If you make money only from the stock market, how much tax you pay depends on whether you’re an investor or a trader.
– For Traders: If you do intraday trading, futures, or options trading without delivery, your earnings count as business income. This means you get taxed based on the income tax slabs.
Here are the tax slabs for the financial year 2024-25:
– 0 to Rs 3 lakh: No tax.
– Rs 3 lakh to Rs 7 lakh: 5% tax.
– Rs 7 lakh to Rs 10 lakh: 10% tax.
– Rs 10 lakh to Rs 12 lakh: 15% tax.
– Rs 12 lakh to Rs 15 lakh: 20% tax.
– Above Rs 15 lakh: 30% tax.
Important Note: In 2025-26, there will be new tax slabs, where you won’t pay tax if your income is up to Rs 4 lakh.
For Investors: If you buy and hold stocks, your income is treated as capital gains. If you sell stocks after holding them for more than a year, you pay 12.5% tax on profits above Rs 1.25 lakh a year. If you sell stocks within a year, you pay a 20% tax on the earnings.
Reinvesting Profits: If you make a profit and put it back into buying stocks, you still have to pay capital gains tax that year. But if you invest in tax-saving options, like ELSS, you might save on taxes.
Expenses for Traders: Traders can deduct some expenses like internet bills and research costs before calculating their taxable income, which helps lower their tax.
Choosing the Right Tax System: You can choose between the old tax regime and the new one. If you pick the old regime, you can use deductions for investments like PPF or ELSS to reduce how much tax you pay. However, those deductions aren’t available in the new tax system, which just offers lower tax rates.
This means you should really think about which tax system works best for you
