How to calculate tax on share trading

Excerpts from a Q & A with Tax Expert Subhash Lakhotia

I am a salaried employee of a PSU. I earn short-term capital gains from buying/ selling shares. Can I show deductions for DP charges for demat a/c, computer upgradation, annual maintenance, Internet etc charges when calculating tax? Can I deduct STT paid for tax calculation?

BC Surti
On the facts stated by you, you can claim the various deductions mentioned by you from the short-term capital gains so derived by you. However, please note that STT will not be deducted as per the provisions of the Income-tax law.

I have difficulty filling the capital gain for shares. Please provide me with the rules and regulations and/or schedules of the IT Act.

Very simple indeed. For calculating income-tax on short-term capital gain of listed securities, you are governed by section 111A of the Income-tax Act, 1961. This section provides for taxing short-term capital gains of listed securities @ 10% only. Please arrive at the net figure of capital gains by deducting the losses, if any.

In this financial year, how is income tax levied on profits made on shares? If there is some loss on share transactions, how can it be offset with profits? What if one makes a loss on buying price of shares, but bonus shares are given?

If you derive short-term loss, the same can be adjusted with short-term capital gain. The cost of the bonus shares will be treated as Nil while calculating the capital gains. Hence, please arrive at the net figure to claim the deduction.

I am involved in share trading and also some intraday trading. If I have a gain of Rs 10,000 and Rs 2,000 loss in others, what will be my gain? Will it will be Rs 8,000 can loss not be calculated, and should be reflected separately in CYLA? 2) Should intraday trading be calculated with other trading, or separately?

Rajendra

For calculating short-term capital gain, you have to calculate the net amount of such gain. Thus, loss from the gross amount of capital gain will be deducted the short-term loss from the gross of capital gain. The intraday trading income has to be separately calculated and has to be adjusted with intraday trading loss and thus the net income arrived at.

My wife invests in shares (though not day trading or F&O). She also receives a rent for a house. Her income from short-term capital gain is Rs 35,000 and Rs 61,000 from house rent. Is there a tax liability, since her income is less than Rs 1,35,000? Which ITR return form (if any) needs to be filled?

Generally speaking short-term capital gains are chargeable @ 10% while other income is chargeable @ slab rates. In your case the total income of your wife inclusive of short-term capital gain income is below the exemption limit, hence, the entire short-term capital gain will be fully exempted as per section 111A of the Income-tax Act, 1961. Your wife can use Return Form No 2 for filing her return.

The author is a tax and investment consultant. He maybe reached at: slakhotia@satyam.net.in