Short term capital gain

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 July 2018 I had burrowed an unsecured loan and i also have secured loan .I have invested these amount in shares .I also invested in portfolio management services . I am gaining short term capital gain on sale of shares .can i deduct Interest and pms fees from my short term capital gain .

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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21 July 2018 No, deduction can be claimed if you show the income/loss under the head 'profit and gains of business or profession'.

Querist : Anonymous

Querist : Anonymous (Querist)

01 August 2018 But Sir can I increase my cost of acquisition by considering these expenses .

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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25 July 2025 Great question! Here's the clear answer regarding your situation with **interest and PMS fees related to investments in shares and STCG:**

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### 1. **Interest on Loan Taken to Invest in Shares (Unsecured/Secured Loan)**

* **If Income is from Capital Gains (i.e., Shares held as Investment):**
You **cannot** claim interest expense as a deduction against Short Term Capital Gains (STCG).

* **If Income is from Business or Profession (i.e., Shares held as Stock-in-Trade):**
Then interest paid on borrowing for such business can be claimed as a business expense.

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### 2. **Portfolio Management Service (PMS) Fees**

* **If Shares are Held as Investment:**
PMS fees are **not allowed as deduction against STCG**.

* **If Shares are held as Stock-in-Trade (Business):**
PMS fees can be claimed as business expenses.

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### 3. **Increasing Cost of Acquisition**

* Interest paid on loans or PMS fees **cannot** be added to the cost of acquisition of shares for capital gains computation.

* Only direct costs related to purchase/sale (like brokerage, stamp duty) can be added to cost of acquisition or sale expenses.

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### Summary:

| Situation | Deduction of Interest & PMS fees allowed? | Can be added to Cost of Acquisition? |
| ---------------------------------------------- | ----------------------------------------- | ------------------------------------ |
| Shares as **Investment** (Capital Gains) | No | No |
| Shares as **Stock-in-Trade** (Business Income) | Yes | N.A. (Expenses deducted directly) |

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If you want to claim these expenses, you need to treat your income from shares as **business income** and not as capital gains.

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Would you like me to help you understand how to convert your income treatment from capital gains to business income?

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