Two of the common tax terms that one regularly comes across are STCG and LTCG – abbreviations for Short Term Capital Gains and Long Term Capital Gains respectively. Investors deploy their money to make profits and in certain cases profits – those made above a threshold level – attract taxes.
These taxes would either be STCG or LTCG. The categorisation is based on the holding period of the shares ie., the time for which the shares are held before selling.
Short Term Capital Gains Tax
If equity shares listed on a stock exchange are sold within a period of 12 months from the date of purchase, the seller may make a short-term capital gain (STCG). Obviously, the gains take place when the investor sells the shares at a price higher than the purchase price.
Short-term capital gains are taxable at 15%.
Long Term Capital Gains Tax
If equity shares listed on a stock exchange are sold after 12 months of purchase, the seller may make a long-term capital gain (LTCG).
Incidentally, the LTCG was introduced in the year 2018.
Only above Rs 1 lakh
The point to note is that both STCG and LTCG have to be paid only if the profits from the sale of shares ie, the capital gains exceed Rs 1 lakh in any financial year.
Securities Transaction Tax
STT is an abbreviation for Securities Transaction Tax. It was introduced in the Budget of 2004.
As the name implies, every transaction – purchase and sale – of shares listed on a domestic and recognised stock market attracts STT. All stock market transactions of equities and derivatives such as futures and options are subject to STT.
It is quick and transparent since the tax is imposed as soon as the transaction takes place.
STT rate
STT at the rate of 0.0625% is levied on an option in securities. It is payable by the seller.
The sale of an option in securities attracts 0.125% which is payable by the purchaser.
The sale of a futures in securities also attracts 0.125% which is payable by the seller.
For the transaction of shares, 0.025% of STT is charged on the sell side. If there is a delivery, the rate rises to 0.1% on both the buy and sell parties.
Taxes are the biggest dampener to any investment. Unavoidable that they are, any investor must know what are the taxes that he/she might be liable to pay for the type of investment being made. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
