{"id":7579,"date":"2022-03-08T20:05:27","date_gmt":"2022-03-08T14:35:27","guid":{"rendered":"https:\/\/www.tickertape.in\/blog\/?p=7579"},"modified":"2022-05-24T10:54:53","modified_gmt":"2022-05-24T05:24:53","slug":"section-111a-income-tax-act","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/","title":{"rendered":"Section 111A Of Income Tax Act: Short Term Capital Gain Tax On Shares"},"content":{"rendered":"\n<p>You may be involved in <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-intraday-trading\/?utm_source=blog&amp;utm_medium=article\">trading<\/a> <a href=\"https:\/\/www.tickertape.in\/blog\/stock-market-participants\/?utm_source=blog&amp;utm_medium=article\">securities<\/a> that you have held for less than a year. If you profit from the transfer of such a security, you are said to have a short-term capital gain. Such gains are mentioned separately under various Sections of the <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-income-tax\/\">Income Tax<\/a> Act.<\/p>\n\n\n\n<p>Let us get into the details of short-term capital gains and how they are taxed under Section 111A of Income Tax Act.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#What-is-short-term-capital-gain\" title=\"What is short-term capital gain?\">What is short-term capital gain?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#Provisions-under-Section-111A-of-Income-Tax-Act\" title=\"Provisions under Section 111A of Income Tax Act\">Provisions under Section 111A of Income Tax Act<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#Illustrations-of-STCG-under-Section-111A-of-Income-Tax-Act\" title=\"Illustrations of STCG under Section 111A of Income Tax Act\">Illustrations of STCG under Section 111A of Income Tax Act<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#Case-1-Where-equity-shares-are-traded\" title=\"Case 1: Where equity shares are traded\">Case 1: Where equity shares are traded<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#Case-2-Gain-on-equity-oriented-mutual-funds\" title=\"Case 2: Gain on equity-oriented mutual funds\">Case 2: Gain on equity-oriented mutual funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#Case-3-Where-units-of-a-business-trust-are-transferred\" title=\"Case 3: Where units of a business trust are transferred&nbsp;\">Case 3: Where units of a business trust are transferred&nbsp;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#Case-4-Where-other-securities-are-traded\" title=\"Case 4: Where other securities are traded\">Case 4: Where other securities are traded<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#How-to-adjust-STCG-under-Section-111A-with-the-basic-exemption-limit\" title=\"How to adjust STCG under Section 111A with the basic exemption limit?\">How to adjust STCG under Section 111A with the basic exemption limit?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/section-111a-income-tax-act\/#In-conclusion\" title=\"In conclusion\">In conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"what\"><span class=\"ez-toc-section\" id=\"What-is-short-term-capital-gain\"><\/span><strong>What is short-term capital gain?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Short-term capital gain is the earning on the sale of any investment that you have held for less than a year. One example of this is the profit earned from the sale of stocks. Gain on <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">equity<\/a> shares held for less than 12 month is considered a short-term capital gain.<\/p>\n\n\n\n<p>As is the case with any other income, you must pay tax on such earnings. The taxation rules depend on whether the stocks come under Section 111A of the Income Tax Act or not.&nbsp;<\/p>\n\n\n\n<p>Let us see the applicable provisions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Provisions\"><span class=\"ez-toc-section\" id=\"Provisions-under-Section-111A-of-Income-Tax-Act\"><\/span><strong>Provisions under Section 111A of Income Tax Act<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>According to Section 111A, tax on short term capital gain is applicable if the following conditions are met:<\/p>\n\n\n\n<ul><li>The transaction involves purchasing or selling <a href=\"https:\/\/www.tickertape.in\/blog\/what-are-equity-shares-meaning-types-features-limitations-and-more\/\">equity shares<\/a> or equity-oriented <a href=\"https:\/\/www.tickertape.in\/blog\/mutual-funds\/\">mutual funds<\/a>. For this purpose, equity-oriented mutual funds are those in which 65% of the investment is in equity shares of domestic companies.<\/li><li>It also includes the transfer of units of business trust.&nbsp;<\/li><li>The securities must be traded on a recognised stock exchange.<\/li><li><a href=\"https:\/\/www.tickertape.in\/blog\/securities-transaction-tax\/?utm_source=blog&amp;utm_medium=article\">&nbsp;Security Transaction Tax (STT)<\/a> must be applicable on such transactions.&nbsp;<\/li><li>The securities must be held for a period that is less than one year (12 months).<\/li><\/ul>\n\n\n\n<p>The investments that fulfil these conditions attract a <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-short-term-capital-gain-on-shares\/?utm_source=blog&amp;utm_medium=article\">short-term capital gain <\/a>tax. The tax rate on such gains is 15%.&nbsp;<\/p>\n\n\n\n<p>Let us see a few examples of where this is applicable.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"Illustrations\"><span class=\"ez-toc-section\" id=\"Illustrations-of-STCG-under-Section-111A-of-Income-Tax-Act\"><\/span><strong>Illustrations of STCG under Section 111A of Income Tax Act<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Case-1-Where-equity-shares-are-traded\"><\/span><strong>Case 1: Where equity shares are traded<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>You sell a listed company\u2019s equity shares that you have held for 5 months, on a recognised stock exchange and profit from it. Moreover, STT is levied on this transaction. Such a profit is considered a short-term capital gain as your holding period is less than a year. Therefore, as per the provisions of Section 111A, you are liable to pay 15% tax on the STCG.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Case-2-Gain-on-equity-oriented-mutual-funds\"><\/span><strong>Case 2: Gain on equity-oriented mutual funds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>You earn a profit from a <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-mutual-funds-directly\/?utm_source=blog&amp;utm_medium=article\">mutual fund<\/a> that you held for 7 months. In this, 70% of the corpus is invested in equity. This makes it an equity-oriented mutual fund. Moreover, the transaction takes place via <a href=\"https:\/\/www.tickertape.in\/blog\/national-stock-exchange\/\">NSE<\/a>, which is a recognised stock exchange. STT is applicable to the transaction. In this situation, you must pay 15% tax on your short-term capital gain as per Section 111A of Income tax Act.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Case-3-Where-units-of-a-business-trust-are-transferred\"><\/span><strong>Case 3: Where units of a business trust are transferred&nbsp;<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>You earn a profit by selling the units of a business trust. You held these units for a period of 11 mth. Since it comes under Section 111A, the profit will be taxed at 15%.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Case-4-Where-other-securities-are-traded\"><\/span><strong>Case 4: Where other securities are traded<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>You transfer debentures that you have held for 3 mth and gain a profit. This transaction will not come under Section 111A as transfer of debentures is not included. The profit earned will be taxed as per your tax slab.<\/p>\n\n\n\n<p>The Income Tax Act allows you to adjust the short-term capital gain according to the basic exemption limit.&nbsp;<\/p>\n\n\n\n<p>Let us see how this can be done.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how\"><span class=\"ez-toc-section\" id=\"How-to-adjust-STCG-under-Section-111A-with-the-basic-exemption-limit\"><\/span><strong>How to adjust STCG under Section 111A with the basic exemption limit?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>If your total income is less than Rs. 2.5 lakh, you do not qualify for paying income tax.&nbsp;<\/p>\n\n\n\n<p>In such a situation, if you have a short-term capital gain, you can adjust it with your income. When you add the amount of STCG to your income, it may exceed the exemption limit of Rs. 2,50,000. Only the amount that goes beyond this limit is taxable.<\/p>\n\n\n\n<p>Let us understand this better with an example.&nbsp;<\/p>\n\n\n\n<p>Assume that your total income is Rs. 1.5 lakh, and you have a short-term capital gain of Rs. 3 lakh from the sale of equity shares. 15% tax is payable on this gain. However, you may adjust your gain with your total income. Adding this Rs. 3 lakh to Rs. 1.5 lakh gives you Rs. 4.5 lakh. This exceeds the exemption limit by Rs. 2,00,000, which is taxed at 15%.<\/p>\n\n\n\n<p>This provision helps you save tax. Otherwise, the entire amount of gain, in this case of Rs. 3 lakh would be taxable.&nbsp;<\/p>\n\n\n\n<p>Moreover, if your income plus the amount of short-term capital gain is less than Rs. 2.5 lakh, no tax is levied provided the amount remains within the exemption limit.<\/p>\n\n\n\n<p>However, you cannot claim a deduction under Sections 80C to 80U on such transactions. But you may claim a deduction if the transaction related to short-term capital gain does not come under Section 111A of Income Tax Act.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"In-conclusion\"><\/span><strong>In conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 111A mentions the rules and provisions regarding short-term capital gains. These are limited to gains on equity shares, equity-oriented mutual funds, and business trust units. Keep the rules in mind to make sure you pay the required tax. You may also benefit from certain provisions that help you minimise your tax liability.&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Looking for information on section 111A? Here&#8217;s a guide on what is short term capital gain tax &#038; how it is calculated. Click to know what all is covered under 111A!<\/p>\n","protected":false},"author":54,"featured_media":7529,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[8,1741],"tags":[1476],"acf":[],"modified_by":null,"jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2022\/03\/6-1.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7579"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/54"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=7579"}],"version-history":[{"count":7,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7579\/revisions"}],"predecessor-version":[{"id":8575,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/7579\/revisions\/8575"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/7529"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=7579"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=7579"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=7579"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}