How stock market profits are taxed in India and how to declare them...
Rohan Das@rohaninvestor
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Jan 23, 2024
~2 min read
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How stock market profits are taxed in India and how to declare them in your Income Tax Return (ITR) Filing.
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β’ Income from shares can be split into two types: Capital Gains and business income. Profits from intraday trading are considered "speculative business income," whereas gains from long-term or short-term investments are categorized as "capital gains."
β’ For short-term capital gains (STCG), if you sell listed stock shares within 12 months of purchase, you'll be subject to a 15% tax under Section 111A, regardless of your tax bracket.
β’ Long-term capital gains (LTCG) apply when you sell listed stock shares after holding them for more than 12 months. If your LTCG on equity shares or equity-oriented mutual funds exceeds Rs. 1 lakh, it's taxed at 10%, without the benefit of indexation.
β’ Profits from intraday trading are categorized as business income, not capital gains. This income is combined with your total net income and subjected to taxation at the applicable income tax rates based on your income slab.
β’ Securities Transaction Tax (STT) is a tax levied on the purchase or sale of shares in Indian stock exchanges. It can be claimed as a business expense under Section 36 of the Income Tax Act of 1961.
β’ Calculating STCG and LTCG alongside your salary involves considering exemptions and tax rates. For instance, LTCG of up to Rs. 1 lakh on equity shares and equity mutual funds held for over a year is exempt from income tax. Beyond that, a 10% tax is applicable.
β’ Tax harvesting can help lower your taxable amount. Selling and immediately buying shares to reset the cost price can reduce your tax liability.
β’ Remember that resident individuals can adjust income tax against the basic exemption limit of Rs. 2.5 lakh. This can significantly reduce your tax liability on capital gains.
β’ For short-term capital gains (STCG), the tax rate is 15%, but adjustments against the basic exemption limit apply.
β’ Income from the sale or transfer of unlisted shares is considered 'Capital Gains' irrespective of the holding period.
β’ Transactions in F&O trading are treated as business income or loss under Section 43(5) of the Income Tax Act. Tax audits may be required if the trader's total turnover exceeds Rs. 10 crore.
β’ Dividend income over Rs. 5000 is subject to 10% TDS. Non-residents face 20% TDS, but DTAA provisions can lower this rate with required documentation such as tax residency certificate or Form 10F etc.
β π ππ‘π«πππ β
β’ Income from shares can be split into two types: Capital Gains and business income. Profits from intraday trading are considered "speculative business income," whereas gains from long-term or short-term investments are categorized as "capital gains."
β’ For short-term capital gains (STCG), if you sell listed stock shares within 12 months of purchase, you'll be subject to a 15% tax under Section 111A, regardless of your tax bracket.
β’ Long-term capital gains (LTCG) apply when you sell listed stock shares after holding them for more than 12 months. If your LTCG on equity shares or equity-oriented mutual funds exceeds Rs. 1 lakh, it's taxed at 10%, without the benefit of indexation.
β’ Profits from intraday trading are categorized as business income, not capital gains. This income is combined with your total net income and subjected to taxation at the applicable income tax rates based on your income slab.
β’ Securities Transaction Tax (STT) is a tax levied on the purchase or sale of shares in Indian stock exchanges. It can be claimed as a business expense under Section 36 of the Income Tax Act of 1961.
β’ Calculating STCG and LTCG alongside your salary involves considering exemptions and tax rates. For instance, LTCG of up to Rs. 1 lakh on equity shares and equity mutual funds held for over a year is exempt from income tax. Beyond that, a 10% tax is applicable.
β’ Tax harvesting can help lower your taxable amount. Selling and immediately buying shares to reset the cost price can reduce your tax liability.
β’ Remember that resident individuals can adjust income tax against the basic exemption limit of Rs. 2.5 lakh. This can significantly reduce your tax liability on capital gains.
β’ For short-term capital gains (STCG), the tax rate is 15%, but adjustments against the basic exemption limit apply.
β’ Income from the sale or transfer of unlisted shares is considered 'Capital Gains' irrespective of the holding period.
β’ Transactions in F&O trading are treated as business income or loss under Section 43(5) of the Income Tax Act. Tax audits may be required if the trader's total turnover exceeds Rs. 10 crore.
β’ Dividend income over Rs. 5000 is subject to 10% TDS. Non-residents face 20% TDS, but DTAA provisions can lower this rate with required documentation such as tax residency certificate or Form 10F etc.