When you sell shares & earn a profit, it's not just about celebrating the profits - you also have to understand Capital Profit Tax “CGT”. In India, the capital gain tax on stocks and depends on how long you have had shares & whether they are listed in a recognized stock exchange.

What Are Capital Gains?

Capital benefits refer to the profits earned by selling shares as a capital property. If you sell shares for more than the purchase price, your difference is your capital gain.

Types of Capital Gains

Capital gains from shares are classified based on the holding period:

Tax on short term capital gains tax on shares (STCG)

• Search when stocks are sold within 12 months
• A flat 15% tax per section 111A of the Income Tax Act

·        Search only when STT (securities transaction tax) is paid on sale

Example:
Bought shares for ₹1,00,000 and sold for ₹1,20,000 within 8 months
→ Profit = ₹20,000
→ Tax @15% = ₹3,000

Tax on long term capital gains tax on shares (LTCG)

• Search when stocks are sold after 12 months
• LTCG is tax-free up to ₹1 lakh per financial year
• Over ₹1 lakh is taxed at 10% without index

Example:
Bought shares for ₹1,00,000 and sold for ₹2,50,000 after 2 years
→ Profit = ₹1,50,000
→ Taxable LTCG = ₹50,000 (after ₹1 lakh exemption)
→ Tax @10% = ₹5,000

Key Points to Remember

• STT should be paid to qualify for discounted prices.
• Gains from unlisted shares may be taxed differently.
• Report capital benefits in your ITR (tax return) under the correct plan.
• Keep records of purchase and sale transactions for audit and filing.

Conclusion

Understanding capital gains tax helps you make smart decisions while investing or trading in stocks. Always plan purchases and sales strategy with regard to the tax effect. If necessary, contact a tax advisor to adapt the return.

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