Income Tax Rules: Income tax rules can sometimes be tricky for retired senior citizens. Especially when it comes to provisions like short-term capital gain (STCG) and section 80C. If you invest in the stock market and your short-term capital gain is up to ₹ 5 lakh
Income Tax Rules: Income tax rules can sometimes be tricky for retired senior citizens. Especially when it comes to provisions like short-term capital gain (STCG) and section 80C. If you invest in the stock market and your short-term capital gain is up to ₹ 5 lakh, then it is important to know whether the benefits of section 80C apply to this income or not?
How will the tax liability be calculated? – This calculation is for senior citizens.
For example, if the general income of a senior citizen is Rs 2 lakh and the short-term capital gain income from listed shares is Rs 5 lakh, then how will the tax be calculated on it.
Normal income: ₹2 lakh (mainly interest income).
Short-term capital gain: ₹5 lakh (from listed shares).
Deduction under Section 80C: ₹1.50 lakh (under the old tax regime).
After deductions, your normal income will be ₹50,000. The basic tax exemption limit for senior citizens is ₹3 lakh.
Short-term capital gain and tax exemption limit
Since in this case the normal income is ₹2.50 lakh less than the exemption limit of ₹3 lakh, this shortfall will be adjusted against your short-term capital gain. After this, the remaining short-term capital gain of ₹2.50 lakh will be taxed.
This tax rate will be like this
Profit earned before 23 July 2024: Tax will be levied at the rate of 20%.
Profit earned on or after 23 July 2024: Tax will be levied at the rate of 15%.
Use of Section 80C
The benefit of Section 80C is available only on normal income. This benefit is not available on short-term capital gain. However, if you have got short-term gain or loss from any other source, then it will be treated as normal income. The benefit of Section 80C can then be applicable on this.
Important things for investors
Choose the old tax regime: The benefit of Section 80C is available only in the old tax system.
Use short-term capital loss: If you have any short-term loss in the financial year, it can be adjusted with short-term capital gain.
Non-resident rule: If you are a non-resident, you will have to pay tax at the rate of 20% or 15% on the entire amount of short-term capital gains.
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