Tds for investments?


Firstly, the investment you make in Stock Markets is made from the income received from various sources (Salary, Business, Rent etc) for which you need to pay Income Tax. They may have TDS (Tax Deducted at Source) based on whether it is Salary/Business etc.

Secondly, tax is always calculated on the realised profit which means that you need to have sold the Stocks at a profit and only then is it considered as profit for Income Tax purposes. Notional profits made are not considered as Profit for Income Tax purposes and hence Tax will not need to be paid on it.

​​​​​​​For example, you invested Rs.1 lakh in Stocks around 1.5 years and today it is Rs.1.30 lakhs. If you continue to hold the Stocks, there is no tax to be paid on it currently. Suppose, you sell it today or sometime in the future, then the difference (profit) will be taxed.

​​​​​​​Short Term - Profits made from transactions completed within 1 year - 15% tax on Profits

​​​​​​​Long Term - Profits made from transactions completed after 1 year - 10% tax on Profits (Tax is exempt upto Rs.1 lakh per year Profit from Long Term transactions)

​​​​​​​Thirdly,​​​​​​​​​​​​​​ there is no concept of TDS in Stock Market investments. Banks do TDS (Tax Deducted at Source) for interest received from FDs since the Government has instructed them to do so. However, in Stock Markets, it is not the Stock broker’s job to check your transactions and calculate the tax and deduct it on behalf of the Government.

​​​​​​​Whenever we Sell any Stocks in the future, at the end of the year, we need to download the Transaction statements for the entire Financial Year or ask your broker to email it to you and hand it over to your Chartered Accountant or Auditor. They will calculate the profit/loss made by you and if there is any Net profit whether from long term or short term, they will inform you on how much tax is to be paid and you need to pay it accordingly at the end of Financial year.