LT/ST gains on Sale of Equity shares

Question

Hi Pankaj,

I have been accumulating equity shares of few companies since 1.5 years. I am a NRI and have a NRI-PIS account. I have never done buy/sell on same day as this is not allowed for NRI-PIS.

I have a few queries related to sale of these shares

When I sell the shares how are the capital gains classified as LT or ST. is it based on FIFO or LIFO. What gains would come under speculative gains.
Are the brokerage and other charges like regulatory charges, STT, Stamp duty etc. (for buy and sell) to be deducted before calculating the gain.
Do I need to consider the dividends received on these shares (prior to the sell) as part of income.
anything else I need to consider while filing the Tax return for this income.

Thanks and appreciate your response. God Bless.

Pankaj Batra · Accepted Answer

You can take FIFO approach in computing short/long term gains. Intraday trading or selling stocks without taking delivery would come under speculative gains.
Brokerage charges, STT, stamp duty and all such charges incurred in selling/buying stocks should be deducted in computing gain.
Dividends earned on listed stocks are tax free.

Short term gains would be taxable @ 15%, Long term gains (sale after a year) would be tax free.

CA Karan Batra · Answer

Pankaj has guided you in the right direction

I would just like to add that STT Paid shall not be deducted while computing Cap Gain as the Law has specifically excluded the same.

This is a error which many taxpayers make.

However, as per Fifth Proviso to Section 48, STT paid is not allowed to be deducted

Refer: http://law.incometaxindia.gov.in/DIT/HtmlFileProcess.aspx?FooterPath=D:\WebSites\DITTaxmann\Act2010\DirectTaxLaws\ITACT\HTMLFiles\2011&DFile=section48.htm&tar=top#

LT/ST gains on Sale of Equity shares

2 Answers