Investors who are looking for high returns and are willing to take high risk, and equity markets, the use of securities / investment avenue. As an investor, you know what the taxes due on the profits / losses arising from this investment? Are you aware of the impact of corporate actions (rights issue, bonus, split, dividend) and you from the perspective of taxes? If not, it is necessary to understand himself so that you are able to reduce the tax rate and increase return on investment
Short-term Capital Gain/Loss
If securities sold in the stock market within one year of purchase, and in the short term in nature. Does not impose taxes on capital gains in the short term at 15%. Can be set short-term capital loss off against capital gains on short-term capital gains in the long term.
Long-term Capital Gain/Loss
The securities held for possession of more than a year, and in the long term. Capital gains in the long term are exempt from taxes. Can be set on the long-term capital losses only against capital gains in the long term.
In the case of Sunil, it is the pivot on which the bank held for a period of less than one year, you will earn a tax @ 15%. That would tax capital gains have 15% of the 200 * (820-740), which is Rs.2400. This will reduce the income to Rs. 13 600. However, if Sunil sold his shares at any time after May 10, 2010, will have a gain of Rs. 16 000.
If the capital losses on long-term and short-term to be set off against capital gains of that year, private, and can be done to forward to a period of 8 years in a row next year. Losses under the head "Capital Gains" can not be set off against income under other heads of both the business income, salary, profession, home ownership, income from another source.
Impact of corporate actions on taxable income
Dividend on shares: If is not taxanble in the hands of the recipient, as the company to declare dividend already paid dividend distribution
Bonus shares: This is the bonus shares to shareholders because, depending on the current contract to the holder of shares. If announced a reward of 1:3, which means shareholders will be given 1 share for each three shares held. For tax purposes, and the reward is the former (which is set the price for the work of companies in the stock market) the date specified by the Company to be from the date of acquisition of shares and the acquisition cost is zero. Accordingly, when sold, will be treated as short-term or long term.
Rights issue: when put additional shares to existing shareholders at a price, called the issue of human rights. And treats the price is the issue of rights and the cost of acquisition, which is usually at a lower price than the market price. And treats the date of allocation of stock right as the date of purchase price of a rights issue. Accordingly, it will attract tax depending on the acquisitions, which are carried out.
Stock splits: This refers to a decrease in range of the shares by reducing the nominal value of shares. This leads to a similar change in market value. And treats the original date of purchase of shares as at the date of acquisition and the imposition of tax on gains made in the proportion of the same division. Sunil has been assumed that 100 shares, the company XYZ) in the nominal value of Rs. 10 was purchased in January 10, 2009 at Rs. 500. On March 10, 2010, the company cut the nominal value of shares to Rs. 5. March 30, Sunil and sold off the shares at Rs. 305.
The impact is as follows:
Change in the number of shares held: on account of the division, and Anil and 200 shares of XYZ) and the purchase prices would have a far Rs. 250 per share
Taxes on gains of liability: Although the division was completed on March 10, 2010, and the date of acquisition for Anil continue to January 10, 2009. Since the contract period is greater than one year, are classified as long as the gain-term capital. That gain him Rs.11, 000 (Rs. 305-250), and exempt from taxation.
Tax Tipsa
Make sure you look at the period prior to the sale of security. You may need to wait for a few days more, to move from short-term and long-term tax treatment, if you profit on the transaction, so enjoy the profits tax lines.
Nor can the loss of capital over the long term that is deducted from the capital in the short term gain, you will be able to reduce your tax liability if you sell the security to make significant losses to you within one year.
In order to reduce your tax liability may have sold shares before the month of March. You need to take note of the same, so you can take a position on the same stock after April 1. This way can you save taxes, and also held shares of the entity that sold, to compensate for the loss of the book and therefore gains. While the account of net gains, make sure that you take the transaction costs of buying and selling in mind.
