Active Stocks
Mon May 27 2024 15:59:11
  1. Tata Steel share price
  2. 175.50 0.40%
  1. NTPC share price
  2. 369.60 -1.40%
  1. State Bank Of India share price
  2. 834.10 0.66%
  1. HDFC Bank share price
  2. 1,527.95 0.75%
  1. ICICI Bank share price
  2. 1,129.15 -0.19%
Business News/ Money / Personal Finance/  How are stock market gains taxed in India? MintGenie explains
BackBack

How are stock market gains taxed in India? MintGenie explains

Taxes on stock market gains include short-term capital gains tax, long-term capital gains tax, and securities transaction tax. There are exemptions available for capital gains up to certain amounts, and it is important for investors to be aware of these regulations.

The Indian Income Tax Act, of 1961, is the primary legislation governing taxation in India. Premium
The Indian Income Tax Act, of 1961, is the primary legislation governing taxation in India.

The stock market has been a source of financial security and growth for investors over the years. But, it is important to understand that any earnings arising out of investments made in the stock market are subject to taxation.

The Indian Income Tax Act, of 1961, is the primary legislation governing taxation in India. The Act lays down the rules and regulations for the taxation of income earned in India and also provides for the computation of taxable income. According to the provisions of the act, any income earned in India, whether directly or indirectly, is subject to taxation.

What are the types of taxes on stock market gains?

In India, there are two types of taxes applicable on stock market gains – short-term capital gains tax and long-term capital gains tax. Short-term capital gains tax is applicable to gains arising out of the sale of stocks within a period of one year. This tax is applicable to all stocks, whether equity or debt. The tax rate for short-term capital gains is 15% for equity stocks and 30% for debt stocks.

Long-term capital gains tax is applicable to gains arising out of the sale of stocks after a period of one year. This tax is applicable to both equity and debt stocks. Equity stocks are taxed at a rate of 10% while debt stocks are taxed at a rate of 20%. Additionally, a surcharge of 10% of the tax amount is applicable on any gains exceeding Rs. 10 lakhs.

READ MORE: Income Tax: Want to reduce LTCG tax? Resort to tax-gain or tax-loss harvesting. Here's how they work

In addition to the taxes mentioned above, all investors are liable to pay securities transaction tax (STT) at the time of the sale of stocks. STT is applicable to all trades executed on stock exchanges in India and is charged at 0.1% of the total value of the transaction.

Are there any deductions available?

The Income Tax Act, of 1961, provides for certain exemptions in the taxation of stock market gains. Such exemptions are provided so as to encourage investment in the stock market. Some of the exemptions available include:

1. Long-term capital gains on the sale of equity shares are exempt from tax if the amount of capital gain does not exceed Rs. 1 lakh.

2. Long-term capital gains on the sale of equity shares are exempt from tax if the amount of capital gain does not exceed Rs. 2 lakhs and the securities transaction tax has been paid on the sale.

READ MORE: Income Tax: Should you submit form 15G or 15H to avoid TDS deduction on interest income?

3. Long-term capital gains on the sale of equity shares are exempt from tax if the amount of capital gains does not exceed Rs. 1 lakh and the securities transaction tax has been paid on the sale.

4. Long-term capital gains on the sale of equity shares are exempt from tax if the amount of capital gains does not exceed Rs. 2 lakhs and the securities transaction tax has been paid on the sale.

5. Long-term capital gains on the sale of mutual funds are exempt from tax if the amount of capital gains does not exceed Rs. 1 lakh in a financial year.

6. Long-term capital gains on the sale of unlisted shares are exempt from tax if the amount of capital gains does not exceed Rs. 2 lakhs in a financial year.

7. Long-term capital gains on the sale of derivatives are exempt from tax if the amount of capital gains does not exceed Rs. 1 lakh in a financial year.

It is essential to be aware of the various taxation regulations related to capital gains in order to make educated investment decisions. Being informed of the rules pertaining to stock market gains can help investors make the most of their investments and avoid potential financial penalties.

 

genie-recommendation-widget
We explain why timing the stock market is not a good idea.
View Full Image
We explain why timing the stock market is not a good idea.

You are on Mint! India's #1 news destination (Source: Press Gazette). To learn more about our business coverage and market insights Click Here!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 17 Apr 2023, 08:44 AM IST
Next Story footLogo
Recommended For You