InvestorQ : I am not still clear about the calculation of STCG tax by clubbing it with total income. Can you explain that with an example?
Neelam Naik made post

I am not still clear about the calculation of STCG tax by clubbing it with total income. Can you explain that with an example?

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Priyanka N answered.
2 years ago
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Mr. Khemani (Indian resident aged 40 years) is a salaried employee working in Dabur Ltd. at an annual salary of Rs. 8,40,000. In December, 2017 he purchased 10,000 equity shares of Firdaus Tech Ltd. at Rs. 100 per share and sold the same in April, 2018 at Rs. 125 per share (brokerage Re. 1 per share). The shares were sold through Bombay Stock Exchange and securities transaction tax was paid by Mr. Khemani. What will be the tax liability applicable to Mr. Khemani?

First we have to compute the taxable income of Mr. Khemani and then we will compute the tax liability. The computation of taxable income will be as under:

Particulars (FY 2018-19)

Amount

Salary income

Rs.8,40,000

Short-Term Capital Gains (less brokerage)

Rs.2,40,000

Gross Total Income

Rs.10,80,000

Less: Deduction under section 80C to 80U

Rs.70,0000

Total Income or Taxable Income

Rs.10,10,000

Income Tax at normal rates on Salary

Rs.66,500

Income Tax on STCG U/S 111A (15% of Rs.2.40 lakh)

Rs.36,000

Tax on total income

Rs.1,02,500

Add: Health & education cess

Rs.4,100

Total tax liability for the year

Rs.1,06,600

As can be seen in the above illustration, the tax liability is calculated separately for the STCG under Section 111A and the normal salary income since the STCG under Section 111A gets preferential treatment. That is because the tax rate on equity STCG is 15% concessional rate compared to your peak rate. However the impact of 4% cess will be the same. In case the income crosses the Rs.50 lakh mark then the applicable surcharge will also add to your tax burden on STCG.

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