Short Term Capital Gains in India

Short Term Capital Gains : -

Capital gain arising from the transfer of a short-term capital asset is called as "Short-term Capital Gains" (STCG) [Section 2(42-B)].

What is the short term capital gain tax rate in India?

Resident

STCG on STT paid Equity shares and Units: 10%
For other STCG: The STCG will be included to the Total Income and will be taxed at normal rate.

Non-Resident
STCG of FII (Foreign Institutional Investor) from Securities:

STT Paid: 10%
STT Not paid: 30%

How to calculate STCG for Non-Depreciable Asset?

Sale Consideration		xxx
Less: - Expenses Incurred for Transfer		xxx
Net Sale Consideration		--- xxx
Deduct:
Cost of Acquisition	xxx
Cost of Improvement	xxx ---
		xxx ---
Short Term Capital Gain/Loss		xxx ---

How to calculate STCG for Depreciable Asset?

Sale Consideration		xxx
Deduct:
Expenditure Incurred	xxx
Opening WDV	xxx
Actual Cost of New Asset	xxx ---
		xxx ---
Short Term Capital Gain/Loss		xxx ---

What is Sale consideration?

Actual amount received or accruing as a result of transfer is treated as Sale Consideration.

However, in the case of immovable properties, the guideline value determined by the Stamp Valuation Authority needs to be taken as the Sale Consideration, if such guideline value is more than the actual sale consideration received or receivable.

Further, there are certain other instances of special charge where the sale consideration has been defined under the Act.

What is Expenses Incurred for Transfer?

Expenses incurred wholly and exclusively for the purpose of transfer of the Capital Asset.

However the "Securities Transaction Tax" (STT) paid for the purpose of transfer of shares is not eligible for deduction.

What is Cost of acquisition?

It represents the actual cost incurred for acquisition of the Capital asset.

In the following cases the cost of acquisition is 'Cost to the Previous Owner'

S.No	Modes of Acquisition	Sec. Ref.	Cost of Acquisition
1	Distribution of capital assets on the total or partial partition of HUF, or throwing an asset of the member of HUF into HUF.	49(1)(i)	Cost to the Previous Owner
2	Succession, Inheritance or Devolution	49(1)(iii)(a)	Cost to the Previous Owner
3	Transfer of a capital asset under a gift or will or an irrevocable trust	49(1)(ii) & 49(1)(iii)(d)	Cost to the Previous Owner

What is Cost of Improvement?

Cost of Improvement is defined as given below

In relation to	Cost of Improvement
Goodwill of a business or a right to manufacture, produce or process any article or thing or right to carry on any business.	Nil
Capital asset, which became the property of the previous owner or assessee before the 01.04.1981.	All expenditure incurred in making any additions or alterations to the capital asset on or after the said date (01.04.1981) by the previous owner or the assessee.
In any other case	All expenditure of a capital nature incurred in making any additions or alterations by the assessee after it became his property or by the previous owner.

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