Income Tax RulesIncome tax rules can sometimes be difficult for retired senior citizens. Especially when it comes to provisions like Short-Term Capital Gains (STCG) and Section 80C. If you invest in the stock market and your short-term capital gain is up to ₹5 lakh, it is important to know whether the benefits of Section 80C are applicable on this income or not?
How will tax liability be calculated? – This calculation is for senior citizens.
For example, if a senior citizen’s ordinary savings are Rs 2 lakh and short-term capital gain income from listed shares is Rs 5 lakh, then how will the tax be calculated?
Normal Income: ₹2 lakh (mainly interest income).
Short-Term Capital Gain: ₹5 lakh (from listed shares).
Deduction under Section 80C: ₹1.50 lakh (under old tax regime).
Your normal income after deduction will be ₹50,000. The basic tax exemption limit for senior citizens is Rs 3 lakh.
Short-term capital gains and tax exemption limits
Because 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, tax will be applicable on the remaining short-term capital gain of ₹2.50 lakh.
This tax rate will be like this
Profits earned before July 23, 2024: Will be taxed at the rate of 20%.
Profits earned on or after July 23, 2024: Will be taxed 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 gains. However, if you have received short-term gain or loss from any other source, it will be treated as ordinary income. Then the benefit of section 80C can be applied on this.
Important things for investors
Choose the old tax regime: The benefit of Section 80C is available only in the old tax regime.
Use short-term capital loss: If you incur any short-term loss in the financial year, it can be adjusted against short-term capital gain.
Non-Resident Rules: 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 gain.
MSSC: On investing Rs 2 lakh, Rs 1.50 lakh or Rs 1 lakh in Mahila Samman Saving Certificate.