In this article I will share with you, numerous ways on how to minimize your Stock Market Taxes and instead add to your wealth 🤑
We all curse the government for imposing upon us various taxes that take a huge share of our hard earned profits but do you know that the government wants to go for a better rate.The Government wants us to go for a better rate suitable for us.
So there are 2 basic tax rates known by us-
- LTCG – Long term capital gains tax of 12.5% if the investment period is more than 12 months.LTCG upto ₹1,25,000 are exempted from taxes.
2. STCG – Short term capital gains tax of 20% if the investment or trading period is less than 12 months.
If you don’t have any other income or if you are retired then according to basic tax slabs,upto 4 lakhs are fully exempted from taxes.Add ₹1.25 lakhs and your full exemption is almost ₹5.25 lakhs.
Basically, traders can be of two types-intraday traders who square off the trades the same day and Future & Options(FnO) traders. Intraday trading comes under classification of speculative income and FnO comes under business income.
If a trader is doing business and income is upto 12 lakhs then the profits are entirely exempted under rebate of Sec 87A. Even if the combination of salary,rental and business is 12 lakhs,then there are no taxes.
Setting off Losses
One thing that many people trading in stock markets don’t know is that business losses can be carried forward for 8 years.Only if the returns are not filed in the Assessment Year, then no losses can be carried forward.
Good legal way to reduce tax burdens above 12 lakhs
You should know that you can claim the following expenses that can be adjusted against profits
-Laptop
-Rent
-Electricity
-Furniture
-Mobile Bill etc.
Forming an HUF
HUF doesn’t offer much benefits until you have incomes of 100 crores and more No taxes are imposed upto income of 2.5 lakhs. If an individual gifts HUF and HUF makes income,then the individual gets taxed instead.
One big cost disadvantage is compliance costs are huge.
GIFTS
IF a husband gifts a wife, then the husband is liable to pay taxes on income generated on the gifts.Gifting is not suitable for Husband and wife but gifts are suitable for children. Suppose an individual gifts 1 cr to child, then the income of both parents and child is exempted upto 12 lakhs from taxes.
Clubbing provisions
If you transfer 1 cr to a child and the child makes 7 lakhs income from 1 cr then this income of 7 lakhs will be taxed on you. If the child makes returns on reinvestment of 7 lakhs then that will not be taxed to you.Same applies if the individual gives to HUF.
Clubbing provisions apply to husband and wife & not major children.Loans can be instead given to avoid imposition of Clubbing Provisions.The same applies to Mutual Funds also.
How buying property can be beneficial in saving taxes
Entire capital gains from stock markets and Mutual Funds can be reinvested into a residential property in India within 2 years upto the value of 10 Cr and are exempted from taxes under section 54F of the Income Tax Act but there is a catch.You need to file the returns the same year and mention in return that you seek to reinvest the capital gains.
If you don’t file the same in returns the same Assessment Year,you will forfeit the right and the capital gains will be taxed. If you have forgotten to file,then you can revise your returns by 31st December.
Turnovers Simplified
The turnovers are complex to calculate and most of the people make mistakes here.Turnover in stock market is defined as the difference between profit and loss
If the turnover is above 2 crores,then audit is mandatory.Don’t underestimate the audit procedures because you will end up paying a fine of Rs 1.5 lakhs if audit is not done.
Conclusion
If you keep all the above things in mind then you will end up saving a lot of taxes and these taxes will help in building your wealth in the long run. So follow the law and make your investing/trading journey easier and filled with money🤑 💰.If you like the articles do sign up for the newsletter and also comment in the space below👇 You can also join our social media spaces and watch out for more such articles.