Income Tax News: Investing in THIS Stock Market Scheme Can Help Salaried Individuals Earning Up to 12 Lakh Save BIG

Income Tax News: The quest for tax-efficient investments often leads investors to explore the potential benefits of equity investments. While equity may not fall under the conventional Section 80C investments, there are several avenues within the equity landscape that offer tax advantages. Let’s delve into the key aspects that make equity investments a viable option for tax-conscious individuals.

RGESS and Section 80CCG

• The Rajiv Gandhi Equity Savings Scheme (RGESS) aims to encourage small and first-time investors to enter the equity markets.
• Investors with an annual income of up to Rs12 lakh can claim a 50% exemption on the amount invested in equities, capped at Rs50,000.
• This benefit can be availed over a span of three years, providing a gradual tax advantage for new entrants into the equity realm.

ELSS for Section 80C Investments

• Equity-Linked Savings Schemes (ELSS) offer an indirect yet tax-efficient route for equity investments.
• Investments up to Rs1.50 lakh per financial year can be claimed under Section 80C.
• Note that this limit encompasses various investments, including ELSS, PPF, CPF, long-term deposits, ULIPs, tuition fees, life insurance premium, and the principal component of a home loan.

Preferential Treatment for Short-Term Capital Gains

• Equities enjoy preferential treatment for short-term capital gains, defined as holding for less than a year.
• The short-term capital gains tax on equities is charged at a concessional rate of 15%, providing a more favorable tax scenario compared to other assets.

Preferential Treatment for Long-Term Capital Gains

• Long-term capital gains on equities are defined for holdings exceeding one year, differing from the longer tenure required for most other assets.
• Until March 2018, LTCG on equities were tax-free; however, a flat rate of 10% has been applicable since April 2018, with a basic exemption of Rs1 lakh per financial year.

Dividends and Tax Implications

• Dividends, while relatively less burdensome compared to interest income, have specific considerations.
• Dividends are post-tax appropriation and subject to a dividend distribution tax (DDT) of 15% plus surcharge and cess.
• Since April 2016, dividends beyond Rs10 lakh are additionally taxable in the hands of the investor at a rate of 10%, necessitating careful consideration.

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