What do We Mean by Short Term Capital Gain Tax

For the purpose of the taxability capital assets are divided into two category short term asset and long term asset. Any gain or loss arising from short term assets are known as short term capital gain or loss and tax paid or payable on such gain is known as short term capital gain tax. In case of short term loss from one capital asset it can be used to set off a long term or short gain from other assets.

One of the basic criteria for dividing the assets into long term and short term is period of holding means for how long assets are owned by the person. And as per section 111A of the income tax act asset is treated as short term if the period of holding .i.e. owned for less than 36 months, but in case financial assets like equity shares, listed securities, units of mutual fund and zero coupon bonds tenure is reduced to 12 months.

Few of the points for short term assets are as follows:

  • Short term gain on listed equity share or units of equity oriented fund on which securities transaction tax is payable is taxable at the rate of 15% .
  • Benefit of indexation is no available on short term gain.

When time –period is considered as 12Months

1 

Equity or Pref. shares 

Shares May or may not be listed 

2 

Securities (Debentures, Govt. securities)

Should be listed 

3 

Units of UTI 

Units May or may not be listed 

4 

Units of mutual Fund

Units May or may not be listed 

5 

Zero Coupon Bonds 

Bonds May or may not be listed 

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