Everything you need to know about the taxation on stocks, mutual funds and bonds

Taxation
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Here’s an overview of Taxation for Stocks, Mutual Funds, Bonds and some Tax planning sections all at one place.

Stocks

Particulars Tax Applicability Type of Income Carry forward of losses Remarks (If any)
Intraday Equity trading As per slab rates Business (Speculative) 4 Years against same income
F&O Trading of Equity, Commodity & Currency As per slab rates Business (Non-Speculative) 8 years against business income
Sale of short term equity (<12 Months) 15% Short term Capital Gains 8 Years against both STCG & LTCG
Sale of Long term equity (>12 Months) 10% Long term Capital Gains 8 years against LTCG Tax exemption upto 1 Lac
Old Slab Rates
Taxable Income (INR) Slab Rate
Up to 2,50,000 NIL
2,50,001 to 5,00,000 5%
5,00,001 to 10,00,000 20%
More than 10,00,000 30%
New Slab Rates
Taxable Income (INR) Slab Rate
Up to 3,00,000 NIL
3,00,001 to 6,00,000 5%
6,00,001 to 9,00,000 10%
9,00,001 to 12,00,000 15%
12,00,001 to 15,00,000 20%
More than 15,00,000 30%

Mutual Funds & ETFs

Long Term Capital Gains

Particulars Equity Oriented Schemes Non-Equity Oriented Schemes
Individual/HUF 10% Applicable as per slab rates
Domestic Company 10% Applicable as per slab rates
NRIs 10% 30%
NRIs 10% 30%

Short Term Capital Gains

Particulars Equity Oriented Schemes Non-Equity Oriented Schemes
Individual/HUF 15% Applicable as per slab rates
Domestic Company 15% Applicable as per slab rates
NRIs 15% Applicable as per slab rates

Note :

  • Holding period for equity schemes - 12 Months
  • Non equity schemes - All are taxed at applicable slab rates
  • International mutual funds and ETFs are treated as debt (non-equity) funds.

What schemes are equity oriented and debt oriented?

Sl.no Equity Oriented Schemes Debt Oriented schemes
1 Large Cap Liquid funds
2 Mid Cap Overnight funds
3 Small Cap Ultrashort term funds
4 Large & Midcap Medium duration
5 Multicap Dynamic bonds
6 Focused Corporate bond
7 Dividend Yield Credit Risk
8 Value or Contra Banking & PSU
9 Sector GILT funds
10 ELSS Gilt with ten-year constant duration
11 Flexi Cap Floater
12 Arbitrage Funds Monthly Income Scheme
13 Equity Savings Conservative Hybrid Funds
14 Aggressive Hybrid funds Debt oriented Multi Asset funds
15 Dynamic Asset Allocation or Balanced Advantage Balanced hybrid
16 Equity oriented Multi Asset funds
17 Index funds and index ETFs

Note:

  • Schemes that invest at least 65% of the scheme’s assets in equities and equity related instruments are considered equity-oriented schemes.
  • The same taxation applies for fund of funds (FoFs) as well
  • The taxation of direct and regular plans remains the same.

Bonds

Government Bonds

Particulars LTCG (> 12 Months)
Interest Income
T-bills Not Applicable Applicable at Slab rates
G-secs 10% without Indexation Applicable at Slab rates
SDLs 10% without Indexation Applicable at Slab rates
Particulars STCG (<12 Months)
Interest Income
T-bills Applicable at Slab rates Applicable at Slab rates
G-secs Applicable at Slab rates Applicable at Slab rates
SDLs Applicable at Slab rates Applicable at Slab rates
Particulars STCG (<36 Months) Interest Income
SGBs Applicable at Slab rates Applicable at Slab rates
Particulars LTCG (> 36 Months) Interest Income
SGBs 20% with Indexation or 10% without indexation Applicable at Slab rates

Note:

  • Tax exemption if held till maturity (SGBs)

Tax Planning

80 C - Investment based exemption (Max limit - 150000)

Section Type of deduction Max tax deduction Remarks (If any)
80C Contribution to ELSS 150000 Lock in period of 3 years
80C Investment in PPF 150000
80C Contribution to EPF 150000
80C Home loan Repayment 150000
80C Life Insurance Premium 150000
80C Children’s Tuition Fees 150000 for 2 children
80C Investment in National Savings Certificate (NSC) 150000

80CCD - National Pension Scheme

Section Type of deduction Max tax deduction Remarks (If any)
80CCD(1) Employees Contribution to Pension Fund INR 1,50,000
80CCD(2) Employers Contribution to Pension Fund 10% of Basic Salary
80CCD(1b) Voluntary Contribution to NPS INR 50,000 Gets an additional tax benefit of 50000 over and above the maximum limit of 150000

80D - Medical Insurance Premium

Paid For Deduction Overall Limit
Self, spouse & Children INR 25,000 on Premium INR 25,000
INR 5,000 on Health Checkup
Spouse, Self & Children + Parents INR (25,000 + 25,000) = INR 50,000 on Premium INR 50,000
INR 5,000 on Health Checkup
Self, spouse & Children + Senior citizen parents INR 25,000 + INR 50,000 = INR 75,000 on Premium INR 75,000
INR 5,000 on Health Checkup
Spouse, Self & children (senior citizen) + Senior citizen parents INR (50,000 + 50,000) = INR 1,00,000 on Premium INR 1,00,000
INR 5,000 on Health Checkup
HUF member INR 25,000 on Premium INR 25,000
NA
HUF member (Senior Citizen) INR 50,000 on Premium INR 50,000

Other Sections

Section Type of deduction Max tax deduction Remarks (If any)
80TTA Savings Account Interest Income 10000
80TTB Interest Income on deposits for Senior Citizens 50000

This is as brief as it gets when it comes to taxation. For any tax related queries and services, @Quicko is here to assist us all.

You can check the below post by @Quicko to know more about the Income tax related changes announced in the union budget 2023.

You can learn in detail about taxation in the Taxation module of Varsity :

13 Likes
4

NPS contribution of 1.5lack is available under 80C as well. @Meher_Smaran

5

Thank you Boss, this information is very helpful for me.

6

So after all the back and forth on the International spends on investments. what was finally decided on the taxation & TCS for international investments, spends, Investments via MFs etc.

I am just looking to know what is the taxation if I want to invest in SP500 via Indian MF route.

@Quicko @Meher_Smaran

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Hello @ranton137,

From July 1, 2023, TCS @20% will be collected on foreign remittances made using international credit cards exceeding ₹7,00,000. You can read more on TCS on International Credit Card Payments

Tax on foreign securities is levied at slab rates in case of STCG if the securities are held for less than 2 years and @20% with indexation in case of LTCG if the securities are held for more than 2 years.

Hope this helps!

2 Likes
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Hallo @Quicko ,

I would like to know how the gains from T-Bills issued by RBI are treated in India. Say, in a year I happen to make Rs.10,000/- from the T-Bills. How is the tax calculated on this Rs.10,000/- gain.

It is taxed as per the income slab or as a STCG or is it subjected to any other taxation?

9

I got my answer from the above thread!!

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Hi @Z-User

The income from T-Bills issued by RBI is taxed as capital gains. Depending on the holding period, if held for a period of 36 months or less, the gains are considered STCG or if held for more than 36 months, the gains are considered LTCG.

11

Hi @Quicko

Your answer is in contradiction to what is written at the beginning of this thread. As far as I know, we cannot hold T-Bills for more than an year because I think we have only 3, 6 and 12 month T-Bills. Can you please clarify?

Also the thread tells that the T-Bill income is treated as per the income tax slab rates. But you tell it is treated as capital gains. May I know which is the right one?

12

Hi @Z-User

T-bills are taxed at normal slab rates as capital gains (STCG)

Any STCG for which STT isn’t applicable is generally taxed at applicable slab rates.

@Quicko please confirm :slight_smile:

13

@Z-User Apologies for the previous answer.

Yes, as rightly mentioned by @Meher_Smaran
The T-bills held for <=12 months are taxed at normal slab rates as capital gains (STCG).