Income tax is levied on salary, rent and business income. But is the sale and purchase of shares also taxable? Yes, the purchase and sale of shares and the profit arising out of it is taxable. Income or loss arising from the sale of shares is covered under ‘Capital Gains’.
Long term capital gains tax
If there is a profit on selling the shares listed in the stock market after 12 months, then it is called long term capital gain. The seller of the shares has to pay tax on this earnings. Long term capital gains tax was reintroduced in the 2018 budget. Earlier, gains from sale of equity shares or units of equity mutual funds were not taxable. It was exempted from tax under section 10 (38) of the Income Tax Rules. But the provision included in the 2018 budget said that if capital gains of more than Rs 1 lakh have been made on the sale of shares and units of equity mutual funds sold after one year, then it will be taxed at 10 percent.
Short term capital gains tax
If the shares listed on the stock exchange are sold within 12 months of purchase, tax is levied at the rate of 15 per cent. Whether you fall in the 10 per cent slab of income tax liability or the 20 or 30 per cent slab, if you have made short term capital gains, then it will be taxed at 15 per cent only. If your taxable income is less than Rs 2.5 lakh, then the profit earned from selling the shares will be adjusted against this and then the tax will be calculated. It will attract 15 percent tax along with 4 percent cess.
Income Tax Filing: CBDT extends last date for submission of Form 15CA/15CB, decision due to problems in portal
Security Transaction Tax (STT)
Securities Transaction Tax (STT) is levied on the shares sold and bought on the stock exchange. Whenever there is buying and selling of shares in the stock market, this tax has to be paid on it. The seller has to pay 0.025 percent tax on the sale of shares. This tax is to be paid on the sale price of the shares. The sale of delivery based shares or units of equity mutual funds is taxed at the rate of 0.001 per cent.