Income tax: Can I claim deduction under Section 80C against capital gains from listed shares?

I am a retired elderly person. I have short term capital gains of around $5 lakh so far in listed shares. My interest income is expected to be approximately $2 lakhs per year. I have fully invested/spent $1.50 lakh on avenues covered under Sec 80C. After a deduction of $1.50 lakh under Section 80C, my taxable income should be around $5.50 lakhs. My tax advisor says that Section 80C benefit is not available against short-term capital gains from sale of listed shares and therefore I will have to pay tax on the entire short-term capital gains at 20%. Can you help me understand how my tax liability will be calculated?

Your tax advisor has correctly observed that the benefit of Section 80C is available only on your normal income, which is $2 lakh. Section 80C benefits are not available against short-term capital gains on listed shares. Therefore, your normal income becomes $50,000.

Section 80C Benefits: Income Tax Consultant Explains Adjustments for Seniors

Since there is a deficit of $2.50 lakh against your basic exemption limit of $3 lakh applicable to senior citizens, the deficit of $2.50 lakh will be adjusted against short-term capital gains taxable to that extent and the balance of short-term capital gain of $2.50 lakh will be taxed at a flat rate of 20% or 15% depending on whether the short-term capital gains are earned before or after July 23, 2024, assuming you are a resident under the income tax laws.

Please note that the benefit of section 80C is only available under the old tax regime. No strategy can be adopted to save or reduce this tax. Yes, it can offset any short-term losses you may incur during the rest of the year, which can be offset against those short-term capital gains.

By the way, any other short-term profit or loss you make from any other source is treated as your normal profit. incomeand the benefit of Sec 80C is available against such short term capital gains. Please note that the benefit of making up the shortfall in the basic exemption limit is not available to a non-resident, and you will have to pay full tax at 20%/15% on 5 lakh short-term capital gains on listed shares . .

Balwant Jain is a tax and investment expert and can be reached at [email protected] and @jainbalwant on his X handle.

Disclaimer: The opinions and recommendations above are those of individual analysts and not those of Mint. We advise investors to consult certified experts before making any investment decisions.