Short term capital gains from shares traded with stt.
This query is : Resolved
02 January 2013
Dear Sirs:
I buy/sell shares on NSE frequently. At times I buy a share on T1 and sell it on T2. All trades are delivery based and all shares are duly credited and debited in my DP A/c.All trades are STT charged. Can the I.T. claim that I cannot take these trades as “ Short Term Capital Gains” just because they are (a) done in volumes (b) they are held for a short period ? I do not do day-trading or F & O trades. All shares are delivered and credited to my depository and subsequently debited. I have no business income or salary income.
I buy/sell shares on NSE frequently. At times I buy a share on T1 and sell it on T2. All trades are delivery based and all shares are duly credited and debited in my DP A/c.All trades are STT charged. Can the I.T. claim that I cannot take these trades as “ Short Term Capital Gains” just because they are (a) done in volumes (b) they are held for a short period ? I do not do day-trading or F & O trades. All shares are delivered and credited to my depository and subsequently debited. I have no business income or salary income.
02 January 2013
IF THERE IS NO LOSS TO THE REVENUE , IT WILL NOT MAKE ANY OBJECTION.
.
KEEPING THE EVENTUALITY IN THE MIND DEBIT CERTAIN LEGITIMATE EXPENSES TO YOUR CAPITAL ACCOUNT AND SHOW SEPARATELY THE SHARE TRANSACTION RELATED EXPENSES ALSO.
.
IF HE CONSIDERS IT BUSINESS INCOME, HE HAS TO TAKE INTO CONSIDERATION SUCH EXPENSES ALSO. ANALYSE THE POSITION BEFOREHAND.
.
IN THIS WAY REVENUE OR AO WILL NOT TRY TO MAKE A FUTILE EXERCISE IF YOUR PROFIT IS 5-8 LACS.
.
.
KEEPING THE EVENTUALITY IN THE MIND DEBIT CERTAIN LEGITIMATE EXPENSES TO YOUR CAPITAL ACCOUNT AND SHOW SEPARATELY THE SHARE TRANSACTION RELATED EXPENSES ALSO.
.
IF HE CONSIDERS IT BUSINESS INCOME, HE HAS TO TAKE INTO CONSIDERATION SUCH EXPENSES ALSO. ANALYSE THE POSITION BEFOREHAND.
.
IN THIS WAY REVENUE OR AO WILL NOT TRY TO MAKE A FUTILE EXERCISE IF YOUR PROFIT IS 5-8 LACS.
.
02 January 2013
Dear Mr. Bafna:
1.I only add/deduct Brokerage and Brokerage Service Tax to the Traded price. No other deductions are made. STT cannot be taken as a deduction.
2.The Revenue seeks ways to collect more tax. So if they can classify it as a "Profit from Business" , they will get 30% instead of 15% in the case of STCG.
3. Since there is a high frequency and since the shares are held for short periods, cannot delivery justify the investment angle and classify the same only under STCG.
Thanks,
1.I only add/deduct Brokerage and Brokerage Service Tax to the Traded price. No other deductions are made. STT cannot be taken as a deduction.
2.The Revenue seeks ways to collect more tax. So if they can classify it as a "Profit from Business" , they will get 30% instead of 15% in the case of STCG.
3. Since there is a high frequency and since the shares are held for short periods, cannot delivery justify the investment angle and classify the same only under STCG.
Thanks,
25 July 2025
Great question! Here’s a detailed explanation about Short Term Capital Gains (STCG) on delivery-based shares with STT and the tax implications:
1. Nature of Income: STCG or Business Income?
When you buy and sell shares on delivery basis (shares are credited and debited from your Demat account) and STT is paid, the gains are typically treated as Short Term Capital Gains if shares are held for less than 12 months.
The tax rate on STCG from equity shares where STT is paid is 15% + applicable cess.
However, the Income Tax Department (ITD) sometimes challenges frequent buying and selling even on delivery basis, arguing it may be business income (Taxed at slab rates) rather than capital gains.
2. Key Points to Consider
Frequency of Transactions: If you trade very frequently (high volume), the ITD may contend that you are trading as a business, not investing.
Holding Period: Holding shares for very short periods (like a few days) may strengthen the ITD's argument for business income.
Delivery-Based Transactions: Since shares are actually credited and debited in your Demat account (not intraday), this supports the argument that these are capital gains, not business income.
3. What the IT Department Usually Does
If it treats your activity as business income, your gains will be taxed at your normal slab rates (which can be higher than 15%).
Also, in business income, you can deduct all related expenses (brokerage, STT, etc.) while computing income.
In STCG, only brokerage and related transaction costs are deductible; STT is not deductible because it’s already considered in arriving at capital gains.
4. Your Situation
Since your shares are delivery-based, STT is paid, and you have no other business or salary income, generally the Income Tax department will accept the gains as STCG.
But if your transactions are very high volume and frequent, there's a risk of reclassification.
5. Precautions and Suggestions
Maintain proper records of all transactions, brokerage paid, and STT paid.
Separate brokerage and other expenses clearly.
Do not deduct STT from capital gains; treat it as a cost of transaction.
If assessed under business income, you can claim all expenses including STT.
To avoid disputes, keep your trading pattern and frequency reasonable.
Summary:
Aspect STCG (usual case) Business Income (If reclassified)
Nature Capital Gains Business/Trading Income
Tax Rate 15% (plus cess) As per income tax slab rates
Expenses Deductible Brokerage, fees (NOT STT) All expenses including STT
Holding period <12 months for STCG N/A
Evidence needed Delivery of shares (DP statement) Frequent, high volume trades
1. Nature of Income: STCG or Business Income?
When you buy and sell shares on delivery basis (shares are credited and debited from your Demat account) and STT is paid, the gains are typically treated as Short Term Capital Gains if shares are held for less than 12 months.
The tax rate on STCG from equity shares where STT is paid is 15% + applicable cess.
However, the Income Tax Department (ITD) sometimes challenges frequent buying and selling even on delivery basis, arguing it may be business income (Taxed at slab rates) rather than capital gains.
2. Key Points to Consider
Frequency of Transactions: If you trade very frequently (high volume), the ITD may contend that you are trading as a business, not investing.
Holding Period: Holding shares for very short periods (like a few days) may strengthen the ITD's argument for business income.
Delivery-Based Transactions: Since shares are actually credited and debited in your Demat account (not intraday), this supports the argument that these are capital gains, not business income.
3. What the IT Department Usually Does
If it treats your activity as business income, your gains will be taxed at your normal slab rates (which can be higher than 15%).
Also, in business income, you can deduct all related expenses (brokerage, STT, etc.) while computing income.
In STCG, only brokerage and related transaction costs are deductible; STT is not deductible because it’s already considered in arriving at capital gains.
4. Your Situation
Since your shares are delivery-based, STT is paid, and you have no other business or salary income, generally the Income Tax department will accept the gains as STCG.
But if your transactions are very high volume and frequent, there's a risk of reclassification.
5. Precautions and Suggestions
Maintain proper records of all transactions, brokerage paid, and STT paid.
Separate brokerage and other expenses clearly.
Do not deduct STT from capital gains; treat it as a cost of transaction.
If assessed under business income, you can claim all expenses including STT.
To avoid disputes, keep your trading pattern and frequency reasonable.
Summary:
Aspect STCG (usual case) Business Income (If reclassified)
Nature Capital Gains Business/Trading Income
Tax Rate 15% (plus cess) As per income tax slab rates
Expenses Deductible Brokerage, fees (NOT STT) All expenses including STT
Holding period <12 months for STCG N/A
Evidence needed Delivery of shares (DP statement) Frequent, high volume trades
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