We are regularly getting queries regarding tax to be paid on trading or investments in share market on profits or loss booked. We found that many people have wrong conceptions. EquityPandit.com decided to publish the following post to enlighten our readers with the clear cut funda of Tax Payment and Tax Savings.

Short term capital Gain/Loss

Mr. Jain purchased some securities on April 17, 2008 at a total cost of Rs 1,10,000. On July 3, 2008, he sold these securities for Rs 1,40,000. Here the Short Term Capital Gain, STCG (gain arising from sale of securities which is less than 12 months old) was Rs 30,000 {“a”} and STCG Tax (15% as per current laws) for the gain calculated to Rs 4500.

But Mr. Jain had also purchased securities worth Rs 85,000 on July 22, 2008 and had sold them at Rs 35,000 on March 20, 2009, hence there his Short Term Capital Loss ( loss arising from sale of securities which is less than 12 months old) was equal to Rs 50,000 (“b”).

Now as per the tax laws Mr. Jain’s Short Term Capital Gain {“a”} is offset by an equivalent Short Term Capital Loss {“b”}, hence there is no Short Term Capital Gains tax payable by Mr. Jain for the financial year 2008-09! Also he carried forward Rs 20,000 loss for offsetting any short term capital gains he makes in the next 8 years.

Long Term Capital Gain/Loss

Mr. Jain purchased securities on March 23, 2007 at Rs. 1,00,000 and sold them on March 14, 2009 at Rs 1, 35,000. The Long Term Capital Gain ( gain arising from sale of securities which are more than 12 months old) from this transaction was Rs. 35,000.

 

Here the entire amount of Rs 35,000 is not taxable for Mr. Jain (as Long Term Capital Gains are exempt from Tax)