Tax Implications on Equity Investments

In this article I will be writing about the various tax rules for the equity and debt investments. It is obvious that more number of investors interested in the equity market. It is sad that only few are very much aware of the actual tax implications on the investment. This article explores the important rules related to the equity investments. Good news is that we have good exemption for the equity investments. Please continue read this article for the more details. If you like the article, please subscribe to our future articles here.

Capital Gains on Stock Investments

Profit from the equity investments are classified into the capital gains. There are two types of capital gains. The following sections explains that in detail. Note that equity investments are investments into stock market via buying shares and mutual funds. Also profit from intraday trading is not considered as the capital gains.

Short Term Capital Gains (STCG)

If you sell a investment within one year of the investment, then it is considered as the Short Term Capital Gains(STCG).  The amount of the tax you have to pay on the profit is 15%. For example if you buy a stock for Rs.100000 and sell the stock for Rs.130000 before one year, then you have to pay the tax of Rs.4500(plus surcharge & education cess) for the profit you have made.

In the case of mutual funds, the equity exposure should be minimum of 65% to be considered as the equity investment.

Profits arising out of intra-day trading in stocks or from futures and options (derivatives) segment are to be added to your income and taxed accordingly.

Long Term Capital Gains (LTCG)

If you sell a stock after one year of holding, then it is considered as the Long Term Capital Gains (LTCG). Good news is that, there is no tax liability for the Long Term Capital Gains (LTCG) arising out of your equity investments. You need no worry for the any long term capital gains coming from your stock investments.

Summary

I hope this article would be useful for those who want to invest in the equity and want learn about the tax structure for the investments. If you have any doubts, please post it in the comments section.

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