The gains on shares be it short term or long term are decided by the holding period. The investment in stocks are classified into two parts as per the income tax act
- Short term capital gains as per section 111A
- Short term capital gains other than section 111A
Short term capital gain as under Section 111A
Gains from equity shares listed on a recognised stock exchange having a holding period of less than 12 months are considered as short term capital gains.
Section 111A is applicable in the case of STCG on the purchase or sale of-
- Equity shares or equity-oriented mutual fund units
- Transferred through a recognised stock exchange
- Such transaction is liable to securities transaction tax (STT)
- Please note that equity-oriented mutual funds are those that invest at least 65% of their assets in the equity shares of domestic companies.
If the conditions mentioned above are satisfied, then the transfer of the stocks will be considered as ‘Short term capital gains under section 111A.
Instances of STCG covered under section 111A-
- STCG on sale of equity shares of a listed company through the recognised stock exchange and liable to STT.
- STCG on sale of units of equity-oriented mutual funds through a recognised stock exchange and liable to STT.
- STCG on sale of units of business trust
- STCG on sale of equity shares, units of business trust or units of equity-oriented mutual funds through a recognised stock exchange located in IFSC (international financial service centre ) where consideration is paid in foreign currency, even if STT is not liable.
- Short-term capital gain under section 111A is taxed at a flat tax rate of 15% with applicable cess.
- Income tax Laws do not allow any deduction under section 80C to 80U from the short term capital gains referred to section 111A.
However, the investor can claim such deduction on short term capital gains other than those covered under section 111A.
