Profits from stock market investments should be taxed. If the shares are purchased and sold within one year (12 months), a short-term capital gains tax (STCGT - Short Term Capital GainTax) is payable. Whoever it is has to pay 15% tax. The basic income limit is Rs. Those below 2.5 lakh will not have to pay this tax.
If the stock is sold after one year, it will be subject to Long Term Capital Gain Tax (LTCGT). If the profit is up to Rs 1 lakh no tax is levied. Profits above this should be taxed at 10 per cent without inflation adjustment.
Bonus shares and taxes ..!
Many people are confused about how to pay the tax when selling bonus shares and additional shares obtained through the stock division
Bonus shares are shares that are offered free of charge to those who are already investors. Here the company's share capital will increase. The shareholders did not pay anything to get these. The number of shares would have increased in proportion to the bonus shares issued
For example, suppose a person buys 100 shares of a company on August 1, 2019 at a price of Rs. 100 per share. On February 5, 2020, the company will issue bonus shares at a ratio of 1: 1. At that date, the share price was Rs. Is 110. Following this the total shares will increase to 100 + 100 = 200. At the same time, the share price will halve to Rs 55.
On September 2, 2020, the investor will sell his 200 shares at Rs. Selling at a price of 120.
Generally, we would buy a company stock in several stages and add it to our investment portfolio, and when selling the shares, the first purchased shares will be taken into account as the first sale.
Accordingly, here, the 100 shares originally purchased by the investor are taken as the first sale and since they have been purchased for one year, the profit to be made from these shares is called the long-term capital gain.
Purchase price 100 * 100 = Rs. 10,000
Selling price 100 * 120 = Rs.12,000
Capital gain was Rs. = Rs. 2,000
Long term capital gains tax 10% = Rs. 200
The long-term capital gain available to an investor during the financial year (company shares and equity mutual). He has to pay 10% tax only when it exceeds Rs 1 lakh. Rs. He does not have to pay tax on the profits of the shares sold if he has a long-term capital gain of less than Rs 1 lakh.
As the bonus shares are issued and sold within one year, a short-term capital gains tax is payable on the profits made from them.
The purchase price of bonus shares is 100 * 0 = Rs. 0
Selling price 100 * 120 = Rs.12,000
Short-term capital gain = Rs.12,000
Short-term capital gains tax 15% = Rs. 1,800
So the total tax is Rs. 200+ Rs. 1,800 - Rs.2,000
So, buying 100 shares for Rs.10,000 and getting free shares . If sold for Rs 24,000, the post-tax profit is Rs. 14,000. Tax is 2,000. That is, one year after the bonus shares are issued, it is sufficient to pay 10% of the long-term capital gains tax, in lieu of 15% short-term capital gains tax on 100 shares. That too in the financial year, Rs. 1 lakh is exempt.
Stock Split tax
Stock split is the reduction in the face value of a stock. Here the share capital of the company remains unchanged. Divides the same stock into more shares. For example, one person owns 100 shares of a company on August 1, 2019. Suppose we buy a stock for Rs.100. As on February 5, 2020, the company has a face value of Rs. 10 stock splits by 1: 1 then face value will divide to Rs5. Now the investor will get 200 (100 + 100) shares with 5 face value. On that date, Rs. 110, the share price halved and decreased to 55.
Purchase price 100 * 100 = Rs. 10,000
Selling price 200 * 60 = Rs. 12,000
Capital gain = Rs. 2,000
Long term capital gain 10% = Rs. 200.
Here too, in the financial year, long-term capital gains from institutional stocks and equity funds were Rs. 1 lakh is exempt.15% short-term capital gains tax if the total investment period is less than one year when selling the original shares and shares acquired through share split will have to pay tax.
At the same time, one year has passed since the purchase of the original shares. It has not been more than a year since the share split. In this case, if the total shares are sold, you have to pay 10% of the long-term capital gains on the original shares. Bonus shares pay a short-term capital gains tax of 15% on capital gains.
Taxation of Bonus shares and Stock split
There are 2 types of Capital Gain taxes , 1) LTCG is Long Term Capital Gain 2) STCG is Short Term Capital Gain
LTCG is listed securities like shares , debentures ,bonds, etc in a recognized stock exchange sold holding more than
12 months is nil on the profits upto Rs 1 lakh and beyond Rs 1 lakh profit its 10% without indexation benefit.
STCG is same listed securities in a recognized stock exchange sold holding less than 12 months is 15% on the profit.
Holding period may vary for unlisted shares s 24 months and unlisted securities other than shares s 36 months.
BONUS SHARES are shares allotted for free to the shareholders and the shareholders dont pay anything to buy these
shares and your capital increases. For example if a person buys 100 shares of company on 1/8/2019 t Rs 100 each and on 5/2/2020
the company allots bonus shares in the ratio 1:1 so the total shares 100+100 is 200. On 2/9/2020 he sells all 200 shares at Rs 120 each.
LTCG on sale of original 100 shares which was bought more than 12 months (1/8/2019).
Cost price 100*100=Rs 10,000
Selling Price 100*120=Rs 12,000
Capital Gains =Rs 2,000
LTCG 10% = Rs 200
STCG on sale of 100 bonus shares which was allotted less than 12 months (5/2/2020)
Cost Price 100*0= Rs 0
Selling Price 100*120= Rs 12,000
Capital Gains = Rs 12,000
STCG 15% = Rs 1,800
So total tax LTCG is Rs 200 + STCG is Rs 1,800 = Rs 2,000
Here in Bonus shares company investment made Rs 10,000 and sold for Rs 24,000 , profit before tax is Rs 14,000, taxes paid Rs 2,000.
STOCK SPLIT is the same stock split into more shares where your capital remains same. For example if a person buys 100 shares of
a company on 1/8/2019 at Rs 100 each. On 5/2/2020 the company announces shares split in the ratio 1:1 , so total shares will be 100+100=200
but the stock price on the day was Rs 110 each will be divided by 2 where the stock will become Rs 55 each. On 2/9/2020 he sells all
200 shares at Rs 60 each.
LTCG on sale of 200 shares
Cost price 100*100 = Rs 10,000
Selling price 200*60 = Rs 12,000
Capital Gains =Rs 2,000
LTCG 10% = Rs 200.
Here in Stock split company investment Rs 10,000 and sold for Rs12,000, profits Rs 2,000 and taxes paid Rs 200
