Responses to questions on Tax implications of stock market investments: Short-term vs. long-term gains and tax strategies
I have a query and look forward to your advice regarding short-term capital gains for FY 24-25. Please clarify as to the date of effect 20 ℅ STCG tax that was earlier it was 15 ℅ till union budget was introduced. – Sundaresa Mallya
Yes, as per the Union Budget 2024, the short-term capital gains (STCG) tax rate on listed equity shares, equity-oriented mutual funds, and units of business trusts has been increased from 15% to 20%.
This revised rate is effective from 23 July 2024. Therefore, any transfer of such assets made on or after 23 July 2024, will be taxed at the new STCG rate of 20%, regardless of your income tax slab.
If the transfer occurred before 23 July 2024, the earlier rate of 15% will apply.
The revised rates apply to Capital Gains after 22-07-2024 and it has to be segregated for computing tax. Is it correct? – Koruthu Jacob
Yes, capital gain needs to be calculated separately based on transactions pre and post budget dates. As per the revised tax regime, long term capital gain will be taxed at a higher rate of 12.5% on capital gains exceeding Rs.1.25 lakhs and short term at 20% if it is transferred after 22 July 2024.
As a new investor in the share market, I wish to know more about NSDL and CDSL. What are their roles and importance? Are they government agencies? What is the differences between these two? Which one is better? – Mohan K, Hyderabad
NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited) are two major central securities depositories in India that hold and manage securities in electronic form, facilitating trading and transfer. Both operate under the framework of the Depositories Act of 1996 and are regulated by SEBI (Securities and Exchange Board of India).
They play a crucial role in the Indian securities market, ensuring the safe and efficient management of securities. NSDL is promoted by IDBI Bank, Unit Trust of India (UTI), and NSE, while CDSL is promoted by the BSE. While both operate across the market, NSDL is more closely associated with NSE, and CDSL with BSE. Both are reliable for securities management. Whether your Demat account is with CDSL or NSDL, the services you get are almost the same. Both ensure your shares are safe and make buying and selling shares easy. You can open a demat account through a depository participant of NSDL or CDSL, and your choice depends on your preferences and the services offered by your Depository Participant (DP).
In the current market situation, can I invest in smallcap shares? Please advise on a good strategy for the smallcap sector. – Rony Mathew, Bengaluru
We believe this is an opportune time to consider investing in smallcap stocks. The broader market has undergone a healthy correction of approximately 20% between September 2024 and April 2025, making smallcap valuations attractive for short to medium-term investors.
Recently, both mid and smallcap segments have shown signs of a rebound, driven by a recovery in earnings growth. Based on Q4 results, India’s overall earnings growth stands at 10 -11%, significantly outpacing the sub-5% growth seen in large caps. This suggests a broader economic recovery is underway.
The combination of price correction and earnings improvement has narrowed the valuation premium of mid- and small-caps relative to largecaps—a positive development for investors. Additionally, mutual fund inflows remain strong, with increasing allocations toward small-cap stocks.
On the macroeconomic front, the easing of external and internal risks—such as the de-escalation of the US tariff war and a ceasefire between India and Pakistan—further supports the outlook for economic growth and potential foreign institutional investor (FII) inflows.
However, investors should remain selective when investing in small caps. The focus should be on high-quality business models, prudent management, and companies with strong promoter holdings and sound fundamentals, rather than simply chasing beaten-down stocks.
