The first thing to understand is that any income generated from investments, such as dividends or capital gains, is subject to taxation. You must report this income on your tax return and pay taxes on it. In India, the Investment Tax<\/mark><\/a> Basis is divided into three categories: <\/p>\n\n\n\n Short-term capital gains are any profits made from investments held for less than a year before being sold. Your income tax bracket determines the rate of taxation for this type of gain. It is only applicable when you buy and sell the stock within 12 months or 1 year. You will have to pay a 15% tax on your total profit in that financial year.<\/p>\n\n\n\n Suppose you bought 100 shares of ABC Ltd. at \u20b9100 per share in February 2022 and sold them in November 2022 at \u20b9150 per share.<\/p>\n\n\n\n Profit made = (150 x 100) \u2013 (100 x 100)<\/p>\n\n\n\n Profit made = 15,000 – 10,000<\/p>\n\n\n\n Profit made = 5,000<\/p>\n\n\n\n So, you have to pay a 15% short-term capital gains tax on your \u20b95,000 profit, which equals \u20b9750.<\/p>\n\n\n\n Long-term capital gains refer to profits from investments held for more than a year before selling them off; these are taxed at a lower rate than short-term capital gains. It is only applicable when you buy and sell the stock after 12 months of holding it. A total of 10% tax is levied if you have made a profit of over \u20b91,00,000 in that financial year.<\/p>\n\n\n\n Securities Transaction Tax (STT) is an additional levy that applies when you buy or sell stocks or equity derivatives through exchanges. For example, when you purchase stock through the National Stock Exchange (NSE), STT is applicable.<\/p>\n\n\n\n\n
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