Unless you were born with a silver spoon in your mouth and have access to a trust fund, once you reach adulthood, you are probably looking for ways to quickly grow your money. Depending on your comfort level with taking risks, you may choose to save your money safely in life insurance schemes, government schemes, real estate or the ever-increasing choice of selling and trading shares in the stock market. Recently, there has been an increase in the buying of IPO shares. These shares if bought and sold under twelve months are liable to short term capital gains tax of 15%, which must be declared when filing your ITR.
Whether you choose to invest in real estate, gold, shares, these come under the umbrella of capital asset and attract capital gains tax on the profit eared on sale of such investments. As an investor if you hold an asset, such as immovable property or unlisted shares, for less than 24 months, then it is labeled as a short-term capital gain. However, if you are trading in certain listed stocks, shares or bonds, the time limit for it to be classified as a short-term capital gain is less than twelve months. Sale of listed shares and units of an equity oriented mutual fund attract 15%, tax if such the transaction was subject to Securities Transaction Tax (STT) and STT was paid at the time of the sale of such shares. In other cases the gain will be taxes as per normal slab applicable to the taxpayer.
So, if by chance you forget to declare your gains on your tax return, then you may find yourself receiving a notice from the ITD, for non-payment of taxes due, for which you will have to respond, which can be a nightmare. However, by enlisting the aid of your personal tax experts at H&R Block India, you can make sure your taxes are filed correctly so that such notices can be avoided in its entirety.
Understanding how to calculate your short-term gains, so that you can declare them on your ITR 2, can be easily done, using the following formula.
Full Sell Value – (Expenses while selling + Acquisition cost + Improvement Expenses) = Short Term Capital Gain
|Full Value||Expenses During Sale||Acquisition Costs||Improvement Expenses|
|Market Value at time of sale||Brokerage (including GST), Stamp duty, etc||Cost of purchase + Brokerage (including GST), Stamp duty, etc. paid at time of purchase||Applies to property (renovations, alterations)|
Regardless of your financial status and your risk factor comfortability, investing in shares to quickly make a profit, is an increasing trend. At the same time ITD is taking various measures to create more transparency in tax filing, due to which errors/omission in income declarations are caught more easily, by the assessing officers, which can cause unnecessary problems for you.
However, you can easily avoid any chances of errors in filing, by taking the necessary steps by taking the help of your personal tax expert at H&R Block India to ensure your ITR 2 is also filed while filing your income tax return.