The Hindu Business Line : Calculating capital gains and tax on shares sold

I PURCHASED 100 shares of a company on May 5, 2005, at Rs 72.25 per share. The broker levied Rs 43 as brokerage and Rs 4.39 as service tax on the transaction. I also paid securities transactions tax (STT) of Rs 5.42.

Thus the total amount I paid was (7,225 + 43 + 4.39 + 5.42) = Rs 7277.81. I sold the above shares on September 14, 2005, at Rs 131.50 per share. The broker levied Rs 78 as brokerage and Rs 7.96 as service tax on the transaction. I also paid STT of Rs 14.

Thus the total amount I received was (13,150 - 78 - 7.96 -14) = Rs 13,050.04. My depository participant (DP) levied a charge of Rs 25 for transferring the shares to the broker.

Now, I request you to help me calculate the short-term capital gain and the tax payable in this instance.

Kameshwara Rao Talluri

What you have transferred is a short-term capital asset. Section 48 makes it categorical that STT is not deductible while calculating capital gains. Thus the STT paid on both the occasions — purchase and sale — will fall by the wayside.

But the brokerage on sale, including service tax, would make the grade as expenses in connection with transfer. The charges levied by the DP would also make the grade for the same reason.

The brokerage, including service tax for purchase, can be added to the cost of shares. The short-term capital gains would be calculated accordingly. Tax payable is 10 per cent plus education cess of 2 per cent thereon.

But before the education cess is applied you may have to pay a surcharge of 10 per cent on your tax liability on your total income, including capital gains in case such total income is in excess of Rs 10 lakh.

Costly stay

MY EMPLOYER has given me accommodation and charges me per month for the same, which is deducted from the gross salary. Still, an additional amount, which is termed as `accommodation perquisite', is added to the taxable income.

Am I entitled for house rent allowance (HRA) for the amount I am paying to the company as rent? If not, is there any way I can claim HRA (for example, by showing my dependent in another city staying in rented accommodation)?

Kindly advise since I am currently paying huge tax continuing in the same accommodation, compared to staying in rented accommodation.

Abhi, email

According to Rule 3, where the accommodation is owned by the employer, the taxable value of the perquisite is 20 per cent of the salary assuming the population of the city where you live is more than four lakh as reduced by the amount that may be recovered from the employee.

I hope this is the treatment given by your employer; else he would be wrong.

I am a little surprised when you say that you are paying a very high tax.

Maybe your salary is considerable and 20 per cent thereof may be ratcheting up your taxable income assuming the recovery from you is a small amount.

Religious trust

IS A religious trust also eligible for income-tax exemption?

Anil, email

Yes if it is not for private religious purposes. Also, it must be ensured that religious trusts created after the commencement of the Income-tax Act, 1961 does not inure for any particular religious community or caste.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

More Stories on : Income Tax | For the Asking

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Getting Down Under

Convergence of accounting standards

Major biz and finance developments in 2005

Sukhasya moolam dharmah, dharmasya mulam arthah
Baskets of X
Bull's Eye
Cartoon Corner
On heat-mapping inherent risks!
Number Crunch - 401
Just Do IT
Calculating capital gains and tax on shares sold
How to prevent IPO scams?
Business-a-Verse
Strategic planning can do better than just feel good