Short-term Capital Gain 

If the gains generated by shares is a short-term capital gain or not is decided by its holding period.

Assets like shares that are listed on a recognised stock exchange and has been held for less than 12 months are treated as short-term capitals. The proceeds earned through them are treated as short-term capital gains.

Such shares include Government securities, debentures, equity-oriented Mutual Funds, UTI units and Zero-Coupon Bonds.

A common question that individuals may have is if short-term capital gains made on shares attract taxation.

The answer is- Yes, they do!

The proceeds earned from the sale of shares is categorised as income under capital gains and is liable for taxation.

What is Short Term Capital Gain Tax on shares?

Short-Term Capital Gain Tax on shares is the tax that is levied on the proceeds earned through the sale of shares. Only shares that are considered to be short-term capital assets would attract a short-term capital gain tax on them.

To determine the STCG tax rate on shares easily, the gains generated through them are divided into two categories –

I.  Short-term capital gains that fall under Section 111A.

II. Short-term capital gains that fall do not fall under Section 111A.

Short-term capital gains that fall under Section 111A

A rate of 15% will be charged as income tax on short-term capital gain on shares that fall under this category. They would further attract surcharge and cess where ever applicable.

Here are a few examples of the STCG that are covered under Section 111A –

1. Gains generated through the sale of equity shares that have been enlisted in a recognized stock exchange.

1. Gains generated through the sale of equity-oriented Mutual Funds that had been enlisted in a recognized stock exchange and had been sold through it.

1. Gains generated through the sale of equity-oriented Mutual Funds, equity shares or units of a recognized business trust. 

Short-term capital gains that do not fall under Section 111A

The income tax on short-term capital gain on shares other than Section 111A would attract a standard rate of tax.

Such tax on STCG on shares would be decided as per the income tax slab of tax-paying individuals.

Here are a few examples of the STCG that are not covered under Section 111A –

1. Gains generated through the sale of equity shares without being enlisted on a recognized stock exchange.

1. Gains generated through the sale of shares that are not equity shares.

1. Gains generated through debt-oriented Mutual Funds.

1. Gains generated through bonds, debentures and Government securities.

1. Gains generated through assets that are not shares.
   

Tips to Reduce the Burden of STCG on Shares

1. Individuals can adjust their short-term capital loss on shares against other short-term or long-term capital gains. However, individuals should refrain from going overboard with this particular tax-saving strategy.

1. Individuals may carry forward their losses as a tax adjustment. Individuals are allowed to carry forward such losses up to 8 financial years.

There is not much scope for share investors to save on their burden of tax on STCG on shares. Individuals can always opt for tax-saving Mutual funds schemes to improve their scope of earnings and to lower their tax burden.