Tax word scaring you? Don’t worry, we explain you everything!

Equity/Equity Mutual Funds/Equity oriented balanced funds:

Short term:-
Holding period<1 year

Taxed at flat 15%

Long Term:-
Holding period>1 year

Taxed at 10% with first 1 lakh exempt from tax each year.

Dividend received from Equity shares:

Rs 5000 is exempt from taxation each year.

After which the dividends are taxed as per your income tax bracket.

Debt Instruments:

Fixed Deposits:

Interest is taxable at the applicable income tax rate.
TDS of 10% is applicable if interest income exceeds 10,000

Debt Mutual Funds/Debt-oriented balanced funds:

Short Term Gains:-

Holding period<3 years
Taxed at marginal income tax rates

Long-term capital gains:-

Holding period>3 years
Taxed at 20% after indexation

Public Provident Fund(PPF):

It is a EEE product

Investors get tax deduction under Section 80C on the investment made, interest paid is tax free and the maturity proceeds are tax free, too.

National Pension Scheme(NPS):

Investors get a tax deduction of up to Rs 50,000 in a year under Section 80CCD, which is over and above the benefit available on Rs 1.5 lakh under Section 80C.

On maturity, 40% of the corpus is invested in annuity and the rest is tax free.

Gold/Gold Mutual Funds:

Short Term Gains:-

Holding period<3 years
Taxed at marginal income tax rates

Long-term capital gains:-

Holding period>3 years
Taxed at 20% after indexation

Real Estate:

Rent received is added to income and taxed at marginal income tax rates

Short Term Gains:-

Holding period<3 years
Taxed at marginal income tax rates

Long-term capital gains:-

Holding period>3 years
Taxed at 20% after indexation

What is Indexation?

While computing long-term capital gain (LTCG), indexation benefit is provided as compensation against inflation.

For example, if the LTCG is 10% p.a. and the inflation is 7% p.a., you need to pay tax only on 3% additional gains.

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