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Brokerage deducation on STCG

Abe Joseph (BA) (26 Points)

05 July 2011

I just wanted to know if brokerage should be deducted from purchase and sale price while calculating STCG for shares.

In this example:

	Quantity	Rate	Total	Brokerage	Service Tax	STT
Bought	2000	21.9	43800	219	22.55	54.75
Sold	2000	25.15	50300	251.5	25.9	62.88

Is my STCG = 43800-50300 = 6500 or shd I reduce brokerage as well?

Please calculate my STCG for this example. Thanks!!

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8 Replies

Hari Krishna.D (CA & CWA Final) (38 Points)
Replied 05 July 2011

while calculating the capital gains sec 45 says the expenses related the sale shal be deducted frm the FVC and the purchase related xpenses just add to the COA...

so here

ur COA = 43800+296= 44096

ur NVC = 50300-340=49960

Dheeraj (Learner) (1100 Points)
Replied 05 July 2011

stcg

49960 (50300-251.5-25.9-62.88)

less: 44096 (43800-219-22.55-54.75)

= 5864

Abe Joseph (BA) (26 Points)
Replied 05 July 2011

Are you sure that Service Tax and Securities Transaction Tax (STT) can be deducted in this manner? I was under the impression that only brokerage can be deducted. Hoping to have clarity on this soon. Thanks!!

Hari Krishna.D (CA & CWA Final) (38 Points)
Replied 05 July 2011

it is clear in section that the expenses related to the sale are to be deducted from the consideration, so the total taxes n brokerage r to be deducted... n same in case purchase too...

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 06 July 2011

STT is capital expenditure in case of capital gains, however its allowable expenditure if such transactions are part of business of trading in securities.

STT can neither be added to COA, nor it can be decucted from Sales proceeds.

Abe Joseph (BA) (26 Points)
Replied 06 July 2011

So from what I gather, in the case of an individual who is not a trader only brokerage and service tax is deductible while STT is not an acceptable deduction.

So therefore the STCG calculation in the given example would be:

50022.60 (50300 - 251.5 - 25.9)

LESS 44041.55 (43800 + 219 + 22.55)

Therefore STCG = 5981.05

Is this correct? Thanks in advance