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How to make tax gains on stock market losses....
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How to make tax gains on stock market losses....
Stock markets have tanked big time, spreading widespread, contagious panic, pain and gloom the world over.
For equity investors, the pain is, of course, real though not unusual given that share prices routinely go through bullish and bearish cycles.
An array of preferential tax treatment on equity investment offers some balm to investors bloodied by capital losses.
Tax gains on capital losses
Your investments may not always result in capital gains. A loss from the sale of a long-term capital asset (such as investment in equity or equity mutual funds held for more than 12 months) can only be set-off against long-term capital gains.
On the other hand, a loss from short term capital asset is allowed to be set-off against both short term and long-term capital gains.
Accordingly, to obtain the maximum benefit one may use the following order of priority to set-off capital losses:
First, try setting off against short term capital gains not subjected to securities transaction tax (STT); this will save 30 per cent tax (since slab rates are attracted);
Second, try setting off against long term capital gains not subjected to STT and thus save 20% tax.
Last, try setting off against short-term capital gain subjected to securities transaction tax.
Where capital loss cannot be set-off and tax mitigated during the ongoing financial year, it can be carried forward to the next year provided you file a loss return along with your return of income. In fact, you can carry forward such losses for up to eight years.
Zero tax on dividends
Dividends are the distribution of a portion of a company`s earnings to its shareholders in proportion to his / her holding in the company.
The dividend distribution may be in cash or kind entailing the release of a company`s assets.
For this purpose, dividends mean and include:
Distribution of debentures or deposit certificates to shareholders, and bonus shares to preference shareholders
Distribution in cash or kind on liquidation of a company to the extent attributable to accumulated profits of the company.Distribution by a company to its shareholders on reduction of its share capital to the extent of accumulated profits of the company.
All such `dividends` received from a domestic company, whether interim or final, are exempt from tax in the hands of the investor. On the other hand, dividend received from an investment in a foreign company is taxable.
However, an investor can reduce his or her tax burden to some extent by claiming deduction for related expenses, such as collection charges, interest paid on money borrowed to purchase the stock, if any.
Source:
http://www.timesofindia.com
For equity investors, the pain is, of course, real though not unusual given that share prices routinely go through bullish and bearish cycles.
An array of preferential tax treatment on equity investment offers some balm to investors bloodied by capital losses.
Tax gains on capital losses
Your investments may not always result in capital gains. A loss from the sale of a long-term capital asset (such as investment in equity or equity mutual funds held for more than 12 months) can only be set-off against long-term capital gains.
On the other hand, a loss from short term capital asset is allowed to be set-off against both short term and long-term capital gains.
Accordingly, to obtain the maximum benefit one may use the following order of priority to set-off capital losses:
First, try setting off against short term capital gains not subjected to securities transaction tax (STT); this will save 30 per cent tax (since slab rates are attracted);
Second, try setting off against long term capital gains not subjected to STT and thus save 20% tax.
Last, try setting off against short-term capital gain subjected to securities transaction tax.
Where capital loss cannot be set-off and tax mitigated during the ongoing financial year, it can be carried forward to the next year provided you file a loss return along with your return of income. In fact, you can carry forward such losses for up to eight years.
Zero tax on dividends
Dividends are the distribution of a portion of a company`s earnings to its shareholders in proportion to his / her holding in the company.
The dividend distribution may be in cash or kind entailing the release of a company`s assets.
For this purpose, dividends mean and include:
Distribution of debentures or deposit certificates to shareholders, and bonus shares to preference shareholders
Distribution in cash or kind on liquidation of a company to the extent attributable to accumulated profits of the company.Distribution by a company to its shareholders on reduction of its share capital to the extent of accumulated profits of the company.
All such `dividends` received from a domestic company, whether interim or final, are exempt from tax in the hands of the investor. On the other hand, dividend received from an investment in a foreign company is taxable.
However, an investor can reduce his or her tax burden to some extent by claiming deduction for related expenses, such as collection charges, interest paid on money borrowed to purchase the stock, if any.
Source:
http://www.timesofindia.com
