Tax Treatment on Income from Investment in Shares: -

Investment in Shares gives two types of Incomes, one is Capital Appreciation i.e. Increase in the Value of Investment another is Dividend Income. Capital Appreciation is Taxable as Capital Gains on sale of Investment whereas Dividend Income is Taxable as Income from Other Source at the time of Receipt of Dividend except where Dividend is exempted from Tax.

 

Tax on Income as Capital Appreciation from Investment in Shares: -

Income from Investment in Share due to Appreciation in Value of Share is treated as Capital Gain. Tax provisions of Capital Gains Tax is applicable on such Income. Tax treatment will be based on Period of Holding of Shares. There are two types of Capital Gain Taxes, one is Long Term Capital Gain and another is short term Capital Gain. Long Term Capital Gain means Gains arising from Sale of Share which is held by Assessee more than 12 months. Any gain other than long term gain is treated as short term gain.

Tax on Long Term Capital Gain where Security Transaction Tax (STT) is paid:-  Where assessee had purchased share through Recognised Stock Exchange and sale through Recognised Stock Exchange and Security Transaction Tax (STT) is paid for share held by him or her for period more than 12 Months then such gain will be exempted from Tax under sec 10(38) of Income Tax Act, so No Tax is payable on such Gain. However any share sold on or after 1st April 2018 and any Long Term Gain arises on such transaction shall be Exempted from up to Rs. 1 Lakh only, any Long term gain on such Transaction in excess of Rs. 1 Lakh is taxable at the rate of 10% without giving Effect of Indexation. Cost of acquisition will be higher of actual purchase price or maximum traded price on 31st January 2018.

Tax on Long Term Capital Gain where No Security Transaction Tax (STT) is paid: - Any Long Term Capital Gain arising due to sale of Shares on which no Security Transaction Tax is paid will be taxed at the Rate of 20% giving Indexation benefit and any Long Term Capital Gain arising due to sale of Shares held will be taxed at the Rate of 10% without giving effect of Indexation.

Tax on Short Term Capital Gain where Security Transaction Tax (STT) is paid: - Where Assessee had purchased shares through Recognised Stock Exchange and sale through Recognised Stock Exchange and Security Transaction Tax (STT) is paid for Share held by assessee for a period less than 12 months then Gain arising from such transaction shall be taxed at 15% .

Tax on on Short Term Capital Gain where No security Transaction Tax (STT) is paid: - Any Short term Capital Gain arising on sale of Shares on which no STT is paid will be taxed at the slab Rate applicable as per Income Tax Act.

 

Tax on Income arising from Dividend on Equity Shares  Held in Domestic Company: -

Any Income arising as Dividend from Equity Shares Held by Assessee will be Taxed under Head Income form Other Source except where Dividend is Exempt from Tax under sec 10(34) of Income Tax Act.

Dividend Arising from Shares Held in Domestic Company: -

Any Income received by assessee as Dividend from Domestic Company will be exempted from Tax under Sec 10(34) of Income Tax Act up to Rs. 10 Lakh. However in any of Amount of Dividend in excess of Rs. 10 Lakh will be taxed at flat rate of 10% of Dividend Amount Received without allowing any Expenses.

 

Tax on Income arising from Dividend on Equity Shares Held in Foreign Company: -

Any Income received by Assessee as Dividend from Foreign Company will included in Income of Assessee under Income from Other Source and will be Taxed at slab as applicable to Assessee.

 

Tax Treatment of Income from Investment in Mutual Funds: -

Tax treatment of Income from Investment in Mutual Funds depends on type of Mutual Fund scheme and Period of Holdings. Any gain arising due to appreciation in value of Mutual fund will be taxed under Head Capital Gains and any Income arising from Dividend on Mutual Fund will be taxed under Head Income from Other Source.

 

Tax on Long Term Capital Gain on Equity Oriented Mutual Fund Scheme: - 

If Security Transaction Tax (STT) is Paid: - Where assessee had purchased Equity Oriented Mutual Fund Scheme and Security Transaction Tax (STT) paid on such Mutual Fund scheme held for period more 12 Months. capital gain arising on such Mutual Fund scheme is Exempt from Tax.

If Security Transaction Tax (STT) is not Paid: - Where assessee had not paid Security Transaction Tax (STT) on Purchase or Sale of Equity Oriented Mutual Fund Scheme held for Period more then 12 Months then any gain arising from such Mutual Fund will be taxable at the Rate of 20% giving benefit of Indexation and Taxed at the Rate of 10% without giving effect of Indexation.

 

Tax on Short Term Capital Gain on Equity Oriented Mutual Fund Scheme: -

If Security Transaction Tax (STT) is Paid: - Where asseesee had purchased Equity Oriented Mutual Fund Scheme and Security Transaction Tax (STT) is paid on such Mutual Fund Scheme held for period not more than 12 Months will be taxed at the Rate of 15%.

If Security Transaction Tax (STT) is not Paid: - Where assessee had not paid Security Transaction Tax (STT) on Purchase or Sale of Equity Oriented Mutual Fund Scheme and held for not more than 12 Months then any Capital Gain arising from such Mutual Fund Scheme will be taxed at the Rate Slab Applicable to the assessee.

 

Tax on Debt Oriented Mutual Fund Scheme: - 

Tax on Long Term Capital Gain:-  Any gain arising from Debt Oriented Mutual Fund Scheme and held for period more than 36 Months will be taxed at the Rate of  20% giving effect of Indexation and taxed at the Rate of 10% without giving benefit of Indexation 10%.

 

Tax on Short Term Capital Gain: - Any gain from Debt Oriented Mutual Fund Scheme held for period not more than 36 Months will be taxed at the slab Rate Applicable to the Assessee.

 

Tax on Dividend Income from Mutual Fund Scheme: - Any Dividend received from Equity Oriented Mutual Fund Scheme will  exempted from Tax subject to Rs..10 Lakh. Any Dividend Income received from Debt Equity will be Taxed at slab Rate Applicable to Assessee.

 

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