Short term capital gain tax: Everything you need to know

Short term capital gain tax is a tax levied on the gains made from the sale of assets held for a short period of time. In India, short term capital gains are taxed at 15%, while long term capital gains are taxed at 10%. The definition of a short term asset varies from country to country, but in general, it is an asset that is held for less than one year. In India, the cutoff for short term capital gains is 36 months. This means that if you sell an asset that you have held for less than 36 months, any gains made from the sale will be subject to the short term capital gain tax rate of 15%.

What is short term capital gain tax?

Short-term capital gain tax is a tax levied on the profits realised from the sale of short-term investments. Short-term investments are defined as assets held for one year or less. The tax rate on short-term capital gains is the same as your marginal tax rate, which ranges from 10% to 39.6%.

How to calculate short term capital gain tax?

Assuming that the short-term capital gain is from the sale of equity shares, the tax rate would be 15% if it is listed on a recognised stock exchange in India and sold through a broker. If the shares are unlisted, the tax rate would be 20%. Short-term capital gains are taxed at the time of sale of the asset.

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To calculate your short-term capital gain, you will need to take into account the following:

1) The cost of acquisition of the asset – This is the price you paid for the asset when you first bought it.

2) The cost of improvement – If you have made any improvements to the asset since you first bought it, you will need to factor in these costs.

3) The cost of sale – This is the price you received for selling the asset.

4) The rate of inflation – You will need to adjust for inflation when calculating your gain.

5) The tax rate – As mentioned above, the tax rate on short-term capital gains is 15% or 20%, depending on whether the asset is listed or unlisted.

Once you have taken all of these factors into account, you can calculate your short-term capital gain as follows:

Short-Term Capital Gain = (Sale Price – Cost of Acquisition – Cost of Improvement) * (1 + Rate of Inflation) * Tax Rate

For example, let’s say you purchased a share

When is the short term capital gain tax payable?

Short-term capital gains tax is payable on the sale of any asset held for less than three years. The tax rate is 15% for most assets, but it is 20% for equity shares and mutual funds.

Exemptions from short term capital gain tax

The short-term capital gains tax is a tax imposed on the profits realized from the sale of certain assets held for a short period of time. The tax rate depends on the type of asset and the holding period.

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Certain assets are exempt from the short-term capital gains tax, including:

-Real estate: Capital gains from the sale of real estate are not subject to the short-term capital gains tax.

-Personal property: Capital gains from the sale of personal property (e.g., cars, jewelry, art) are not subject to the short-term capital gains tax.

-Stock in mutual funds and other investment vehicles: Capital gains from the sale of stock in mutual funds and other investment vehicles are not subject to the short-term capital gains tax.

Conclusion

Short term capital gains tax is a tax levied on the profits made from the sale of assets held for less than three years. In India, short term capital gains are taxed at 15%. This rate is higher than the rate for long term capital gains, which is 10%. However, short term capital gains can be offset by losses incurred in other investments.

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