Taxation of Capital Market Transactions in Bangalore
Taxation of Capital Market Transactions in Bangalore
Taxation of capital market
transactions in Bangalore, or anywhere in India, is subject to the regulations
set forth by the Income Tax Act, 1961. The taxation rules apply to various
transactions such as buying and selling of stocks, bonds, mutual funds, and
other securities. Below are some key points related to the
taxation of capital market transactions in Bangalore:
1.
Securities
Transaction Tax (STT): STT is
applicable on the purchase and sale of securities listed on recognized stock
exchanges in India. The rates for STT are predetermined and vary for equity
delivery, equity intraday, and derivatives transactions.
2.
Capital
Gains Tax:
·
Short-Term
Capital Gains (STCG): If
securities are held for a period of less than 12 months, any gains arising from
their sale are considered short-term capital gains. STCG is taxed at the
applicable slab rates for individuals.
·
Long-Term
Capital Gains (LTCG): If
securities are held for more than 12 months, any gains arising from their sale
are considered long-term capital gains. LTCG on listed equity shares and
equity-oriented mutual funds were exempt from tax till a certain limit.
However, Budget 2018 introduced LTCG tax at 10% for gains exceeding Rs 1 lakh
in a financial year. Indexation benefits are not available.
3.
Dividend
Distribution Tax (DDT):
Previously, companies were required to pay DDT on the dividends distributed to
shareholders. However, in the Union Budget 2020, the government abolished DDT,
and the shareholders are now liable to pay tax on dividends as per their
applicable tax slab.
4.
Tax
Deducted at Source (TDS): If the
total income from securities transactions exceeds a certain threshold, TDS may
be applicable on the gains. Investors need to ensure that they comply with TDS
provisions.
5.
Tax
Planning and Compliance: Investors
should keep track of their capital market transactions and maintain proper
records for tax purposes. Seeking advice from tax professionals or financial
advisors can help in efficient tax planning.
It's crucial to note that
tax laws are subject to change, and it's advisable to consult with a tax
professional or refer to the latest amendments in the Income Tax Act for the
most accurate and updated information on capital market taxation in Bangalore or
any other location in India.
What Is a Primary vs. Secondary
Market?
New capital is raised via stocks and bonds that are issued and sold to
investors in the primary capital market, while traders and investors
subsequently buy and sell those securities among one another on
the secondary capital market but where no new capital is received by the
firm.
Which Markets Do Firms Use to
Raise Capital?
Companies that raise equity capital can seek private placements via
angel or venture capital investors but are able to raise the largest amount
through an initial public offering when shares list publicly on the stock
market for the first time. Debt capital can be raised through bank loans or via
securities issued in the bond market.
The Bottom Line
Capital markets are a very important part of the financial industry.
They bring together suppliers of capital and those who seek it for their own
purposes. This may include governments that want to fund infrastructure
projects, businesses that want to expand, and even individuals who want to buy
a home. They are divided into two different categories: the primary market
where companies list new issues for the first time and the secondary market,
which allows investors to purchase already-issued securities. The key benefit
to these markets is that they allow money to move from those who have it to
those who need it for their own purposes.
Created & Posted by Navneet Kumar
CA Article at TAXAJ
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