Can senior citizens avail short-term capital gains under Section 80C? Know the rules and calculations – ..

income tax rules Questions often arise in the minds of senior citizens regarding Short-Term Capital Gain (STCG) And Section 80C As per the provisions. If you have invested in the stock market and your short-term capital gain income is up to ₹5 lakh, it is important to understand how the benefit of Section 80C applies to this income, or whether it is applicable at all.

How will tax liability be calculated for senior citizens?

Let us understand through example:

Suppose:

• Normal Income: ₹2 lakh (mainly interest income).
• Short-Term Capital Gain (STCG): ₹5 lakh (from listed shares).
• Section 80C Deduction: ₹1.5 lakh (under old tax regime).

Now the calculation will be like this:

1. Ordinary income after deduction:
   ₹2 lakh – ₹1.5 lakh (80C deduction) = ₹50,000.
2. Basic Tax Exemption Limit:
   Tax exemption is available for senior citizens on income up to ₹ 3 lakh.
   Ordinary income is ₹50,000, which is less than the exemption limit of ₹3 lakh.
3. Exemption on short-term capital gains:
   • The shortfall (₹2.5 lakh) in the ordinary income exemption limit (₹3 lakh) will be adjusted against STCG.
   • After adjusting the STCG of ₹5 lakh, the remaining amount will be ₹2.5 lakh.
4. Tax on remaining STCG:
   • On profits earned before 23 July 2024: 20% tax.
   • On profits earned after July 23, 2024: 15% tax.

Is Section 80C applicable on short-term capital gains?

• Scope of Section 80C:
  This benefit is available only on normal income (like salary, pension, interest income).
  This does not apply to STCG.
• Special situation:
  If short-term gain or loss is adjusted against any other income, it can be treated as ordinary income and avail 80C benefit.

Short-term capital gains and Section 80C: Points to note for investors

1. Select old tax regime:
   The benefit of Section 80C is available only in the old tax system. The benefit of this provision is not available in the new tax system.
2. Use short-term capital loss:
   If you have suffered a short-term loss in a financial year, you can set it off against short-term capital gains, thereby reducing your tax liability.
3. Rules for non-resident investors:
   if you Non-Resident (NRI) If so, you will have to pay tax on the entire amount of short-term capital gain:
   • 20% on profits before July 23, 2024.
   • 15% on profits after July 23, 2024.

How does tax exemption on short-term capital gains work?

Adjustment from ordinary income:

• The basic tax exemption limit for senior citizens is ₹3 lakh.
• If ordinary income (e.g. pension, interest) is less than ₹3 lakh, the remaining exemption is used in adjustment from STCG.

Example:

Normal income is ₹50,000 and STCG is ₹5 lakh.

• The basic exemption limit is ₹3 lakh.
• ₹3 lakh – ₹50,000 = ₹2.5 lakh (will be adjusted by STCG).
• The remaining ₹2.5 lakh will be taxed.