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Capital gain on equity derivative trading

14 March 2013

I have gains in trading equity derivatives stock features in financial year 2012-13. approximately rs.40000/=

pl let me know how the derivative gains are to be treated,and how much tax to be paid. does this gain come under short term capital gain.I know that trading in equity derivatives thru recognised stock excahnge with certain conditions, are not treated as specultive..

can these gains be set off against long term capital loss arrived on sale of equity shares ,sold thru off market,i.e. not thru recognised stock market. on which STT not paid.

can these gains be set off against short term capital gains arrived on sale of equity shares sold thru recognised stock market which is STT suffered.

kindly clarify.

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CS Sandip Rahane (CS & Legal ) (368 Points)
Replied 20 March 2013

Transaction through a recognised stock exchange and on which STT (Securities Transaction Tax) has been paid would be entitled to exemption from Long Term Capital Gains under Section 10 (38) of the Act. Similarly, in case of Short Term Capital Gain of such shares, the gains shall be taxed only at 10%, plus surcharge and education cess.

A capital loss (short-term/long-term) can be carried forward for a maximum period of 8 years from the assessment year in which the loss was first incurred. A short-term capital loss can be set off against any capital gain (long-term and short-term). However a long-term capital loss can be set off only against a long-term capital gain.