Taxation On Share Market
By buying and selling shares in the stock market, you may be making a profit or loss, but do you know how income tax treats on that profit and loss and how much tax you have to pay on that profit?
In today’s blog, I will try to provide you all the information and will also tell you about the income from the share market.
There are two types of income here.
The first is dividend income :
If any company declares dividend on its shares and you hold the shares of that company, then the amount of that dividend will be directly transferred to your bank account. That’s called dividend income. Taxation On Share Market
The second is capital appreciation :
Let us understand with the help of an example what is meant by capital appreciation. Suppose you have purchased any company’s share for ₹ 100 and its value at the time of selling was ₹ 150, then simply ₹ 50 is your capital appreciation which is also called capital gain and can also be called profit.
The current capital appreciation has been divided into three different categories.
Intraday profit :
Intraday profit means that if you bought any share in the morning and sold it in the evening. You did not pick up the delivery of that share. You did not take that share in your demat account.
If you purchase in the morning and sell it in the evening itself, then that profit will be called your intraday profit and the treatment of income tax return is inside business income and there you will have to show this income as speculative profit.
And an individual is taxed on the income of normal business, he is exempted up to the limit of 2.5 lakhs, the remaining 2.5 lakhs to 5 lakhs is five percent and at that rate only income tax will be levied. Taxation On Share Market
That is, if all your income together is up to ₹ 5 lakh, then you will not get any tax and if you have a loss from intraday trading then you can also take the benefit of that loss.
For that you have to file your ITR on time and inside that you have to declare that this is my speculative loss.You can adjust this year’s loss further.
If you ever make a profit in the future, you will adjust that loss so that you do not have to pay tax on the future profit. You can carry forward this loss for up to four years.
Short-term capital gain :
Short-term capital gain means that if you buy a share and sell it anytime within the next 12 months other than the same day and from there the profit you make is called short-term capital gain.
Whatever equity shares you sell within a year, it is called a short-term capital asset and the profit from there is called short-term capital gain. Taxation On Share Market
Now the treatment of short-term capital gain in income tax will be in such a way that you will have to show income under capital gains and there you will have to show short-term capital gain is from equity and on top of that your flat 15% tax is levied.
That is, if you earn a profit of ₹ 1 lakh, then you will be charged a flat tax of ₹ 15,000. But here you can take a benefit, as you would know that there is no tax on income up to 2.5 lakh rupees.
So if you do not have any income from other sources. If there is no income from business salary, house property, then you can also use the short-term capital gain of Rs 2.5 lakh here.
That is, you have a profit of ₹ 4 lakh from short-term capital gains and if you do not have any other income, then you are free up to 2.5 lakh rupees,You will have to pay 15% tax till the income of 1.5 lakh rupees. Taxation On Share Market
87a That the deduction you get on income up to ₹ 5 lakh will also be available to you and you will not get any tax on income up to ₹ 5 lakh.
That is, you will get a flat tax of 15% on the short-term capital gain. If you do not have income from any source, then you can use it in the exemption limit.
Now suppose instead of short-term capital gain, you have short-term capital loss, then you can also take the benefit of that in income tax return.
For that, you have to file your income tax return on time and you will have to declare in the income tax return how much loss has happened and you can carry forward that loss.
That is, if you have any short-term capital gain or long-term capital gain next year, then you can adjust it from there.
suppose next year you got a profit of 5 lakhs. If you carry forward a loss of ₹ 4 lakh this year, then next year it will be adjusted and next year you will have to pay tax only on ₹ 1 lakh and the loss here can be carried forward for eight years.
You can carry forward whatever you had lost within the intraday period only for four years. Taxation On Share Market
Long Term Capital Gains:
If you buy any share and hold it for 12 months and then sell it anytime after that, the profit made on it is called Long Term Capital Gain.
Now your profit on long-term capital gains up to ₹ 1 lakh is exempt. That is, if you are making a long-term capital gain of ₹ 1 lakh in a year, then you do not have to pay any tax on it.
And if you earn any long-term capital gain beyond ₹ 1 lakh, in any year, you have to pay a flat 10% tax on it.
You will also show this in the income tax return under capital gains and there you will show a profit in long capital gains. There your flat ten percent tax will go.
On the other hand, if you have a long-term capital loss in a year instead of long-term capital gain, then you can carry forward that also.
For that also you will have to file your income tax return before the due date and there you will have to declare how much loss you have incurred in this year so that you can take benefit of it anytime within the next eight years.
If you incur a long-term capital loss in any year even by mistake, you must file your income tax return on time, as you can save up to 10% tax on long-term capital gains.
If you carry forward the lost, then these three types of income can come from your capital appreciation Taxation On Share Market
There is no flat tax on your dividend income. The tax levied on it is applicable according to your slab rate. That is, after adding all those salary businesses which is your normal income, then dividend income is taxed.
But if a company is paying you a dividend and it is more than ₹ 5,000, then that company will deduct TDS on it of 10% and it will pay you the net amount only, if your income is less than the taxable limit.
That is, if your income is less than ₹ 5 lakh, then you have to file your income tax return and from there your TDS was deducted on the dividend income, you can also claim it.
That is, it will become tax-free in a way. And on the other hand, if you come in the rate of 30 percent, then you may have to pay extra tax on that dividend income because the TDS deducted by the company is only 10 percent, you may have to pay extra 20 percent. If your slab rate is 30% Taxation On Share Market
Conclusion: If you do not invest in the stock market, then you must invest. Even if you do with a very little amount but you must invest
Is there any tax on the stock market
taxed Are 15%
why are stocks taxed
because you are earning from that stocks & according to the income tax slab you fall in.
Taxes on intraday share trading in India
there is no income tax on intraday share trading
How do you calculate tax on shares?
a 15% tax on short-term capital gains