If securities transaction tax (STT) was paid when the shares were bought, but when they were sold (sold within 12 months), would it be subject to a 15% Short-Term Capital Gains Tax (STCG)?
-Sanjana
Capital gains from the sale of short-term capital assets are taxed at 15% under section 111A of the Income-tax Act, 1961 if the following conditions are satisfied:
Gain is from transfer of equity share in a company, unit of equity-oriented fund or unit of business trust; And whereas the transaction of sale is after the commencement of Chapter VII of the Finance (No. 2) Act, 2004, that is, the 1st day of October, 2004; and such transaction is subject to securities transaction tax or STT.
To answer your question, since the transaction is not subject to STT at the time of sale, capital gains will be taxable at normal tax rates and not 15%. To be able to take advantage of reduced taxation under section 111A, STT has to be paid at the time of sale.
This was answered by Shailesh Kumar, Partner, Nangia & Co. LLP. Send your queries to mintmoney@livemint.com
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