Do we have to pay tax on sales of share?

 

In this last 2-3 years there is increased in a number of people who trade in shares. Thanks to Zerodha, Upstock, Angleone, 5paisa & many other players who are offering services at low cost.

There is bit confusion around people who don’t have accounts or taxation knowledge. The confusion is-  

Do we have to pay tax when we sales our shares while filing IT return?

Is there any threshold of capital gain for paying tax?

What if we don’t pay it?

What is short term capital gain & loss?

What is long term capital gain & loss?

What is the tax rate for both short & long term capital gain on sales of shares?

 

This 6 question will solve your maximum query. It will help you to understand whether you fall in the category of paying tax or not.

 

So let us first understand what is capital gain or loss in terms of share.

Let say you have purchased a 10 share of Rs. 1000  on 01.04.2019 (total amount of buy= 10,000)

 

Now we will discuss 4 possibilities when you sell your shares.

Case 1

Let say you sell the 10 share on 15.12.2019 for Rs. 1150 per share (total amount of sell= 11,500)

Difference amount = (sell – buy)= 1500.00

Here 1500 is your profit. Total days between buy & sell is 258, which is less than 365 days i.e. 1 year hence it will be termed as short term capital gains

Short Term Capital Gain- if you sell shares at profit & days is less than 365 days ( 1 year) then it is called as short term capital gain.

 

Case 2

Let say you sell the 10 share on 15.12.2019 for Rs 900 per share (total amount of sell- 9,000)

Difference amount = (sell – buy) = -1000.00

Here 1000 is your loss. Total days between buy & sell is 258, which is less than 365 days i.e. 1 year hence it will be termed as short term capital loss.

Short Term Capital Loss- If you sell shares at loss & days is less than 365 days (1 year) then it is called as short term capital loss.

 

Case 3

Let say you sell the 10 share on 15.04.2022 for Rs 1800 per share ( total amount of sell- 18,000)

Difference amount = (sell – buy) = 8000.00

Here 8000 is your profit. Total days between buy & sell is 1110, which is more than 365 days i.e. 1 year hence it will be termed as long term capital gain.

Long Term Capital Gain- If you sell shares at profit & days is more than 365 days (1 year) then it is called as long term capital gain.

 

Case 4

Let say you sell the 10 share on 15.04.2022 for Rs 700 per share (total amount of sell- 7,000)

Difference amount = (sell – buy) = 3000.00

Here 3000 is you loss. Total days between buy & sell is 1110, which is more than 365 days i.e. 1 year hence it will be termed as long term capital loss.

Long Term Capital Loss-  If you sell shares at loss & days is more than 365 days (1 year) then it is called as Long term capital loss.

 

Now we will understand what will be tax rate for short term capital gain & long term capital gain in terms of share’s

 

Short Term Capital gains are taxable at 15%

This is the special rate of tax that is applicable to short term capital gains, irrespective of your tax slab.

There is no threshold for short term capital gains on shares if your annual income is taxable under direct tax.

 

Long Term Capital gains are taxable at 10% (plus applicable cess) when your gains are more than or equal to 1 lakh on the sale of equity shares or equity- oriented units of a mutual fund.

IMP NOTE- TAX SHOULD BE PAID ON PROFIT & NOT ON SALE AMOUNT

Moving to the last question what if I don’t pay tax?

After reading this article I am sure you can decide whether your profit’s that you earned from selling share’s will be taxable or not. If your income falls under taxable bracket, I recommend you to consult a Chartered Accountant & plan accordingly.

WHETHER YOU CAN SET-OFF LOSS (SHARE) ?- If you want an article on these please leave comment. If I receive even 1 comment I will put an article on this subject.