InvestorQ : Will I get credit for securities transaction tax paid on a transaction while calculating capital gains?
Dia Deshpande made post

Will I get credit for securities transaction tax paid on a transaction while calculating capital gains?

Answer
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Ria Jain answered.
1 year ago


That is an interesting question. Let us answer this with the live case of Rakesh Shah who is working in a diamond firm in Surat. In the month of December, 2017 he purchased 100 equity shares of AFM Foods Ltd. @ Rs. 1,400 per share from Bombay Stock Exchange. These shares were sold in the NSE in August, 2018 @ Rs. 2,000 per share (securities transaction tax was paid at the time of sale). What will be the nature of capital gain here?

Shares were purchased in December, 2017 and were sold in August, 2018, i.e. sold after holding them for a period of less than 12 months. Hence, the gain will be short term capital gain. Section 111A is applicable in case of STCG arising on transfer of equity shares or units of equity oriented mutual-funds or units of business trust which are transferred on or after 1-10-2004 through a recognised stock exchange and such transaction is liable to securities transaction tax. It does not matter that the shares were bought on the BSE and sold on the NSE. That is immaterial. In the above case, Rakesh has made a short term gain of Rs.60,000 {100 x (2000-1400)}. Rakesh will have to pay a tax of Rs.9,000 or (15% of Rs.60,000 in the above case). Of course the effective rate will depend on the income level of the individual as it is clubbed with total income. While the cess is mandatory on this tax, the surcharge will depend largely on whether the total exceeds Rs.50 lakhs or Rs.1 crore. In the two cases, the surcharge applicable will be 10% and 15% respectively.