When does my trading and investment income become taxable? Does it become taxable though it is in demat account or it become taxable after depositing in Bank account?
Tax is payable on the net trading and investment income irrespective of whether you withdraw or not into your bank account.
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Not an expert, but the way I understand is,
The brokerage platform follows FIFO method - First in First Out. This means that there is a record of all purchase transaction of a particular stock with them. When you sell a portion of the stock, this is offset against the first purchase. So if the first purchase was at 50 per share and if you sell it at 80 per share, there is a gain of 30 per share. Tax is calculated on this. Also there is short term and long term. If you hold the stock for more than 12 months, then you are eligible for long term tax benefit. As per current laws, there is an exception upto 1 lacks for one year. Anything over this amount you will be liable to pay tax. Short term is if you sell before 12 months.
On the contrary if you sell it at a loss, there will not be any tax liability, and I am told these losses will be offset against the profit. The losses can be carried forward for 8 years.
For non residents, I am told that if there is profit on a trade and if it is less than 12 months of holding, the broker will deduct TDS. Not sure if this applicable for residents.
Tax gets into play only when you sell and not on the balance maintained on your demat account.
This is my understanding, please do check with the experts.
also you become eligible to pay taxes after you cross BEL i.e. basic exemption limit. so if your total income is more than 250000 in a year then you have to pay taxes otherwise you don’t have to
If my understanding is correct, the gains from investing in shares are considered as capital gains/loss and cannot be adjusted against the basic exemption limit.
Can someone clarify. Attaching a matrix which says the same.
I mean if trading is the only source of income then one has to pay taxes on the amount exceeding 250000 otherwise no need to pay taxes.