InvestorQ : What is the incidence of taxation of LTCG and STCG in case of equities?
Jignesh Gupta made post

What is the incidence of taxation of LTCG and STCG in case of equities?

Maniish Lofar answered.
2 years ago

Just as equities get preferential treatment with respect to the definition of LTCG and STCG, they also enjoy the additional benefit of preferential rates of taxation in both the cases. For example while other assets have to pay tax on LTCG at 20% after considering indexation, in case of equities LTCG was entirely tax free till March 2018. However, effective April 2018, equity LTCG is also taxed at a flat rate of 10% of the gains above Rs.1 lakh per fiscal year. This is a flat rate so no benefit of indexation is available.

That means if you bought equity shares today and sold it after 12 months then the entire capital gains made by you is taxed in your hands at 10% above Rs.1 lakh threshold irrespective of the quantum of capital gains made by you. Even in case of STCG there is preferential treatment for equities. In case of other assets, STCG is taxed at your peak rate of tax by inclusion under the head of “Other Income”. So if you are in the 30% tax bracket then in case of non-equity assets you will have to pay tax at your peak rate of 30%. However, in case of STCG on equities, you are only needed to pay tax at a concessional rate of 15% plus surcharge and cess. Thus both in case of LTCG and STCG, equity and equity-related products tend to get preferential treatment. However, it must be said that the imposition of tax on LTCG in the 2018 budget has slightly diluted the advantage that equity enjoyed with respect to LTCG taxation.