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 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 gains: ₹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 Rs 3 lakh.
Short-term capital gains and tax exemption limit
Because in this case the normal income is Rs 2.50 lakh less than the exemption limit of Rs 3 lakh. This shortfall will be adjusted against your short-term capital gain. After this, tax will be applicable on the remaining short-term capital gain of Rs 2.50 lakh.
This tax rate will be like this
- Profits earned before July 23, 2024: Taxed at the rate of 20%.
- Profits earned on or after July 23, 2024: Taxed at 15%.
Use of section 80C
The benefits of section 80C are available only on normal income. This benefit is not available on short-term capital gains. However, if you have got short-term gain or loss from any other source, then it will be considered as normal income. The benefit of section 80C can then be applicable on it.
Important things for investors
Choose old tax regime : The benefit of Section 80C is available only in the old tax system.
Use short-term capital losses: If you incur any short-term losses in a financial year, the same can be set off against short-term capital gains.
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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