Tax Loss Harvesting

What is short term capital gain tax? How is it calculated?

Any profit or gain arising from stock investment is less than 12 months termed as short-term Capital gains. Until 23^rd July, 2024, short term capital gains were taxed at a flat rate of 15%. As per the new budget announced on 23^rd July, 2024, tax rate on short term capital gains has increased from 15% to 20%.

For example, Mr. A bought 100 shares of Larsen & Toubro ltd at Rs 950 per share on 1^st February, 2024.

Case 1: Shares sold before 23^rd July, 2024

Mr. A sold the same 100 shares of Larsen & Toubro at Rs 1500 per share on 3^rd June, 2024, within 1 year (less than 12 months).

In this case, gains on Larsen & Toubro = Rs. 55,000

Short term capital gain tax = 55000 X 15% = 8,250

Case 2: Shares sold after 23^rd July, 2024

Mr. A sold the same 100 shares of Larsen & Toubro at Rs 1500 per share on 25^th July, 2024, within 1 year (less than 12 months).

In this case, gains on Larsen & Toubro = Rs. 55,000

Short term capital gain tax = 55000 X 20% = 11,000

Case 3: Shares sold before 23^rd July, 2024 and also after 23^rd July, 2024

Mr. A sold 30 shares of Larsen & Toubro at Rs. 1000 per share on 3^rd June, 2024. He sold the remaining 70 shares of Larsen & Toubro at Rs. 1200 on 25^th July, 2024.

In this case, gains on 30 shares = Rs. 1500

Gains on 70 shares = Rs. 17,500

Now, tax will be calculated for the gains according to the tax rates applicable to the date when the shares were sold i.e. pre-budget or post-budget.

Short term capital gain tax on 30 shares = 1,500 X 15% = 225

Short term capital gain tax on 70 shares = 17,500 X 20% = 3,500

Total gains = 3,725