Lots of query’s comes in mind regarding Investment Gains and Taxation. There are many investment options available to citizens. Investments are made for different purposes. Some want regular income while others want an increase in investment. The return on investment is taxable with few exceptions. In the last two-three years, there have been several major changes in the investment income tax structure. Long-term profits from the sale of listed companies and units in equity funds were tax-free, now taxable.
Dividends on companies and mutual funds are now taxable to the investor. If the company buys back the shares, the investor does not have to pay tax on the profits made on the sale. Depending on the type of investment, the duration, the taxability on the income is determined. The taxpayer should consider this when investing as the tax portion is large.
Example of FAQ About Investment Gains and Taxation
I have received dividends of Rs. 75,000 from various companies in the financial year 2021-21. Some companies have deducted TDS of Rs 5,500 on these dividends. This income was tax free till last year. How much will I have to pay on this income from this year?
Dividends received from last financial year i.e. after 1st April, 2020 are taxable to investors. If the dividend exceeds Rs. 5,000, the companies are required to deduct 10 per cent (7.50 per cent) withholding tax on it. ) Will have to pay tax on it. If the taxpayer’s tax liability is more than Rs. 10,000 after deduction of withholding tax, advance tax provisions apply. In making this tax, the taxpayer has to take into account the estimated income for the financial year.
In this year’s budget, it is suggested to consider the dividend only after receiving it without calculating it in the estimated income. This provision will be effective from 1st April, 2020. If advance tax provisions apply, you will have to pay advance tax before March 15, 2021, taking into account the total dividend received.
I sold the gold jewelery my father bought in 1970 in February 2021. Do I have to pay tax on this? What can I do to save this tax?
Since gold jewelery falls under the definition of capital assets, the capital gain on its sale is taxable. Since the jewelery was purchased in 1970, the market value of gold as on April 1, 2001 and the inflation index have to be taken into account in calculating capital gains. This long-term capital gain will be taxed at 20 per cent (plus 4 per cent on education and health tax).
I bought 500 shares of a company listed on the stock exchange in October 2019 for Rs 155 each. The company announced a one-to-one bonus share in March 2020. I sold 800 shares at Rs 225 each in February 2021. Do I have to pay tax on this sale? If so how much
You sold 800 of the 1,000 shares you held, including your prize shares. On the principle of ‘first buy first sell’, you have sold 800 shares, first 500 shares bought in October 2019 and 300 bonus shares. Shares purchased in October 2019 are long-term (because they are sold 12 months after the date of purchase) and 300 bonus shares have a short-term capital gain (because they are sold within 12 months from the date the bonus was announced). You have a long term capital gain of Rs. 35,000 (selling price Rs. 225 times 500 shares = 1,12,500 minus purchase price of Rs.155 * 500 shares = Rs.77,500 And short-term capital gains of Rs 67,500 (selling price Rs 225 times 300 shares = 67,500 minus purchase price). As per Section 112A, first long term capital gains up to Rs. Short-term capital gains of Rs 67,500 will be taxed at 15 per cent.
I bought some units of the equity fund in June 2018 for Rs 4 lakh. They are now priced at Rs. 600,000. How much tax do I have to pay if I sell these units?
If you sell units of equity fund in March 2021, you will get a long term capital gain of Rs. 2 lakhs (Rs. 6 lakhs minus Rs. 4 lakhs). The first tax will not be levied on Rs. 1 lakh and the remaining amount will be taxed at the rate of 10% on Rs. But if you sell half of these units in March 2021 and the rest in April 2021, you will not have to pay tax, because your capital gain of Rs. 2 lakhs will be divided into two financial years (Rs. 1 lakh each) You don’t have to pay taxes every year.
Conclusion
Depending on the type of investment, over time, the profitability is taxable. Since the tax component is large and income-cutting, the taxation aspect should be considered when investing.
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