Short term capital gains or STCG represents the profit that arises from holding equities for less than 1 year. Anything more than 1 year holding becomes LTCG. Of course, intraday trading is not included in this as it is treated as speculative income for tax purposes. The short term capital gains are charged under the Income Tax at the rate of 15% on the amount of capital gains. However, there is a surcharge and cess that is applicable on the STCG tax which also has to be paid on top of the 15% basic tax. This raises the effective rate of tax that the individuals pay. The effective STCG tax comes to 17.47% (15% basic STCG tax + 12% surcharge + 4% cess). Let us see how the tax calculations pan out?

Particulars

Calculation of STCG Tax

Shares of RIL bought on 01^{st} January 2017

1000 shares @ Rs.750/share

Value of purchase of RIL

Rs.7,50,000

Sale of shares of RIL on 01^{st} November 2017

1000 shares @ Rs.875

Value of sale of RIL

Rs.8,75,000

Short Term Capital Gains (less than 12 months)

Rs.1,25,000

Applicable effective tax rate

17.47%

Tax payable

Rs.21,838

Net Capital Gains (net of tax)

Rs.1,03,162

It can be seen from the above table that the STCG tax reduces the net dividends in the hands of the investor. That is because the shares were sold in less than 1 year and like in the case of other assets, even in case of equities, the LTCG is taxed at a lower rate compared to short term capital gains.

indhumathi Sayanianswered.Short term capital gains or STCG represents the profit that arises from holding equities for less than 1 year. Anything more than 1 year holding becomes LTCG. Of course, intraday trading is not included in this as it is treated as speculative income for tax purposes. The short term capital gains are charged under the Income Tax at the rate of 15% on the amount of capital gains. However, there is a surcharge and cess that is applicable on the STCG tax which also has to be paid on top of the 15% basic tax. This raises the effective rate of tax that the individuals pay. The effective STCG tax comes to

17.47%(15% basic STCG tax + 12% surcharge + 4% cess). Let us see how the tax calculations pan out?ParticularsCalculation of STCG TaxShares of RIL bought on 01

^{st}January 20171000 shares @ Rs.750/share

Value of purchase of RIL

Rs.7,50,000

Sale of shares of RIL on 01

^{st}November 20171000 shares @ Rs.875

Value of sale of RIL

Rs.8,75,000

Short Term Capital Gains (less than 12 months)

Rs.1,25,000

Applicable effective tax rate

17.47%

Tax payable

Rs.21,838

Net Capital Gains (net of tax)Rs.1,03,162It can be seen from the above table that the STCG tax reduces the net dividends in the hands of the investor. That is because the shares were sold in less than 1 year and like in the case of other assets, even in case of equities, the LTCG is taxed at a lower rate compared to short term capital gains.