Income

Short Term and Long Term Gain on Equity Shares

If you sell equity shares, listed on a stock exchange, within 12 months of buying them, you will earn a short term capital gain. Short term capital gain = Sale price less expenses on sale lesspurchase price. Or you may incur a short term capital loss when you sell them at a price lower than what they were bought for.

And equity shares which are sold after 12 months of their purchase are long term. So any gain/loss on them is termed as long term capital gain or loss.

Tax on Gains from Equity Shares

Short term capital gains are taxed at 15%. What if your tax slab rate is 10% or 20% or 30%? Special rate of tax of 15% is applicable to short term capital gains, irrespective of your tax slab. Also, if your total taxable income excluding short term gains is less than the minimum income which is chargeable to tax (Rs 2,50,000 for financial year 2014-15) – you can adjust this shortfall against your short term gains. Remaining short term gains shall be then taxed at 15% + 3% cess on it.

Whereas long term capital gain on equity shares listed on a stock exchange are not taxable.

STT

STT or Securities Transaction Tax is applicable on all equity shares which are sold or bought on a stock exchange. The above tax implications are only applicable for shares which are listed on a stock exchange. Any sale/purchase which happens on a stock exchange is subject to STT and therefore these tax implications are for shares on which STT is paid.