On Thu, Nov 11, 2010 at 5:11 PM, Prashant R wrote: I have a query regarding the short term capital

gain tax. Suppose a person earns around Rs 10000 as short term capital gain in FY 11. Suppose he buys a share in the same financial year of a company. (Name of company ABC, share price RS 100, Qty 50) So total buying is Rs 5000. If this company gives bonus shares in the ratio 1:1. So now the investor is having 200 No of shares of company ABC. He sells 100 No of shares at Rs 29. So technically his loss will be Rs 2100 (50002900). So my question is whether he can adjust these 2100 rs loss against Rs 10000 profit. So his net profit will be Rs 7100 (10000-2900). So in this case he has to pay tax Rs 710 instead of Rs 1000. Whether this is allowed. I am not sure about it and different people are giving different opinions about this. Pls let me know if you know the right answer.

OPINION 1:
Capital gain tax will be on total net capital gain with all transaction in a financial year for example 20000 gain from 7 transaction and 14000 loss in 3 transaction in one fin yr than tax will be on 20000-14000=6000 for that fin year

OPINION 2:
At the end of year all transaction results are sum up and one has to pay tax on that only not on profited transactions only. Here i am not sure about what to do in case of bonus shares.

OPINION 3:
1. At present short term capital gain tax is 15.5 %. on net profit. I have made profit on Coal india IPO Rs 20,000/-.Hence HDFC bank has deducted Rs 3,100/- as short term capital gain tax and balance amount has been credited to A/c.( Short Term means holding of shares for less than 12 months).I have been told that TDS certificate will be issued to me as proff of tax deduction. 2. At present there are no Long term Capital gain Tax on shares.(Long terms means holding of shares for more than 12 months.. 3. Now question is if ther are short term capital loss on shares.For this loss you have to claim the same in your income tax return which is filed Annualy). 4. Now the important question is short term capital loss can be adjusted if the shares are sold on same day.For example if I sold x shares on 11-11-2010 and made profit on Rs 5,000/--and on the same day I sold y share and loss incurred Rs 4,000/-.As both the sahre are sold on same day loss of rs 4,000/- will be adjusted on profit of Rs 5,000/-.Hene we have to capital gan tax @15.5% on Rs 1,000/- (Profit Rs 5,000 less loss of Rs 4,000/-).Hence it advisable to sale both the shares on same day to avoid tax deduction. 5. Now answer for the below question.If person earns capital gain of Rs 10,000/- he has to pay tax on short term capital gain tax @15.5 %.on the day of sale. 6. Cost of Bonus share are calculated as below so far as I know.

The said short term capital loss can be adjusted at the time of filing return.

OPINION 4:
You could adjust your capital gain in one transaction and loss in other transaction; The tax rate is 15% for short term gain (not 10% as in the question).

OPINION 5:
Bonus stripping is allowed. Bonus shares are supposed to carry cost of Zero. So the entire cost belongs to the original share. If one sells he original share n books a loss; such a loss is adjustable against short term capital gains. This is my understanding and I have been working on this basis.

OPINION 6:
You can adjust short term capital losses with short term capital gains. According to currently applicable tax laws (DTC might change these things a lot): 1. Any short term capital loss can be adjusted against ONLY short term capital gains. Moreover, these losses can be carried forward till 5 or 7 future years - I'm sure about 5 years, but few of my CA friends say that it can be carried forward till 7 years. 2. Any short term capital gain/loss can NOT be adjusted against long term capital gains. 3. Please remember that in your example, net profit would be 7100 after including losses in "original" shares ONLY. Bonus shares will be treated as fresh purchase on issue date at price of Rs. 0. So, when you sell those bonus shares, short/long term capital gains would be calculated at (sell price - 0). In order to save tax at that time, you need to make sure that you sell bonus shares after 1 year of issue date - so that total profit falls under long term capital gains category, which is tax free UNDER CURRENT TAX LAWS. After DTC in implemented, you might want to re-consider tax implications at that time. I'd suggest to consult a tax professional at that time. PLEASE NOTE that all this I'm saying in context of capital gains/losses from equity market transactions only. This does not apply as it is on other forms of capital gains/losses e.g. real estate etc. Hope this helps.

OPINION 7
I am afraid the example is not correct. In case of Bonus we dont average the cost. Bonus is costed at Zero. Split is costed at average.