Capital gain tax impact on Stock Market Investment
Long Term capital gain (LTCG).
When the holding period of your equity investment is more than 12 months, then it is called a long term investment. The gain on selling your equity investment after holding for 12 months is called Long term capital gain.
The tax rate is 10% of income exceeding 1 lakhs from LTCG from 1/04/18
For Example:-
Let suppose you brought stock worth ₹ 15 lakhs & it went up in value to ₹ 17.5 lakhs. The total profit i.e. LTCG is ₹ 2.5 lakhs, but the Government of India has given a relaxation of tax of ₹ 1 lakhs. So the actual LTCG is ₹ 1.5 lakhs which will be taxed @ 10%.
Short Term capital gain (STCG).
Equity investing in which the holding period is less than 12 months is called short term investment. The gain on selling stocks before 12 months holding period is called short term capital gain.
The tax rate is flat 15%
For Example:-
If a person’s total income is less than the basic exemption limit i.e. Income is less than ₹ 2.5 lakhs then only the amount above ₹ 2.5 lakhs will be taxed @15%.
For Example:- A person’s salary is ₹ 2 lakhs p.a. & he have a STCG of ₹ 1 lakh than ₹ 50K (i.e. ₹ 3 lakhs – (₹ 2 lakhs + 1 lakh) - ₹ 2.5 lakhs) only be taxed @ 15%.
Few important point:-
STCG can be set off against short & long term gain. But not against salary & business income.
Do one get taxed even if he does not sell his position?
A. No, one do not gets taxed until and unless he have sell his position.
What is tax implications on dividend income?
A. Dividend income is taxed as per the individual slab rate.
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