How is long-term capital gain and short-term capital loss on sale of shares taxed during the same financial year?
The taxability of long-term capital gain (LTCG) would depend on whether at the time of sale of shares, the securities transaction tax (STT) has been paid or not.
If you are liable to pay STT at the time of sale of shares on a recognized stock exchange, then the LTCG can be claimed tax-exempt. This amount of exemption, however, should be disclosed in your personal income tax return to be compliant with reporting requirements.
If you are not liable to pay STT, then the LTCG should be taxed at 20%. Additionally, if your total taxable income during FY14 exceeds Rs.1 crore, you will have to pay a surcharge at 10% on basic rate (i.e., 20%). Further, you will have to pay an education cess of 3% on basic as well as surcharge (if surcharge is applicable in your case).
Further, the LTCG could be claimed as exempt from tax by investing in prescribed investment avenues—residential apartment or specified bonds— subject to the fulfilment of conditions specified under the domestic tax law.
Short-term capital loss (STCL) arising from sale of shares can be set off against taxable short-term capital gain (STCG) or LTCG, if any, resulting from sale of any capital asset in the same fiscal. If the same could not be entirely set off, then the balance STCL can be carried forward to subsequent eight fiscals. In each of these fiscals, the said STCL can be set off either against STCG or LTCG.
I have gifted my younger brother some money, which he intends to invest in shares. Who will have to pay taxes on capital gains, if any, upon selling the shares?
If an individual receives money from any person during any financial year (FY) without consideration and the aggregate value of which exceeds Rs.50,000, it is taxable under the head “income from other sources”. However, an exemption is available if the money is received from a relative, which includes siblings among others.
Accordingly, the money received by your brother from you as gift shall not be taxable in his hands. You may separately examine the documentation/registration and applicability of stamp duty with respect to the gift transaction.
Capital gains, if any, resulting from subsequent sale of shares purchased by your brother from the gift money shall be taxed in your brother’s hand.
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