What is Short Term Capital Gains Tax?

Wondering w

hat are short term capital gains, here is your answer. 

Short-term capital gains tax in India is a tax levied on the profits earned from the sale of certain assets held for a short period. The tax rates and rules for short-term capital gains are defined under the Income Tax Act, of 1961.

What is Short Term Capital Gain Meaning?

• Short-term capital gains arise when an asset is sold within a specified period of its acquisition. For most assets, including equity shares, mutual funds (equity-oriented), and immovable property (held for less than 24 months), gains from the sale are considered short-term if held for less than 36 months.

• The taxable amount for short-term capital gains is calculated by subtracting the cost of acquisition and any allowable expenses from the sale proceeds. The resulting profit is added to the taxpayer's total income for the financial year and taxed at the applicable short-term capital gains tax rate.

• Short-term capital gains tax rates vary depending on the type of asset. For equity shares and equity-oriented mutual funds, the short-term capital gains tax rate is typically 15% (plus applicable surcharge and cess), as per the provisions of Section 111A of the Income Tax Act.

• However, for other assets such as debt mutual funds and immovable property, short-term capital gains are taxed at the taxpayer's applicable income tax slab rates.

• Unlike long-term capital gains, short-term capital gains do not qualify for indexation benefits. Indexation adjusts the cost of acquisition for inflation, thereby reducing the taxable capital gains amount. Since short-term assets are held for a shorter duration, indexation benefit is not available.

• Taxpayers are required to report short-term capital gains in their income tax returns using the appropriate schedule or section provided in the ITR form. Details such as the nature of the asset, sale proceeds, cost of acquisition, and taxable gains must be accurately reported.

• Short-term capital gains tax is generally required to be paid before filing the income tax return. Taxpayers can calculate and pay the tax due through advance tax payments or self-assessment tax payments as per the prescribed deadlines.

Your query should have been solved, what is short term capital gains tax.

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