Does Short Term Capital Gain change Tax slab/surcharge
This query is : Resolved
Quick Summary
05 August 2021
* I'm a resident Indian
* After deductions my taxable income is below 50 lakhs and in the 30% tax bracket
* Recently I sold unlisted shares with a holding period of less than 2 years which would result in short term capital gains tax at the marginal tax slab rate
* Now, the combined amount of my taxable income + short term capital gains tax exceeds 50 lakh.
* Will I now have to pay 10% surcharge (on the entire taxable income + short term capital gains) or would I still be taxed only in the 30% tax bracket.
* After deductions my taxable income is below 50 lakhs and in the 30% tax bracket
* Recently I sold unlisted shares with a holding period of less than 2 years which would result in short term capital gains tax at the marginal tax slab rate
* Now, the combined amount of my taxable income + short term capital gains tax exceeds 50 lakh.
* Will I now have to pay 10% surcharge (on the entire taxable income + short term capital gains) or would I still be taxed only in the 30% tax bracket.
05 August 2021
You have to calculate tax on the entire taxable income + short term capital gains.
10% surcharge applicable on the tax calculated (not on the income).
10% surcharge applicable on the tax calculated (not on the income).
05 August 2021
Thanks a lot for the reply sir.
Yes, the surcharge is applicable on the tax. Sorry for the wrong wording in the question.
As a follow on query, is the same rule applicable for long term gains?
Let's say I've sold unlisted shares after 2 years or listed shares after a year. Ideally these should be charged at 20% and 10% respectively (10% for the amount beyond 1L).
But, are these added with the taxable income to determine the tax slab/surcharge?
Yes, the surcharge is applicable on the tax. Sorry for the wrong wording in the question.
As a follow on query, is the same rule applicable for long term gains?
Let's say I've sold unlisted shares after 2 years or listed shares after a year. Ideally these should be charged at 20% and 10% respectively (10% for the amount beyond 1L).
But, are these added with the taxable income to determine the tax slab/surcharge?
05 August 2021
It has to be added to determine surcharge.
For capital gains and not for slab rates. For capital gains on shares maximum surcharge is 15%.
On 20 September, finance minister announced that enhanced surcharge rates introduced in the Finance Bill 2019 will not apply on capital gains from shares, equity-oriented mutual funds and unit of a business trust liable for securities transaction tax; the current surcharge of 10% for income between ₹50 lakh and ₹1 crore and 15% for income over ₹1 crore will continue to apply. However, enhanced surcharge rates will continue to apply on other incomes such as salary, interest, dividend, capital gains from assets like real estate and gold and so on, if applicable. Therefore, while calculating the income tax liability for financial year 2019-20, the tax payer will have to calculate taxes as well as surcharge separately in case total income includes capital gains from equity investments.
For capital gains and not for slab rates. For capital gains on shares maximum surcharge is 15%.
On 20 September, finance minister announced that enhanced surcharge rates introduced in the Finance Bill 2019 will not apply on capital gains from shares, equity-oriented mutual funds and unit of a business trust liable for securities transaction tax; the current surcharge of 10% for income between ₹50 lakh and ₹1 crore and 15% for income over ₹1 crore will continue to apply. However, enhanced surcharge rates will continue to apply on other incomes such as salary, interest, dividend, capital gains from assets like real estate and gold and so on, if applicable. Therefore, while calculating the income tax liability for financial year 2019-20, the tax payer will have to calculate taxes as well as surcharge separately in case total income includes capital gains from equity investments.
05 August 2021
Hi Sir,
I'm not completely sure what you had meant by
"It has to be added to determine surcharge. For capital gains and not for slab rates."
Let me ask two examples to clarify:
Example 1:
* Assume for example my taxable income from salary and other sources is 30L
* And my "long term capital gains" from sale of unlisted/listed shares is 25L.
* Now, my query is if I would need to pay 10% surcharge?
* On one hand income is only 30L. But, if I add the capital gain, then it becomes 55L, thereby exceeding the 50L limit...
Example 2:
* Assume for example my taxable income from salary and other sources is 30L
* And my "short term capital gains" from sale of unlisted shares is 25L. (Which would be taxed at marginal tax rate)
* Now, my query is if I would need to pay 10% surcharge?
* On one hand income is only 30L. But, if I add the capital gain, then it becomes 55L, thereby exceeding the 50L limit...
* I agree that once surcharge is applicable, then it has to be paid on the entire tax
* My question is what all income are considered to calculate the threshold to determine whether surcharge is applicable or not in the first place.
I'm not completely sure what you had meant by
"It has to be added to determine surcharge. For capital gains and not for slab rates."
Let me ask two examples to clarify:
Example 1:
* Assume for example my taxable income from salary and other sources is 30L
* And my "long term capital gains" from sale of unlisted/listed shares is 25L.
* Now, my query is if I would need to pay 10% surcharge?
* On one hand income is only 30L. But, if I add the capital gain, then it becomes 55L, thereby exceeding the 50L limit...
Example 2:
* Assume for example my taxable income from salary and other sources is 30L
* And my "short term capital gains" from sale of unlisted shares is 25L. (Which would be taxed at marginal tax rate)
* Now, my query is if I would need to pay 10% surcharge?
* On one hand income is only 30L. But, if I add the capital gain, then it becomes 55L, thereby exceeding the 50L limit...
* I agree that once surcharge is applicable, then it has to be paid on the entire tax
* My question is what all income are considered to calculate the threshold to determine whether surcharge is applicable or not in the first place.
06 August 2021
All taxable income to be added to determine rate of surcharge payable.
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