Capital Gain

Short Term Capital Gains and Tax Liability

By Scripbox

March, 2021

Short Term Capital Gains And How They Are Taxed

Short term capital gains arising from equity-oriented investments are taxed differently than such gains if they come from investing in debt securities like bonds and debt mutual funds.

Here’s a closer look

Capital Gains Tax

Capital gains are profits you make on the sale of an investment. These profits are bucketed as short or long term and taxed accordingly. 

Short Term Capital Gains Tax

When you hold your capital asset like equity shares, bonds or mutual fund units for only a few months before selling, you may incur what is called a short-term capital gains tax.

What Defines Short Term?

For shares listed on stock exchanges and for equity-oriented MFs, “short term” is a period of 

If you buy shares or equity MFs and sell them within 12 months, any profits you make will be considered short-term gains.

less than 12 months.

 Short Term Capital Gains Tax: The Amount 

Short term capital gains tax is applicable only if there are profits, which means your buy price has to be lower than your selling price.

If not, you end up with a short-term capital loss.

The tax applicable is a flat 15%.

The Tax Write-Off

 For tax purposes, this short-term loss can be written off against any other short- or long-term capital gains and you can carry it forward for eight years if you are not able to do so in the year you book the loss.

 TDS and Short Term Capital Gains

Budget 2020 proposed a TDS for income arising from MFs, at 10% of the gains.

This TDS pertains only to dividend income arising out of MF units and not on capital gains. So, you don’t have to pay any TDS on short term capital gains. 

 When Do You Pay The Tax?

 This tax liability is calculated along with your IT return and the tax amount added to your overall tax bill.

If your short term capital gains tax is more than Rs 10,000, you have to pay advance tax in the quarter that the gains are realised.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.