I am a home maker. I earn small amounts by buying and selling shares for the short term (after holding for one or two months). I don’t have any other income. Do I need to pay any tax on the profit earned from these transactions? Since my income is below the taxable limit of ₹7 lakh, I think it is not taxable. Kindly advise.
Jyothi
Assuming that no intraday trades are being made, the income tax applicable to the redemption of shares will be calculated based on the capital gains, which is determined by subtracting the acquisition cost of the shares from the sale value.
The Income Tax Act, 1961 (the Act) outlines specific provisions governing the taxation of capital gains from share sales. These gains are classified as either short term capital gains (STCG) or long term capital gains (LTCG), depending on the duration for which the shares are held. Tax rates for capital gains vary based on whether they are short term or long term. Short-term capital gains from the sale of equity shares are taxed at a flat rate of 15 per cent.
However, as per Section 87A of the Act, where the total income of a resident assessee is chargeable to tax under section 115BAC (i.e. new tax regime), and the total income does not exceed ₹7 lakh, a rebate of amount equal to 100 per cent of the tax or ₹25,000, whichever is less, is allowed from the tax payable.
Therefore, on the assumption that you shall qualify as a Resident of India during FY 2023-24, in case your total taxable income does not exceed ₹7 lakh, no tax will be payable.
However, it is essential to note that even if your income falls below the taxable threshold, you may still be required to file an income tax return to declare your capital gains and to adhere to the provisions of the Act.
The author is a practising chartered accountant
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