Tax Applicability on Equity Shares Buy and Sell

Hello Quicko team,
I have 2 Queries,
I am a salaried employee at 30% tax bracket.

  1. Buy 100 Shares of Brittania @ 3000 on 20May2020 and Sell for 3700 on October 2020. Buy 100 Shares of Brittania @ 3600 on Nov 2020 and keep them till May2021. How will the Gain calculated for tax purpose for FY 2020-2021.

will i need to show (600x100) as STCG or show (100x100) as STCG / LTCG.

  1. If i Buy shares worth 10 lakhs in different Companies in May2020 and Sell and Rebuy shares of other companies with the money earned throughout the year. If all the Initial Investment and Earnings are reinvested in Stocks by end of May 2021. No money withdrawn from the Demat Account and all profits and Initial investment all are reinvested in different company stocks. Do i need to show any Additional Earning in my Income Tax Filing because of earning from sale of shares which were re-invested.

Looking forward to your reply.

Hi @Ravi_Kachhadiya,

  1. If the holding period for shares and securities is less than 1 year, it will be Short Term Capital Gains which will taxed at 15%. If the holding period for shares and securities is more than 1 year it will be considered as Long Term Capital Gains, which are taxed at 10% above INR 1 Lakh. Read more about Capital Gains and taxes here.

  2. Tax liability arises when income is accrued or arise during a financial year. Even when you do not withdraw any funds/profit from your Demat account, you are liable to pay tax on the sale of shares of securities. Depending on the nature of income, the taxability will be different.

If I make a profit or loss by shorting a stock (either by SLBM or other means) what are the applicable taxes?

Hi @d.r, tax is applicable when you have realized gains the taxability comes into the picture. Intraday trading is treated as speculative business income from an income tax perspective and should be reported under the head income from business and profession when filing ITR 3.

In case you have losses, you can set it off against any other speculative business income and carry forward the remaining loss.

Hope this helps :slight_smile:

Hi, My question is a bit different in that I am not asking about selling, instead I am asking about shorting (not intraday shorting). Shorting is when someones borrows a stock and sells it, this can be done via SLBM (Securities lending and borrowing scheme). I want to know the taxation for a short held over a day or longer.

@Kaushal_Soni can you help with this?

Hey @d.r

As per the Income tax laws and circular, any transfer in a scheme for lending of any securities under an agreement or arrangement, which the assessee has entered into with the borrower of such securities shall not be regarded as transfer and hence, no capital gain tax will be applicable for such transfer.

Further, if any income arises except of transfer of securities shall be taxed under other incomes or business incomes depending upon nature of activities under SLBM.

Hope, it helps!