With the financial year nearing its end, you would surely be doing some last-minute calculations to know the tax liability on the capital gains you earned through the year.
Here is a comprehensive assessment of the amount of tax an individual would have to pay for capital gains from investing in equity; directly or through mutual funds.
• The short term capital gains tax will be deducted at the time of redemption of units in case of NRI investors only
• Securities Tranaction tax (STT) is also levied and is deducted on equity transactions at the time of redemption. The STT is usually included in the brokerage paid to the broker and gets deducted there automatically
The law provides for provisions to offset capital losses from equity transactions. These are:
• Short term capital losses can be offset against short term as well as long term gains in the same year
• Long term capital losses can be offset only against long term gains in the same year.
• If there is a net capital loss, it can be carried forward up to 8 assesment years.
• Losses cannot be offset against gains under any other category like salaries or house property.
Following are the two ways through which you can get exposure to equity and save tax at the same time
Section 80C:
The total deduction under this section (alongwith section 80CCC and 80CCD) is limited to Rs 1 lakh only. The section has one equity scheme which is the ELSS.
A person can invest all of the Rs 1 lakh eligible under the section 80C in the Equity Linked Saving Scheme (ELSS) eligible funds. These mututal funds are diversified funds and have at least 65 per cent of the corpus invested in equity. It has a lock in period of 3 years and after that the investor can either stay invested or redeem the units as per choice
Section 80CCG:
Rajiv Gandhi Equity Saving Scheme (RGESS) was a scheme launched during Budget 2012. It was launched as a way to get more retail investors in the equity markets. Those investors whose annual income is less than Rs 10 lakh can utilise the scheme and invest as much as Rs. 50,000 and get a deduction of 50 per cent of the investment. So an investment of Rs 50,000 will entitle you to a maximum deduction of Rs 25,000. The investor here is restricted to invest in BSE100 and CNX100 stocks as well as some public sector companies or RGESS compliant mutual funds. The Scheme has a full lock in period for the first year and a partial lock in for further 2 years.
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