Taxation on the capital gains on the sale of shares listed on any of the recognised stock exchange in India depends on two factors –holding period and seller’s residential status. These capital gains are taxable.
Understanding LTCG and STCG
Those shares listed on the stock exchange are known to be long term capital gains (LTCG) if they are held for more than 12 months and are taxed at 10 per cent on amounts exceeding lakh rupees. Short term capital gains (STCG) are taxed at 15 per cent along with application to a surcharge, and health and education cess.
Understanding the exemption of tax on LTCG
Limited to specified conditions, you can claim tax exemption that is to be levied on LTCG, only If
- The capital gains are reinvested in one residential house in India (only to be purchased within one year before or two years after the construction within the transfer of LTCG asset), the owner should not own more than one house.
- You can deposit the amount in a Capital Gains Account Scheme (CGAS) with a bank, if not invested till the date of filing of tax returns in India. You can later withdraw it for reinvestment. The leftover amount, if not funded, will be taxable.
What’s for NRIs?
There’s a particular taxation scheme for NRIs who invest in India through convertible foreign exchange. Under the plan, NRIs can
- Claim roll-over exemption of tax on LGTC on the transfer of specified assets for reinvestment within few months from the date of transfer.
- Claim over a lock-in period of three years creating “claw back” of exempt LTCG, giving them an opportunity to declare that the provisions of this chapter shall not apply to them for that tax year while filing ITR available on a year-on-year basis.
NRI taxpayers can pay tax on STCG and LTCG in four instalments in advance in the form of 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March.
