Income Tax Act for Stock Market

I have come here to teach you What is a Stock Market?

As we had previously discussed in our last session, about Depository Acts, Contract Notes.

Ok!

So, we will begin today with our today's topic that is Income Tax,

Normally, we all know as to What is an Income Tax is.

It is Tax that we have to pay to the government.

Every where there is different types of taxes,

For example, if you got your salary, and your income comes around 5 lakh or above that 8 lakh, so What will happen?

Your salary will be deducted by 10 percent.

You will have to pay 10 percent as the direct tax,

So, when we get the same type of taxation inside our share market, then how much tax do we have to pay there?

As Share market is considered as Business,

So, in this way as per the business,  taxes have been levied upon.

Here, there are normally two types of taxes,

So, first is Long Term Capital Assets.

Meaning any XYZ stock, be it Reliance, HDFC, you hold it for more than 1 year.

And when you get profit after one year, then you have to pay the taxes, how much that will be?

It will be 10 percent of tax.

So, it's not like I have earned ten thousand rupees, in that I will pay 1000 rupees as tax ,it doesn't work like that

There are clauses, what type of clauses and everything else, we will just discuss.

Second is Short Term Capital Asset, that is if you are holding any stocks for less than one year, whether that's only for that day, 6 month, 2 months ,3 months, then if you're holding for less than 1 year, then directly you will have to pay 15 percent of tax.

Now, we will discuss What are the different types of taxation?How much taxes  are incurred? How much profit or loss will I get, after which I will have to pay the taxes of 10 percent or 15 percent!

So, all of that,

Ok!

So, any individual who is holding the stock for more than one year, he will have to directly pay 10 percent as tax, but How is this calculated?

If you have hold that stocks for one year and you get the profit of more than one lakh rupees, then only you will have to pay the income tax,

How one lakh?

Suppose my profit for  holding Reliance and other shares comes around one lakh 50 thousand, then it has given relaxation uptil one lakh, but whatever profit that you have got above that on that you will have to pay 10 percent, meaning the profit that you have realised is 1 lakh 50 thousand, and up till 1 lakh taxation was relaxed, now the remaining 50 thousand, out of that 50 thousand you will have to pay 10 percent, so your tax will be directly of 5 thousand rupees.

We can make assumptions and redemption, how?

Suppose you are holding a stock for a long term, and in that stock you have booked a loss, and now you don't have to pay the taxes for it or want to pay less taxes, so after that one year, meanwhile you have incurred any loss, that you can inform to the income tax department, that here you have got loss, then you will get redemption for it,

So, this means that the long term realised losses that we have,  we can set them off in front of our long term capital taxes, but only when you have booked that loss for more than one year then only.

Otherwise there is no way that you want to do tax redemption, it is not possible, you will have to pay the taxes for the profit that you have got above 1 lakh.

So, tax relaxation is only up till one lakh,

And, if suppose I have got 50 thousand of profit, and I have to pay 5 thousand tax, but in that same year I also face 20 thousand of loss and hold it for one year, then you can make the adjustment only in this, and not in anything else.

Next is , Short term Capital Gain tax,

So, here what happens is if you have hold a stock for less than 1 year, then in this, whether you have got the profit of 10 thousand, one lakh or 10 lakh you will have to directly pay 15 percent as tax, so that means if you have earned one lakh then your 15 thousand will go in tax,

But when is this counted, it is counted only after one year when you have to pay the taxes, it is not like today itself you will have to pay.

Second, if I Have incurred losses in short term, then I cannot set off that in front of short term gains, this is applicable only for the long term capital gain taxes, and there are no other clause where these things are included.

So, these were some of the income tax rules, so if you have entered the market, or doing any job, running your business, or managing funds or anything else, then you should be knowing about this, these two are main taxes.

So, now these are the taxes but it's not necessary that even after 10 years, 20 years same thing will remain, as this is time to time updated, whenever the budget is launched on 1 st of February, then some or the other changes come about capital gain, sometimes they will increase the other times reduce it.

So, it's time to time changing, it's not like I told you that taxes are incurred only after one lakh, it is not going to remain permanent as in future it is important that it will be updated. Therefore it's important that you should be having the knowledge of each and everything in taxes.

So, this was our basic income tax information.

Ok!

We will meet.