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Tax on shares- stcg

akikris (Business) (37 Points)

08 October 2014

Hello,

I had purchased some shares in at the beginning of the financial year about Rs50000 and now those share price is Rs57000 (today's date). This was performance bonus given to me by my organization, which i intended to use for buying new house. Now I want to sell the bonus money worth (i.e 50000) and use it as additinal payment into principle.

What tax implication will be there on my share trading, will i be charged for STCG tax and if so what percentage. And how will the remaining 7000 worth of shares be treated for tax.

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3 Replies

Ajay (CA Job) (512 Points)
Replied 08 October 2014

Dear Aki

Assuming you are holding the shares in demat account, your transaction of sale of shares before completing 1 year from the date of purchase will be exigible to STCG @ 15% + Surcharge (if applicable) + Cess.

Since held in demat form, the cost of acquisition for the purpose of computing STCG will be computed following First in First Out (FIFO) since you are selling only a part of your holdings. However, if you have bought all the shares in a single lot or the same date or all the shares at the same purchase rate, then there is no need to apply FIFO as the Cost per share is same for all the shares.

In case your taxable income Less: STCG is less than the exemption slab, you can take the benefit of Sec.111A of unused exemption slab.

In case, it is possible for you to hold the shares till the end of this financial year so as to complete 12 months holding period, you can generate teax exempt Long Term Capital Gain. However, caveat, for one, you can't predict the stock market and secondly, you have to make a cost-benefit ananlysis of postponing your principal repayment of loan (?).

Regards

Ajay

akikris (Business) (37 Points)
Replied 09 October 2014

Thanks for the reply ajay. I purchased all shares at once, so NO FIFO applies here.

And how is the STCG is applied here, as the amoutn invested and retrieved back is the same. i.e Rs50000. How is tax calculated, on individual share price like (selling price- purchase price= Profit, and STCG is calculated on this profit)

1000 shares @ Rs 50 purchased which is Rs 50000. When I sell 877 shares now @ Rs57 for Rs 50000. The above mentioned sentense applies?

Thanks