InvestorQ : Do I have to pay taxes if I make money on investing?
Niraja Mehta made post

Do I have to pay taxes if I make money on investing?

user profile image
Anu Biswas answered.
2 years ago

Investing also needs to be looked from a tax efficiency perspective. Let us understand this a little more closely. If you park your money in a savings account, then you do not get any tax benefits. On the other hand, the interest you earn on these savings accounts attracts the peak rate of tax. Investing through equities can be a lot more tax efficient. To begin with, dividends are tax-free. Long-term capital gains were free of tax (but from this year you pay 10% which is still quite low) and short-term capital gains are taxed at a concessional rate of 15%. Alternatively, if you invest in equities through Equity Linked Savings Schemes (ELSS), you get the added benefit of tax rebate under Section 80C of the Income Tax Act. This makes investing through equities and mutual funds a lot more tax efficient.
There are different types of taxes that you pay on equities. When you get dividends, the company deducts dividend distribution tax (DDT) before paying you. Then if you’re annual dividends are more than Rs.1 million, then also you need to pay 10% tax. When you make profits by selling shares also you need to pay tax. You must know why the tax is important. If you get Rs.50,000 as capital gains and then if you pay 30% taxes, then you are only left with just Rs.35,000. That is why taxes are important.