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Capital Gain on Equity ETF

Tax queries 463 views 2 replies

Sreevidhya V

478 Points Joined March 2017

There is Capital gain (both short and long term) on Equity ETF.
But in the broker statement it is classified as (STT not paid and booked profit is less than double of Index Profit). what is the meaning of this?
Based on the above clause, what would be the taxation rate applicable for this Equity ETF under both short and long term?
Short term and long term classified based on 1 year of holding and it is sold before 23rd july 2024

Replies (2)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9434 Points Joined December 2011

Understanding the Classification and Taxation of Equity ETF Capital Gains The classification "STT not paid and booked profit is less than double of Index Profit" in your broker statement relates to the tax treatment of your Equity ETF capital gains. Here's a breakdown¹ ² ³: - *Securities Transaction Tax (STT)*: STT is a tax levied on transactions involving securities, including equity ETFs. If STT is not paid, it may impact the tax rate applicable to your capital gains. - *Booked Profit and Index Profit*: The statement mentions that the booked profit (your actual gain) is less than double the index profit. This might be relevant for determining the tax implications, but specific tax rates depend on the holding period and type of asset. Taxation Rates for Equity ETF Capital Gains The tax rates for your Equity ETF capital gains depend on whether they are short-term or long-term, based on a holding period of 1 year. - *Short-Term Capital Gains (STCG)*: If you held the ETF for 1 year or less, the gains are considered short-term. Prior to July 23, 2024, STCG on listed equity shares and equity-oriented mutual funds were taxed at 15%. However, for transactions on or after July 23, 2024, the STCG tax rate has been increased to 20%. - *Long-Term Capital Gains (LTCG)*: If you held the ETF for more than 1 year, the gains are considered long-term. For equity-oriented assets, LTCG exceeding ₹1.25 lakh in a financial year is taxed at 12.5% without indexation benefits. Applying Tax Rates Based on the Holding Period and Sale Date Since you sold the ETF before July 23, 2024, the tax rates applicable would be: -

*STCG*: 15% if the holding period is 1 year or less -

*LTCG*: 10% on gains exceeding ₹1 lakh if the holding period exceeds 1 year Keep in mind that tax laws and rates are subject to change, and individual circumstances may affect the applicable tax rates.

Sreevidhya V

478 Points Joined March 2017

sir,

thanks for the answer

But still I am not clear from the above explanation

If STT not paid and Equity ETF transaction of sale (Short term as less than12 months) done before 23rd july, is it still 15% or higher tax? Pls confirm. Need to know the correct % of tax if STT not paid.