sale Value
100 × ₹250
₹25,000
Less: Brokerage & Other Sale Expenses
Includes brokerage, STT, and transaction fees
₹500
Net Sale Proceeds
₹25,000 – ₹500
₹24,500
Short-Term Capital Gain (STCG)
₹24,500 – ₹20,000
₹4,500
Key Takeaways from the Example:
- The gain was accounted for short term because the shares were held for less than a year.
- Despite the ₹ 25,000 market trade price, brokerage and sale fees can be subtracted when calculating STCG.
- In this case, the net short-term capital gain is ₹ 4,500, and it'll be subject to 15% tax plus any relevant surcharge and cess.
Short-Term Capital Gains Tax Rate
Selling listed equity shares or equities-initiated mutual funds within a year after accession results in a short-term capital gain( STCG), which is taxable under Section 111A of the Income Tax Act, 1961. Depending on your income level, there may also be a 15% STCG tax, a surcharge, and a cess( presently 4%). However, shares' short-term capital earnings are taxed at a flat rate of 15. If the following criteria are satisfied:
- The transaction is routed through a recognised stock exchange
- STT (Securities Transaction Tax) is paid
STCG Tax Rate Table:
Particulars
Tax Rate
STCG on listed equity shares
15% + surcharge + cess
STCG on equity mutual funds
15% + surcharge + cess
STCG on debt mutual funds (as per slab)
As per the income slab
STCG on unlisted shares
As per the income slab
STCG Rates Holding on Mutual Fund Schemes
Mutual fund investors must understand that the STCG tax rate differs based on the type of mutual fund and holding period:
Mutual Fund STCG Tax Rate Table:
Type of Mutual Fund
Holding Period for STCG
STCG Tax Rate
Equity Mutual Fund
Less than 12 months
15% + surcharge + cess
Balanced/Hybrid (Equity Oriented)
Less than 12 months
15% + surcharge + cess
Debt Mutual Fund
Less than 36 months
As per the individual tax slab
International Mutual Fund
Less than 36 months
As per the individual tax slab