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How does the capital gains tax apply to stocks and mutual funds?

Curious about Capital Gain

How does the capital gains tax apply to stocks and mutual funds?

In India, the capital gains tax on stocks and mutual funds depends on the holding period of the investment. Here's how it typically works:

1. Shortterm Capital Gains (STCG): If you sell stocks or mutual fund units within one year of their purchase, any gains from the sale are considered shortterm capital gains. Shortterm capital gains on stocks are taxed at the applicable income tax rate based on your income slab. For mutual funds, shortterm capital gains are taxed at a flat rate of 15% plus applicable surcharge and cess.

2. Longterm Capital Gains (LTCG): If you sell stocks or mutual fund units after holding them for more than one year, the gains are considered longterm capital gains. For stocks, longterm capital gains exceeding INR 1 lakh in a financial year are taxed at a rate of 10% without indexation benefit. For mutual funds, longterm capital gains exceeding INR 1 lakh are taxed at a rate of 10% with indexation benefit, or 20% without indexation benefit, whichever is lower.

It's important to note that the rates mentioned above are subject to change based on the prevailing tax laws. Additionally, certain securities like equity shares and equityoriented mutual funds may enjoy tax exemptions or reduced rates for a specific period under certain conditions.

Tax laws and regulations can be complex, and it's advisable to consult with a tax professional or financial advisor who can provide uptodate and personalized guidance based on your individual circumstances and the tax laws applicable in India.

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