InvestorQ : Why is taxation important when investing in equity investments?
Manish Mehta made post

Why is taxation important when investing in equity investments?

Answer
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1 year ago


Equity is one of the better performing asset class in recent times and with the concept of Systematic Investment Plan (SIPs) having gained unprecedented popularity, many retail investors have taken to investing in equity asset class.

However, it is important for investors to keep in mind the varied ways in which investments are taxed on redemption.

This is because time frames differ among equity class itself from the point of view of taxation. For example, capital gains tax is based on the period of holding. So, for stocks and equity-oriented mutual funds, long term is defined as more than 1 year, but for Unit Linked Insurance Plan (ULIPs) this parameter doesn’t apply.

Once returns are taxed, the take home returns you earn reduce. Hence, given that different equity assets attract different tax rules, investors must take a careful look at the suitability of an investment in terms of taxes, too.