Stock Market and Taxes in India
- March 3, 2022
- Posted by: MvM Team
- Category: Equity
We all dread taxes, and a part of the reason is many people don’t really understand them. So let us try and simplify a part of taxation for you!
Taxation on Individual Stocks and Equity based Mutual Funds:
Long Term = >1 year,Short Term = 12 months or shorter
Equity based mutual funds = Mutual Funds where 65% or more investible funds are invested in equity of domestic companies. This includes balanced funds where 65% or more investible funds are invested in equity of domestic companies
Taxation on Non-Equity Oriented Mutual Funds:
Non-Equity Oriented mutual funds include all funds or funds of funds not recognised as Equity-Oriented FundsLong Term = >3 year,
Short Term = 36 months or shorter.
Investor Type | Equity and Equity Oriented MFs | Non Equity Oriented MFs | Tax on Dividend received | TDS on Dividend Distributed | ||
Long-Term | Short-Term | Long-Term | Short-Term | |||
Resident Individual / | 10% over ₹1,00,000 (Long Term Capital Gains up to ₹1,00,000 are exempted from tax) | 15% | 20% with Indexation | At the applicable Tax slab rate | At the applicable Tax slab rate | 10% (if amount of dividend is >₹5,000) |
NRI | 10% over ₹1,00,000 (Long Term Capital Gains up to ₹1,00,000 are exempted from tax) | 15% (TDS deducted @15) | 20% with Indexation (TDS deducted @20%) * | At the applicable Tax slab rate (TDS deducted @30% ) | 20% | |
Taxation on dividend received
Tax at 10% shall be deducted at source for those resident shareholders with valid PAN, if the total dividend to be received by them during financial year exceeds Rs. 5,000.
The Finance Act, 2021, has inter alia inserted the provisions of section 206AB of the Act with effect from July 1, 2021. The provisions of section 206AB of the Act require the deductor to deduct tax at higher of the following rates from amount paid/ credited to ‘specified person’:
i. At twice the rate specified in the relevant provision of the Act; or
ii. At twice the rates or rates in force; or
iii. At the rate of 5%
The ‘specified person’ means a person who has:
i. not filed return of income for both of the two assessment years relevant to the two previous years immediately prior to the previous year in which tax is required to be deducted, for which the time limit of filing return of income has expired; and
ii. subjected to tax deduction/collection at source in aggregate amounting to Rs. 50,000 or more in each of such two immediately preceding previous years.
