We always read that there is no tax implication on equity or stocks and shares, as they are called in common parlance, provided one holds them for more than 12 months. Yes, there isn't any tax liability in the long-run, as long as you purchase them through a regular exchange sale, hold them and again sell them on the exchange through the regular route.
Any alteration in the way you offload these shares or acquire them could lead to a tax burden on the income that would otherwise have been tax exempt.
Find the most common mistakes that could turn your long-term equity gain taxable.
Sale of Shares
Even though shares sold move from one demat account to another, how they move decides how a shareholder would be taxed.
Open offers
Several open offers hit the market each year. Many are tempted to sell via the open offer route if the company is offering attractive prices. But if shares are sold through open offers then the sale is considered as a debt transaction because the promoters are offering to purchase your shares for money.
If you tender your shares through an open offer you would have to bear taxes on the gains. This is because there is no long-term taxation on equity, but debt funds are taxed at 20% on completion of 12 months (prior to July 10, 2014) or 36 months (after July 10, 2014).
Bonus Shares
The shareholder need not pay any income tax in the year in which a company issues bonus equity shares. An issuance of bonus shares is considered to be dividend and hence the price of acquiring these shares is considered as zero. As a result, when these bonus shares are sold, the total sales proceeds would be taxed as capital gains..................Read more about how 'Your Long-Term Equity Gains Could Turn Taxable'
Article Source: http://EzineArticles.com/8905181
Any alteration in the way you offload these shares or acquire them could lead to a tax burden on the income that would otherwise have been tax exempt.
Find the most common mistakes that could turn your long-term equity gain taxable.
Sale of Shares
Even though shares sold move from one demat account to another, how they move decides how a shareholder would be taxed.
Open offers
Several open offers hit the market each year. Many are tempted to sell via the open offer route if the company is offering attractive prices. But if shares are sold through open offers then the sale is considered as a debt transaction because the promoters are offering to purchase your shares for money.
If you tender your shares through an open offer you would have to bear taxes on the gains. This is because there is no long-term taxation on equity, but debt funds are taxed at 20% on completion of 12 months (prior to July 10, 2014) or 36 months (after July 10, 2014).
Bonus Shares
The shareholder need not pay any income tax in the year in which a company issues bonus equity shares. An issuance of bonus shares is considered to be dividend and hence the price of acquiring these shares is considered as zero. As a result, when these bonus shares are sold, the total sales proceeds would be taxed as capital gains..................Read more about how 'Your Long-Term Equity Gains Could Turn Taxable'
Article Source: http://EzineArticles.com/8905181
