{"id":307,"date":"2020-02-28T07:36:26","date_gmt":"2020-02-28T07:36:26","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=307"},"modified":"2020-02-28T07:36:29","modified_gmt":"2020-02-28T07:36:29","slug":"do-i-need-to-pay-tax-on-my-stock-investments","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/do-i-need-to-pay-tax-on-my-stock-investments\/","title":{"rendered":"Do I Need to Pay Tax on My Stock Investments?"},"content":{"rendered":"
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As a citizen of a nation, we are bound by some duties and\nliabilities among which tax is one of them. Tax is a compulsory contribution to\nthe government from our end and is something that is levied to you on behalf of\nthe facilities provided by the government. The purview of taxation is pretty\nwide and there are different ambits to it. <\/p>\n\n\n\n

The word tax often brings different queries among us. For\nsay, whether a certain income will be liable to taxation or not, whether our\ninvestments need to be taxed or not. It\u2019s a reason why the word taxation is one\nof the widely discussed matters in our nation. <\/p>\n\n\n\n

India currently has the Income Tax Act, 1961 governing the\ndirect taxation rules when it comes to income of a person while other indirect\naspects are covered in other acts. For most of us, the income derived from\nsalary, rents, profession or other sources are a known terminology. But when it\ncomes to income from sale and purchase of shares, that\u2019s something people are\nstill unclear about. Let\u2019s find out whether or not you will have to pay the tax\non your stock investments down below:<\/p>\n\n\n\n

Capital Gains\/ Losses on Sale of Stock Investments<\/h2>\n\n\n\n

Before dwelling deep into the tax on stock investments first\nwe need to take a look at the capital gain or loss aspect. As per the rules of Income\nTax, shares are classified as capital assets and hence come under the purview\nof capital gain.  If the share listed on\na stock exchange is sold within 12 months of the date of holding, then they are\ndeemed as short term capital assets while those which are held for over 12\nmonths are called long term capital assets. <\/p>\n\n\n\n

Here\u2019s a snippet of it: <\/p>\n\n\n\n

Period of Holding <\/strong> <\/td> Short term or Long term <\/strong><\/td><\/tr>
\n Less than 12 months\n <\/td>\n Short Term Capital Asset\n <\/td><\/tr>
\n More than 12 months\n <\/td>\n Long Term Capital Asset\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

Short Term Capital Gains\/Losses<\/h2>\n\n\n\n

If the person holds equity shares or stocks for less than 12\nmonths and sells it then it will culminate in short-term capital gain or loss. Here\u2019s\nhow it can be calculated:<\/p>\n\n\n\n

Short-term Capital Gain\/Loss:\nSale Price = Expenses occurred on Sale – Purchase Price <\/strong><\/p>\n\n\n\n

If the sale price is higher than the purchase price and\nexpenses occurred on sale then short term capital gain will arise and if the\nsame is lower then short term capital loss will arise. Income tax allows you to\nset off the short term capital loss from the short term or long term capital\ngain. If the amount is not set off, then it can be carried forward to 8 years\nand can be adjusted with short term or long term capital gains in these next 8\nyears.<\/p>\n\n\n\n

Tax on Short Term Capital Gain<\/h3>\n\n\n\n

Short term capital gains are taxed at 15% as per the Income Tax Rules. The rate is irrespective of your tax slab. However, if your total income is below the threshold of the basic slab, i.e. 2.5 lakhs then you can adjust your short term capital gains to fulfil that limit and the rest will be liable to 15% of taxation. <\/p>\n\n\n\n

Long Term Capital Gains\/ Losses<\/h2>\n\n\n\n

As we\naforementioned above, if a person holds the share over 12 months then the same\nwill incur long term capital gain on the sale. <\/p>\n\n\n\n

Here\u2019s how it\ncan be calculated <\/p>\n\n\n\n

Long-term Capital\nGain\/Loss = Sale Price \u2013 Cost of Acquisition<\/strong><\/p>\n\n\n\n

Previously when the long term capital asset was exempt from\ntaxation, the losses were not allowed to be set off. But with the amendment of\nrules, the long term capital losses can now be set off against other long term\ncapital gains and if the same is not completely set off, then it can be carried\nforward for up to 8 years. <\/p>\n\n\n\n

Tax on Long Term Capital Gain <\/h3>\n\n\n\n

Previously there\nwas no taxation on the long term capital gain made from the sale of equity\nshares. However, the rules have changed and now if a seller generates more than\n1 lakhs on sale of stocks, then that shall attract taxation of 10%. Furthermore,\nthe seller will not be able to avail of the benefits of indexation. <\/p>\n\n\n\n

View Source:<\/strong> https:\/\/resource.cdn.icai.org\/56467bos45796cp4u4.pdf<\/em><\/p>\n\n\n\n

Securities Transaction Tax (STT) on Sale of\nStock<\/h3>\n\n\n\n

STT is a tax\nliability that is applicable to the shares that are bought or sold via a stock\nexchange. Any shares that are listed on the stock exchange shall attract STT on\nthe sale or purchase of it. <\/p>\n\n\n\n

What\u2019s ITR?<\/h2>\n\n\n\n

ITR refers to Income Tax Return which means a form in which\nthe assessee the information regarding his income and taxation liability to the\ngovernment. There are 7 different ITR forms and an assessee can file the return\nin the designated form as defined by the Income Tax Act. An assessee showcases\nall his incomes and expenses derived within the assessment year in the ITR.\nHe\/she shall submit the ITR form by 31st<\/sup> July (unless an extended\ndate is offered by Income Tax Dept.). \nWe\u2019ll look at the steps to file the ITR down below. <\/p>\n\n\n\n

Steps to File an Income Tax Return\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/h2>\n\n\n\n

If you earn an income that comes\nunder the ambit of Income Tax Act, 1961 and the same is taxable then you have\nto file the income tax return showcasing your income. There are different types\nof ITR forms available based on the type of assessee and we have thoroughly\nillustrated the same above. You can select the ITR form based on your\ntaxability and file the same. In case, if you fall under ITR 1 and ITR4 you can\nfile the same online. For the rest of the ITR forms, you will have to download\nthe ITR form upload the XML file of the same. <\/p>\n\n\n\n

We here look at the step by step procedure\nfor filing the income tax return down below.<\/p>\n\n\n\n

Step – 01<\/strong> Visit the Income Tax Portal: Visit the website www.incometaxindiaefiling.gov.in<\/a><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

<\/p>\n\n\n\n

Step – 02<\/strong> Download ITR Utility Form: Click on the IT Return Preparation Software option placed on the right side. <\/p>\n\n\n\n

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Step – 03<\/strong> Select the right Assessment Year and download the offline based ITR utility software either in Excel or Java version as per your preference. <\/p>\n\n\n\n

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Step – 04<\/strong> Once you have downloaded the utility form you can fill in the relevant details of your income and expenses.\u00a0 Once you have filled the right details and the number of deductions available to you, you can click on the \u2018Validate\u2019 button present at the right-hand side to see if all the required information is filled. <\/p>\n\n\n\n

Step – 05<\/strong> Once you have validated the information, you can then click on the \u2018Calculate Tax\u2019 button. The utility file will calculate the tax and showcase your liability. <\/p>\n\n\n\n

Step – 06<\/strong> After you have calculated your taxability you can click the \u2018Generate XML\u2019 button to convert the file into an XML file format. Save the XML file on your device. <\/p>\n\n\n\n

Step – 07<\/strong> Click on the Income Tax Portal website and log in your credentials. If you are a new user you can register yourself on the said link. If you are a registered user you can simply login therein as showcased in the screenshot. <\/p>\n\n\n\n

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Step – 08<\/strong> Once you have login your details you can proceed to click on the e-File section where a drop-down box will showcase Income Tax Return. <\/p>\n\n\n\n

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Step – 09<\/strong> There as visible in the screenshot down below. You can insert your PAN number, Assessment Year, ITR Form No as required. Then click on the \u2018Upload XML\u2019 button where you should upload the XML file that you have previously filled and saved. You can choose from the available verification modes like Aadhaar OTP or Electronic Verification Code. <\/p>\n\n\n\n

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