What is the capital gains liability arising on sale of shares, i.e. long-term/short-term?
In case of equity or preference shares in a company, if the shares are held for more than 12 months immediately prior to its transfer then it is known as long-term capital asset and on transfer of long-term capital asset, long-term capital gain may arise. Long-term capital gains arising on transfer of equity shares will not be chargeable to tax, if such transaction of sale is entered on or after April 1, 2004, and is subjected to STT (Section 10(38)).
Up to September 30, 2004, long-term capital gain shall be taxed at 20 per cent of indexed cost and short-term capital gain shall be indexed at the normal rate of taxation. On or after October 1, 2004, in case of shares credited through a recognised stock exchange the long-term capital gain on transactions, which have suffered STT would be nil and in case of transactions resulting in short-term capital gain, the tax would be at the rate of 10 per cent. In case of shares, which are not transacted through a recognised stock exchange and on which STT has not been paid, the law prior to October 1, 2004 would continue to be applicable.
In case of equity or preference shares in a company, if the shares are held for more than 12 months immediately prior to its transfer then it is known as long term capital asset and on transfer of long term capital asset, long term capital arises. Long term capital gains arising on transfer of equity shares will not be chargeable to tax from assessment year 2005-06 if such transaction is covered by securities transaction tax under section 10(38).
