Taxation is something that leaves most people baffled. Computing the income tax you owe would be relatively easy if you earned money from only one source. But what if you are an active investor and your investments are a source of income as well? Computing how much you have earned from your different investments and how much of your earnings are taxable can get extremely tricky.
The earnings from your equity investments are categorised into short-term capital gains and long-term capital gains. Investments held for over one year are referred to as long-term investments, and the gains or losses made on them are called long-term capital gains or losses. On the other hand, investments held for less than a year are short-term investments, and gains and losses on them are called short-term capital gains or losses.
Short-term gains on equity investments are taxable, while long-term gains are not. But calculating the tax due on capital gains is not that easy. Capital gains are calculated by the first-in-first-out (FIFO) principle. So, if you buy shares of one company at different times through the year, and sell some of it after one year, the shares bought first will be deemed to have been sold first.
Similarly, if you invest in mutual funds through systematic investment plans (SIP), then each SIP instalment is considered an individual investment. So, if you redeem a portion of your investments one year after you started the SIPs, only some part of the gains earned on them would not be taxed by the taxman.
Complicated, isnít it? But donít worry; weíre here to making things simple for you. This is where the Value Research Portfolio Managerís Capital Gains tab will come in handy. You can access the Capital Gains tab once you have registered on www.ValueResearhOnline.com (itís free!) and filled in the details of your portfolio in the Portfolio Manager tool.
Once the details of your investments have been entered into the Portfolio Manager, the Capital Gains tool will automatically calculate your long- and short-term capital gains or losses. The tab shows you the name of your investment, initial date of purchase, total cost of the fund, current value, unrealised long-term gain, unrealised short-term gain, realised long-term gain and realised short-term gain.
It is as easy as that. Once you have accessed the Capital Gains tab, you are all set. No more tedious tax computations to worry about. How much tax you are liable to pay on your earnings from investments will be just a few clicks away.