How Income from Shares and Mutual Funds are taxed
Across the globe including India, stock markets had a bull run in 2009. Most of you might have had a good return on your investment in 2009. This information will help you in understanding how your income from share trading / mutual fund will be taxed in India.
| # | Source Of Income | Criteria | Tax | Example |
| 1 | Share Trading - Short Term | Purchased and sold within one year and STT is paid. | 15 % on the profit | You did buy a Stock ‘A’ on Dec 1 2009 and sold it on Dec 11 2009. You made a profit of Rs.5000. Then you have to pay tax for 15% of Rs.5000 |
| 2 | Share Trading – Long Term | If you are holding a stock for more than one year and STT is paid. | No Tax | You did buy a Stock ‘A’ on Dec 1 2008 and sold it on Dec 11 2009. You made a profit of Rs.5000. As you are holding the stock for more than a year it is not taxable. |
| 3 | Mutual Funds (Equity) – Short Term | Purchased and sold within one year. | 15 % on the profit | You did buy a MF ‘A’ on Dec 1 2009 and sold it on Dec 11 2009. You made a profit of Rs.5000. Then you have to pay tax for 15% of Rs.5000 |
| 4 | Mutual Funds (Equity) – Long Term | You should hold a MF for more than one year | No Tax | You did buy a MF ‘A’ on Dec 1 2008 and sold it on Dec 11 2009. You made a profit of Rs.5000. As you are holding the MF for more than a year it is not taxable. |
| 5 | Dividends from Mutual Funds | Any dividend you receive from the MF | No Tax | MF’s might issue dividend. These dividends are not taxable. |
| 6 | Dividends from Companies (Share / Equity) | Any dividend you receive from the Companies (Share / Equity) | No Tax | Companies might issue dividends to their share holders. These dividends are not taxable. |
1 Year = 365 Calendar Days
STT = Security Transaction Tax. Your share broker might have deducted this tax during the trading transaction.
MF = Mutual Funds
*Updated for FY 2009 – 2010
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Categories: Tax Planning
Interesting article. Good to know.
Thank you for the useful information
This is a clear and concise article and clarifies the doubts of the investors with regards to the taxation on investments.
Thanks a lot !
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