Capital gain tax

Dear Client,

               Unless you invest them in  mutual funds or in securities under Section 80 IT Act1961, you are liable to pay short term capital gains tax on those stocks which are reinvested by you.

Ms.Nirmala P. Rao

Legal Expert

Madam,

Are you saying that if we have short term capital gains by selling shares of listed companies and if we invest that profit in Mutual funds, we can avoid tax on that profit? Please clarify whether I understood your reply to Mr Murali correctly.

K Krishnamurthy

Dear Sir,

         Such Short Term capital gains are subject to tax at the threshold limit of 10% only provided such profits on sale of equity shares etc were already subjected to Securities Transaction Tax. However, in such cases the benefit of Deductions under Chapter VI A including  that of Section  80 C IT Act 1961 is not available.

If   such profits are reinvested in mutual funds set up by a Public Sector Bank or Public Financial Institution under Section 10(23D) or in shares under Section 10(34) IT Act  or  units of UTI  or Mutual funds  all income arising therefrom(Dividends on such shares as referred in Section 115 O)  is fully exempt from Tax under Section 10(35).

Ms.Nirmala P.Rao

Legal Expert