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Income tax benefits of Investment in Shares

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Income tax benefits of Investment in Shares

Today the investment in the share market has become so easy that even a 10-year-old can do
it. So with the ease of investment, there are also income tax benefits that are available to the
assessee when investment in the shares is made for the long term. However, benefits are also
available when investment is made for the short term but long-term investments are more
beneficial in comparison to short-term investments. The main benefit for investment in the
shares is that it gives a tax saving to an investor, as capital gains are chargeable at lower rates
whereas business incomes are chargeable at higher rates. So, the following are some
advantages that are available to the investor when investment is made in the Shares.

  • Lower Tax Rate: Sale of shares will be chargeable at the 20 percent highest as capital
    gain rates, provided the capital gains are long term. Also, the short-term capital gains
    are chargeable at 15 percent, provided the shares sold are through the stock exchange.
    Shares sold other than stock exchange and a short term will be charged at the normal
    rates applicable to the individual. Hence it is advisable to keep the investment for the
    long term as long as the shares are giving profits.
  • More Return on Investment: Investment in shares is provided more returns in
    comparison to investment in Fixed Deposits and saving bank accounts, provided the
    Investment is made with proper analysis and proper guidance. Return percentages are
    generally twice the return percentage offered by the Fixed Deposits.
  • High-Risk High Return: Although share trading comes with a calculated risk, when you
    look at the return side, it is very much acceptable by the investor. Regular investors on
    average earn 30 percent per annum.
  • Investment in Listed Shares are tax-free: This statement is a hundred percent true
    provided the capital gains arose are up to Rs. 100,000/-. Amount exceeding Rs 100000,
    will be taxable at 10% which is very less in comparison to business tax rates. (However
    this benefit of Rs. 100000 exemption will only be available where the capital gains in
    consideration are long term only.)
  •  The risk-Averse portfolio is Possible: In the Stock market, there are thousands of stocks
    trading. One can choose stocks with his/her knowledge and make a portfolio with very
    low risk. However, return in that case will also be very low but still high in comparison to
    saving bank interest rates. If the assessee does not know about investing, then he/she
    can take the services of a portfolio manager which comes with very low fees but very
    great results.
    Hope the article was informative and helpful. Thanks
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