Hi all in this post I am going to tell about the taxes on share market (investing, trading,) there are different taxes involved in investing for long term, short term and futures-options ok now lets move to the actual topic
What is income tax :
Income tax is
annual tax levied by the government of India on every indivisual and business,
in simple words income tax is a tax portion of money (profits) that will
pay to the government.
Why should we pay tax :
as per the
indian government rule every one should pay the tax according to the
indian income tax slab, because the government needs funds to discharge
different number of responsibilities such as importmnet of government
hospitals, eduaction, defence, and ifrastructure etc...
How much tax we need to pay for Government:
every person
should pay the income tax according to the income tax slab,it is setted by the
government
- taxes have to pay based on how
much profits will get every year
- taxes will pay every financial
year starts 1st-April to ends 31st march every year.
Income tax slab for taxpayer :
1. For tax payer less the 60 years
|
Income |
Tax rate |
|
Income upto
2,50,000
|
Nill |
|
Income from
2,50,000 to 5,00,000 |
5% |
|
Income from
5,00,000 to 10,00,000 |
20% |
|
Income more
than 10,00,000 |
30% |
2. For tax payer more than 60 years :
|
Income |
Tax rate |
|
Income upto
3,00,000 |
Nill |
|
Income from
3,00,000 to 5,00,000 |
5% |
|
Income from
5,00,000 to 10,00,000 |
20% |
|
Income more
than 10,00,000 |
30% |
Note : the
above taxes are applicable only for income from business and indivisuals not
for shares
Capital gain taxes on shares in India:
before going to
study about capital gain taxes in India you need to know few things about it
are as follows
Long-Term Investments :
lets assume you
boughts some shares and your hoilding period more than 12 months then it
called as long term investment, and when you sell the shares for profit after
12 months then it know as long term captial gains
long Term
Capital Gain Taxes (LTCG Tax)
the government
of India announced the new rules in budget 1-april-2018, long term capital
gains are Taxed 10%, if the income is more than 1 lakh.
Essential
things to know before :
- the holiding period should be more
than 12 months
- if you sell the shares then you
have to pay tax
- if you do not sell th shares, you
do not have to pay taxes
- if you sell the shares after 12
months then you have to pay tax of 10% is under Long- term capital gains
Short-Term Investments :
when you hold
your share less than 12 months then its called as short-term investments, and
when you sell the shares for profit before long-term year is known as
short-term capital gains
Speculative
Business Income:
Trading is
considered as speculative business, as per income tax act 1961 section 43(5)
income earned by trading shares for intraday (or) day trading is categorized as
speculative business income, they taxed according to tax slab
Non-Speculative
Business Income
Trading in
Futures and Options considered as Non-speculative business income, as per
section 43(5) under income tax act 1961
Short Term
Capital Gain Tax (STCG Tax) :
short term
capital gain tax is appilcable both Investor/Trader, ther is no matter how much
tax in income tax slab, you have to pay flat 15% tax for short term capital
gains
for example you
have got a short term income Rs 2 lakh you have to pay 15% for short
term capital gain tax
Tax on Dividends :
the company
already pay the tax to the govenment on dividends distribution tax, before
distribution of dividends to shareholders, in generally you already paid
the tax on dividends
Note : if you income from dividends is
more than 10 lakhs you have to pay 10% tax
Note: All the
cases mentioned above are for those whose primary source of income is salary,
self-employment or business. In case you declare trading as your primary
business income, i.e. in case of full-time traders, you have to pay the
short-term capital gain according to your tax slab (not a flat 15% tax).
Other cases will remain the same as they are charged according to your tax
slab.
sources :
- https://www.tradebrains.in/capital-gain-taxes-on-share-in-india/
- https://cleartax.in/s/taxation-on-income-earned-from-selling-shares
- https://zerodha.com/varsity/chapter/classifying-your-market-activity/
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