Do I Have to Pay Taxes on Money Earned from Stocks in India?

Yes, in India, you are required to pay taxes on the profits earned from stocks. The taxation on these profits can be categorized into two types based on the holding period: short-term capital gains (STCG) and long-term capital gains (LTCG).

Short-Term Capital Gains (STCG)

Short-term capital gains arise when you sell equity shares listed on a stock exchange within one year of purchase. If the sale price is higher than the purchase price, you incur a short-term capital gain (STCG).

Calculation of Short-Term Capital Gain

The short-term capital gain is calculated as follows:

Short-term capital gain Sale price minus Expenses on Sale minus Purchase price

Long-Term Capital Gains (LTCG)

Long-term capital gains occur when you sell equity shares listed on a stock exchange more than one year after their purchase. If the sale price is higher than the purchase price, you make a long-term capital gain (LTCG).

Taxation on Long-Term Capital Gains (LTCG)

Before the introduction of the budget in 2018, long-term capital gains from the sale of equity shares or equity-oriented units of mutual funds were exempt from tax. However, since April 1, 2018, any gains exceeding Rs. 1 lakh will be taxable at a rate of 10% plus applicable cess.

These provisions apply to transfers made on or after April 1, 2018.

Tax on Dividend Income

Dividends received from equity shares are also considered regular income and are taxable according to your tax slab. This means that dividend income is subject to income tax based on the applicable tax bracket.

FO Tax Rate for Non-Resident Indians (NRIs)

For Non-Resident Indians (NRIs), the taxation on capital gains from stocks is classified as foreign overhead (FO) tax. This tax rate is applied based on the standard income tax slab rates because such gains are treated as business income.

Conclusion

Whether you are a resident or a non-resident, understanding the taxation on capital gains from stocks is crucial for managing your finances effectively and ensuring compliance with Indian tax laws. Always consider consulting a tax professional to ensure accurate determinations and filings.

Taxation of Gains from Equity Shares

Short-Term Capital Gains (STCG): Gains from selling stocks within one year of purchase, taxable at 15%. Long-Term Capital Gains (LTCG): Gains from selling stocks after one year of purchase, taxable at 10% plus applicable cess if the gain exceeds Rs. 1 lakh. Dividend Income: Considered regular income and taxable according to your tax slab. FO Tax for NRIs: Treated as business income.

Key Points to Remember:

Taxation on gains from stocks is essential to understand for tax compliance. STCG and LTCG are calculated based on holding periods. Dividends are taxable as regular income. NRI taxation is treated as foreign overhead (FO) tax.

Stay Informed and Stay Compliant:

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