How to Pay Short Term Capital Gains Tax?

Wondering how to pay short term capital gains tax? Short-term capital gains arise when you sell an asset like stocks, mutual funds, or property within three years (two years for immovable property) of acquisition. Paying short-term capital gains tax (STCG) in India involves several steps which I have mentioned below.

How to Pay Tax on Short Term Capital Gain?

The tax rates and procedures for paying STCG tax are outlined below.

• Calculate the short-term capital gains by subtracting the cost of acquisition and any associated expenses (like brokerage fees) from the sale proceeds.

• For equity-oriented investments like stocks and mutual funds, STCG is taxed at 15% under Section 111A. For other assets, the gains are added to your income and taxed according to your income tax slab.

• Report the STCG in your Income Tax Return (ITR). If your STCG falls under Section 111A, it must be specifically mentioned in the relevant section of your ITR form. Use ITR-2 if you have no business income or ITR-3 if you do.

• If your total tax liability exceeds ₹10,000 in a financial year, you must pay advance tax in quarterly installments (15%, 45%, 75%, and 100% by June, September, December, and March, respectively). Failure to pay advance tax may result in interest under Sections 234B and 234C.

• File your ITR before the due date (usually July 31st for individuals). Make sure to declare all STCG, and the tax paid. You can file your ITR online via the Income Tax Department's e-filing portal.

If there’s any outstanding tax liability after accounting for TDS, advance tax, and other credits, pay it using Challan 280 on the Income Tax Department's website.

Maintain records of all transactions, including purchase and sale agreements, broker statements, and tax payments, in case of any scrutiny by the tax authorities. This is how to pay STCG tax.

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