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Short term capital gain due to sale of shares

vyas (engr) (43 Points)

15 December 2015

Let us say, I sold some shares (stock-1) and holding period is less
than one year. I have used the complete sale proceeds to buy the
shares stocks-2) again in the same financial year. Is the gain due to selling the stock-1
taxable?

In case of capital gain due to sale of the property, if it is
reinvested to buy another property becomes exempted from IT. Is it
same in case of stocks too or is it different?

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10 Replies

CA Mehul Chudasama (Chartered Accountant) (618 Points)
Replied 15 December 2015

Both are different. You will not get exemption

CA Reshma K N (CHARTERED ACCOUNTANT) (96 Points)
Replied 15 December 2015

Hi Vyas,

Gains from stock 1 and stock 2 are taxable as short term capital gain in the same year. However if is a dividend reinvestment plan, u get tax benefit.

There exists a specific provision in the Income Tax Law to exempt the gains from sale or transfer of immovable property if such gains are invested in any other immovable property on complying with the required conditions.

There is no such specific or general charge similar to this for shares.

Revert for clarifications on reshucakn @ gmail.com

vyas (engr) (43 Points)
Replied 15 December 2015

Thank you. Gains from stock-1 have been invested in stock-2 and stock-2 has not been sold. So, the query is related to the gains from stock-1. So, I understand from your response that the gains from stock-1 are taxable even the complete sale proceeds of stock-1 has been reinvested in stock-2 and stock-2 is not sold in that year. Did I understand correctly?

CA Reshma K N (CHARTERED ACCOUNTANT) (96 Points)
Replied 15 December 2015

Yes Mr Vyas. You have got it right. There apparently has no link on whether the gains are further reinvested in any other shares or stock or not.

Gains form Stock 1 are taxable and gains from Stock 2 are taxable in the year of sale.

However if it is sold after 1 year and has suffered Securities Transaction Tax, they are exempted from income tax.

sagar (mathura) (214 Points)
Replied 15 December 2015

My querry was regarding mutual funds As we invest in mutual funds through SIP.so units purchased through sip redeemed within a year will also be taxable or not.

sagar (mathura) (214 Points)
Replied 15 December 2015

My querry was regarding mutual funds As we invest in mutual funds through SIP.so units purchased through sip redeemed within a year will also be taxable or not.

Amitesh (Student) (38 Points)
Replied 15 December 2015

Yes, units redeemed within a year shall be taxable as STCG However if the same units are redeemed after 12 months and through stock exchange (STT paid on such transaction) capital gain will be exempt

CA Reshma K N (CHARTERED ACCOUNTANT) (96 Points)
Replied 15 December 2015

Hi vyas, Rule remains to be the same for mutual funds as well.

Tony John (Chartered Accountant) (6085 Points)
Replied 16 December 2015

Exemption for equity shares or equity oriented funds held for over a year and subjected to STT is provided in Section 10 (38) of the Income Tax Act, 1961.