INDIAN economy has grown consistently over the last few years and has made a positive impact on the earnings of an individual. Also, the lowering of the tax rates contributing to an increase in the disposable income has, in turn, led to increase in investments in various avenues by the individual.
Shares and mutual Shares and funds are popular investment options as an individual can invest depending upon his risk appetite and the target earnings that he is looking for. It is important that the tax aspects are also kept in mind, as some planning may be required on this front too.
Some of the provisions that are beneficial from the tax standpoint are summarised below: Capital gains on sale: In case of sale of shares and mutual funds, if the sale consideration exceeds the cost of acquisition, the same would result in capital gains, else a capital loss. Short term or long term capital gains: Capital gains on sale of shares and mutual funds can be classified as short term or long term depending upon the period for which these are held before making the sale.
In case shares and mutual funds are held for upto 12 months before their sale, then gains arising from these would be classified as short-term capital gains and after 12 months of holding, the capital gains would be considered as long term capital gains.
Taxability: The tax treatment of the capital gains arising from sale of shares and mutual funds depends upon whether the gains are short term or long term, besides certain other factors.
For a resident individual, short-term capital gains on sale of equity shares or equity oriented MFs, on which securities transaction tax (STT) has been paid, are liable to tax at 15 per cent plus applicable cess. In case the gains are long-term and STT has been paid, then the same would be tax-exempt.
On sale of unlisted shares and non-equity oriented mutual funds, the short-term gains would be taxable as per the normal tax rates applicable to the individual.
Therefore, the period of holding may be a deciding factor before an individual plans to sell.
Set-off of capital loss: Short term capital loss can be set off against both short term and long term capital gains, whereas, long term capital loss can be set off against long term capital gains only.
If short/long term loss cannot be wholly set off in a particular financial year, then the said loss can be carried forward upto next eight financial years and can then be set off in the manner as specified above.
Dividend from shares or mutual funds: Besides the above provisions, investing in shares or mutual funds remains a lucrative option, as the dividend received by the individual is tax exempt in his hands.
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Also, know how to buy mutual funds online:
1) DSP BlackRock Mutual Funds:
http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html
2) Reliance Mutual Funds:
http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html
3) Birla Sunlife Mutual Funds:
http://prajnacapital.blogspot.com/2011/06/buying-birla-sunlife-mutual-funds.html
4) UTI Mutual Funds:
http://prajnacapital.blogspot.com/2011/06/buying-uti-mutual-funds-online.html
5) SBI Mutual Funds:
http://prajnacapital.blogspot.com/2011/06/buying-sbi-mutual-funds-online.html
6) Edelweiss Mutual Funds:
http://prajnacapital.blogspot.com/2011/06/buying-edelweiss-mutual-funds-online.html
7) IDFC Mutual Funds:
http://prajnacapital.blogspot.com/2011/06/buying-idfc-mutual-funds-online.html
