The section 111A of the income tax act 1961, lays down the provision for Tax Deduction Rate for short term capital gains.
Definition of short term capital gains:
If a person yields profit resulting out of transactions of capital assets within 36 months or shares and securities within one year of their respective possession, then such gains are termed as short term capital gains. In case of shares and securities transaction, the profit is considered after deducting charges such as brokerage, service tax,value added tax etc. The short term gains arising out of capital assets may include capital gains from selling depreciable assets, selling a portion of assets from the full block of assets in a single assessment year such that the written down value of such asset come to NIL.
Summary of the Section 111A:
The section 111A clearly lays down that income from such transactions falling in the taxable income slab are chargeable at the rate of 15%. However, an in an Indian joint family business, the total income is divided among partners, though sleeping. Thus, in such a case the balance amount which falls after the allotment of short term capital gains amongst the partners is charged at the rate of 15%.
The Exemption under Section 111A:
The online filing of return in India, gives an easy access to the individual to file its income tax return. The online ITR filing can be done easily to file return for amounts of saving and donations, but in case of short term gains such provisions hardly finds its way.
However, the tax paying agents have devised ways to save these short term gains from the eyes of the income tax department. Theloopholes of Gift tax in India are an appropriate way of making short term transaction out of the purview of section 111A. The capital asset thus transacted amongst relatives (as defined by income tax act) can be treated as a gift thus it can be exempted from the Indian gift tax.
The question of the hour- what is slab rate for Short Term Capital Gains:
The finance act , 2008 gives a proper cut definition of the Income tax rates starting from 10% ,levied on various slab rates whereas , here any amount exceeding the slab of short term gains is deemed to the deduction of income tax at the rate of 15% .With the increase in online filing of income tax in India , the share of awakened Indian population ,towards it rights and laws ,this anomaly is likely to attract the attention of ample amount of litigation.
The law has devised rules to check its citizens.There are some sections which tend to raise the brows of certain class of the population of India, but then there are law pundits who can play well within the legal terms to exempt an individual from such odd rules.
Related Read- How to Calculate Capital Gains Tax