S. 111A: Current Income Tax Rate on Short Term Capital Gain (STCG) on transfer of equity shares or units of equity-oriented mutual fund under Income Tax Act, 1961.
If investor sell this stock/shares/securities within 12 months from date of purchase then any gain on such investment will be treated as short term gain and will be taxed at the rate of 15%. If investor sell any property including land, building, house property within 36 months from the date of purchase then any gain on such transaction will be treated as short term gain and will be taxed at income tax slab rates as applicable to such assessee.
Any gain arising out of short-term capital assets is short-term capital gain. Any capital asset sold by the tax payer within 36 months and shares or securities within twelve months of its purchase then the gain arising out of its sales after deducting the expenses of sales and cost of acquisition and improvement is treated as short-term capital asset.
S. 111A of the Income tax Act provides that those equity shares or equity oriented funds which have been sold in a stock exchange and securities transaction tax is chargeable on such transaction of sale then the short term capital gain arising from such transaction will be chargeable to tax @10% upto A.Y. 2008-09 and 15% from A.Y. 2009-10 onwards.
The short term capital gains other than those u/s 111A shall be added to the income of the assessee and no such benefit is available on short term capital gains arising in other cases and they will be taxed normally at slab rates applicable to the assessee.
If an assessee does the business of selling and purchasing shares he cannot take advantage of S. 111A or S. 10(38). In this case income will be treated as business income.
S. 2, 28, 45, 111A of IT Act, 1961—Business income—S. 2(14) defines “capital asset” to mean property of any kind held by an assessee, whether or not connected with his business or profession. The definition of “Capital asset” does not, however, include stock-in-trade held for the purpose of business. S. 111A inserted by the Finance Act, 2004, relates to tax on short-term capital gains in certain cases and, under sub-s. (1) thereof, where the total income of an assessee includes any income chargeable under the head “Capital gains” arising from the transfer of a short-term capital asset being an equity share in a company and such transaction is chargeable to securities transaction tax, the tax payable by the assessee shall be the aggregated of the amount of income tax calculated, on such short-term capital gains, at the rate of fifteen per cent—P.V.S. Raju vs. Addl. CIT (2012) 340 ITR 75 (AP)
S. 70 & 111A of IT Act, 1961—Capital gain—Sub-s. (2) of S. 70 as substituted w.e.f. 1st April, 2003 deals with the set off of any short-term capital loss with any other capital gain. It means the inter-head set off of short-term capital loss is permissible against any income under the head Capital gain. In view of introduction of S. 111A, choice has been left over the assessee in taking decision about the setting off of short-term capital loss from one transaction against any other short-term capital gain, whether within or outside the cut-off date. Therefore, the assessing authority was not justified in not granting the set off of short-term capital loss arising from sale transactions subject to securities transaction tax against the short-term capital gains arising from sale transactions not subject to securities transaction tax—First State Investments (Hongkong) Ltd. vs. Dir. of IT (International taxation) (2010) 132 TTJ 218 (ITAT-Mum)
As Per Section 111A, of the Income Tax Act, 1961-
Tax on short-term capital gains in certain cases.
(1) Where the total income of an assessee includes any income chargeable under the head “Capital gains”, arising from the transfer of a short-term capital asset, being an equity share in a company or a unit of an equity oriented fund and—
(a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and
(b) such transaction is chargeable to securities transaction tax under that Chapter,
the tax payable by the assessee on the total income shall be the aggregate of—
(i) the amount of income-tax calculated on such short-term capital gains at the rate of [fifteen] per cent; and
(ii) the amount of income-tax payable on the balance amount of the total income as if such balance amount were the total income of the assessee:
Provided that in the case of an individual or a Hindu undivided family, being a resident, where the total income as reduced by such short-term capital gains is below the maximum amount which is not chargeable to income-tax, then, such short-term capital gains shall be reduced by the amount by which the total income as so reduced falls short of the maximum amount which is not chargeable to income-tax and the tax on the balance of such short-term capital gains shall be computed at the rate of [fifteen] per cent.
The following second proviso shall be inserted after the existing proviso to sub-section (1) of section 111A by the Finance (No. 2) Act, 2014, w.e.f. 1-4-2015 :
Provided further that the provisions of this sub-section shall not apply in respect of any income arising from transfer of units of a business trust which were acquired by the assessee in consideration of a transfer as referred to in clause (xvii) of section 47.
(2) Where the gross total income of an assessee includes any short-term capital gains referred to in sub-section (1), the deduction under Chapter VI-A shall be allowed from the gross total income as reduced by such capital gains.
(3) Where the total income of an assessee includes any short-term capital gains referred to in sub-section (1), the rebate under section 88 shall be allowed from the income-tax on the total income as reduced by such capital gains.
Explanation.—For the purposes of this section, the expression “equity oriented fund” shall have the meaning assigned to it in the Explanation to clause (38) of section 10.