Many new investors are also investing in equities either directly or through mutual funds. If you are also involved in this, then it is important to keep in mind not only the earnings in equities, but how much tax is levied on the profits made.
Taxation: As the country is accelerating vaccination and daily cases of Kovid 19 are decreasing, the stock market is gaining momentum. Sensex remains above 52000 and Nifty 15600. Market experts are bullish about this and they believe that this momentum will continue in the future as well. In this boom of the market, the returns of investors have also increased, while many new investors are also investing money in equities directly or through mutual funds. If you are also involved in this, then it is important to keep in mind not only the earnings in equities, but how much tax is levied on the profits made.
Long term profits or short term earnings
Some people invest in stock market for short term and get profit. Some people invest money for a long period. Investing in equity for more than 1 year is considered as long term investment. At the same time, if it is redeemed before 12 months, it is considered as a short term investment.
10 per cent long term gains tax is levied on returns from long term investments. However, long term gains tax is not levied on returns up to Rs 1 lakh. But if you redeem it before 12 months, then 15 percent short term capital gains tax is levied.
On intraday profit
In intraday, trading of shares takes place on the same day. That is, the shares are bought and sold on the same day. It means to say that here in 1 day you can earn money by investing money in shares. This benefit is short term capital gain. In such a situation, they have to pay a tax of 15 percent on their profits.
On earning in other ways in capital market
Apart from capital gains, dividend benefits are also available in mutual funds. The tax that is levied on mutual funds dividends is called Dividend Distribution Tax (DDT) and is paid by the fund house. In mutual funds, the tax liability is different for equity and debt funds. Investments in Liquid, Short Term Debt, Income Funds, Government Securities, Fixed Maturity Plans for 3 years or 36 months are considered as Long Term Investments. At the same time, if redeemed before 36 months, then it is considered as a short term investment.
Returns matching with long-term investments in debt mutual funds are taxed at 20 per cent after indexation. But redemption on short term investments attracts short term capital gains tax, which is based on the tax slab of the investor.
