How to Smartly Save Taxes on Stock Market Gains? | CA Rachana Ranade

Summary

In this informative video, Rachna Randare explores various strategies for tax-saving on stock market gains, including short-term and long-term capital gains, intraday trading, and F&O segment gains. She explains the tax implications based on different scenarios and offers insights on deductions, basic exemption limits, and the concept of profit and loss harvesting. The video also touches on dividend taxation for both residents and NRIs, aiming to educate viewers on smart tax planning in the stock market.

Takeaways

• 📈 Stock market gains can be categorized into five types: short-term capital gains, long-term capital gains, gains from dividends, intraday equity transactions, and gains from the F&O (Futures and Options) segment.
• 📊 Taxation of these gains depends on factors such as the time period of the investment, availability of deductions, and the individual's tax bracket.
• 💡 The presenter emphasizes the importance of understanding tax implications for financial planning and encourages viewers to like and share the video for educational purposes.
• 🎓 The video provides a shout-out to active viewers as a form of appreciation and community engagement.
• 💼 Intraday trading in the cash segment is considered a speculative business and taxed at the individual's applicable tax rate, with losses being carry-forward for four years.
• 📉 Losses from intraday trading can be offset against gains from other sources, but there are limitations on what can be set off against salary income.
• 🏦 Gains from F&O trading are treated as normal business income and are taxed at the individual's tax rate, with the ability to deduct business-related expenses.
• 🏠 Deductions for F&O trading include office rent, utilities, and depreciation on equipment, similar to any other business.
• 💡 The presenter introduces a strategy called 'profit harvesting' to minimize tax liability by selling and immediately repurchasing shares to realize gains in smaller amounts over time.
• 📉 'Loss harvesting' is another strategy mentioned, where investors book a loss to reduce tax liability and then repurchase the same shares to maintain their investment while potentially benefiting from a lower tax rate in the future.
• 💰 Dividend income is taxed at the individual's normal tax rate, with a flat 20% rate for Non-Resident Indians (NRIs), and a 10% TDS (Tax Deducted at Source) if the dividend exceeds 5000 rupees.

Q & A

What is the main focus of the video?

The main focus of the video is to explain how to smartly save taxes on different types of stock market gains, including short-term capital gains, long-term capital gains, dividends, intraday transactions, and F&O (futures and options) segment gains.

What are the five aspects of taxation covered in the video?

The five aspects of taxation covered in the video are short-term capital gain, long-term capital gain, dividend income tax, intraday transaction tax, and F&O segment gain tax.

How does the video suggest to reduce tax on intraday trading profits?

The video suggests that intraday trading profits are treated as speculative business income and taxed at the individual's tax slab rate. It also mentions that losses from intraday trading can be carried forward for up to four assessment years.

What is the tax implication for gains from the F&O segment?

Gains from the F&O segment are treated as normal business income and taxed at the individual's tax slab rate. The video explains that these gains can be offset against other income streams and that business expenses related to F&O trading can be deducted.

How are short-term and long-term capital gains on listed equity shares taxed differently?

Short-term capital gains on listed equity shares are taxed at 15%, while long-term capital gains are taxed at 10%. Additionally, long-term capital gains may qualify for an additional exemption of one lakh rupees.

What is the basic exemption limit for capital gains?

The basic exemption limit for capital gains is such that if the total long-term capital gain on listed equity shares is up to two lakh rupees, no tax is required to be paid.

What is the concept of 'profit harvesting' mentioned in the video?

Profit harvesting is a strategy where an investor sells shares to realize a gain, and then immediately repurchases the same shares. This allows the investor to book profits while maintaining the same investment, potentially reducing tax liability.

What is the tax treatment for dividend income if it exceeds 5,000 rupees?

If the dividend income exceeds 5,000 rupees, the company paying the dividend will deduct tax at source (TDS) at the rate of 10 percent.

How does the video suggest reducing tax on capital gains?

The video suggests using strategies like profit harvesting and loss harvesting, where losses are booked to offset against gains, thus reducing the overall tax liability.

What is the tax rate for dividend income for Non-Resident Indians (NRIs)?

For Non-Resident Indians (NRIs), the tax rate on dividend income is a flat 20 percent.

What is the time period for carrying forward capital losses?

Both short-term and long-term capital losses can be carried forward for eight assessment years.

Outlines

00:00

📈 Stock Market Taxation Overview

The video introduces various types of gains in the stock market and their respective tax implications. It covers short-term and long-term capital gains, dividend gains, intraday equity transactions, and F&O segment gains. The presenter emphasizes the importance of understanding taxation aspects based on time period, available deductions, and the tax slab of the individual. The video also encourages viewers to like, share, and subscribe for more financial education.

05:02

🚀 Taxation of Intraday Trading

This section delves into the specifics of intraday trading taxation, explaining that intraday transactions are treated as speculative business income and taxed at the individual's income tax rate. It discusses the possibility of carrying forward losses for up to four assessment years and the availability of deductions under section 80C, including investment in instruments like PPF or tax saver FDs. The presenter also highlights the importance of insurance as a tax-saving tool and mentions a platform called Ditto for insurance advisory.

10:02

💼 Tax Treatment of Futures and Options

The paragraph explains that gains from futures and options (F&O) are considered normal business income, not speculative, and are taxed at standard income tax rates. It discusses the set-off of losses against various income streams and clarifies that losses from F&O cannot be set off against salary income. The paragraph also highlights the importance of recognizing F&O income as a business for the purpose of claiming deductions on related expenses.

15:03

📊 Deductions and Taxation of Listed Equity Shares

This part of the script focuses on the taxation of short-term and long-term capital gains from listed equity shares. It outlines the tax rates for both types of gains, the availability of deductions for brokerage and other charges, and the benefit of basic exemption limits. The video also touches on the additional exemption for long-term capital gains and the rules for carrying forward losses for up to eight assessment years.

20:05

🌱 Profit Harvesting Strategy

The presenter introduces the concept of profit harvesting as a tax-saving strategy. By selling shares after gaining a profit and immediately repurchasing them, an investor can book profits while maintaining their investment, thus reducing the tax liability. The example given illustrates how this strategy can be used to minimize tax on long-term capital gains by utilizing the available exemption limit.

25:07

📉 Loss Harvesting and Dividend Taxation

The final paragraph discusses the concept of loss harvesting, where an investor books a loss to reduce tax liability and then repurchases the same shares to maintain their investment. It contrasts two investors, one who books a loss and another who does not, showing the tax benefits of loss harvesting. The paragraph also covers the taxation of dividends, including the tax rates for residents and non-residents, and the TDS implications for dividends exceeding a certain threshold.

Keywords

💡Taxation

Taxation refers to the compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures. In the context of the video, the theme revolves around understanding different types of taxes applicable to gains made in the stock market, such as short-term capital gains and long-term capital gains, and how these taxes can be smartly managed or reduced.

💡Stock Market Gains

Stock market gains refer to the profits made from buying and selling stocks. The video discusses various types of gains one can make in the stock market, including short-term and long-term capital gains, intraday trading gains, and gains from the futures and options segment. These gains are subject to different tax implications, which is the central focus of the video.

💡Short-term Capital Gain

A short-term capital gain is the profit realized from the sale of an investment asset that the investor held for a short period, typically less than one year. The video explains that such gains are taxed at a higher rate compared to long-term capital gains, and it provides insights on how these taxes can be calculated and managed.

💡Long-term Capital Gain

Long-term capital gain is the profit made from selling an investment asset that was held for more than one year. The script highlights that long-term capital gains are taxed at a lower rate than short-term gains, providing an example of how the tax on such gains is calculated and the benefits of the exemption limit.

💡Intraday Trading

Intraday trading is a type of trading where positions are taken and squared off within the same trading day. The video script explains that intraday trading profits are treated as speculative business income and are taxed at the individual's income tax slab rate, with the possibility of carrying forward losses for up to four years.

💡Futures and Options (F&O)

Futures and options are financial instruments used in derivative trading. The script clarifies that gains from F&O trading are treated as normal business income and are taxed at standard income tax rates. It also discusses the implications of losses from F&O trading and how they can be offset against other income streams.

💡Tax Deductions

Tax deductions are amounts that can be subtracted from an individual's taxable income, thereby reducing the tax liability. The video mentions various deductions available for different types of stock market gains, such as brokerage fees, investment in tax-saving instruments, and expenses related to the business of trading.

💡Profit Harvesting

Profit harvesting is a strategy used to realize gains in a tax-efficient manner. The script illustrates this concept by showing how selling and immediately repurchasing shares can help in booking profits while resetting the cost basis, thus allowing for tax exemptions on long-term capital gains in subsequent years.

💡Loss Harvesting

Loss harvesting is a tax strategy where losses from the sale of an asset are used to offset capital gains to reduce tax liability. The video script provides an example of how this strategy can be applied by selling shares at a loss and immediately buying them back, which allows the investor to carry forward the loss to reduce future taxes.

💡Dividend Taxation

Dividend taxation pertains to the tax levied on income received from dividends. The script explains that dividends are taxed at the individual's normal income tax rate and that if the dividend income exceeds a certain threshold, tax is deducted at source by the company paying the dividend.

💡Tax Exemption

Tax exemption refers to an amount that can be deducted from an individual's income to reduce the taxable income, thereby lowering the tax liability. The video discusses the basic exemption limit and additional exemption for long-term capital gains, which are key to understanding how much tax one might have to pay on stock market gains.

Highlights

Introduction to the video on smartly saving taxes on stock market gains.

Explanation of five different types of gains and their taxation: short-term capital gain, long-term capital gain, dividend gain, intraday equity transaction gain, and F&O segment gain.

Taxation depends on time period and availability of deductions, which determine the final tax rate.

Importance of educating oneself on taxation to increase awareness and understanding.

Shout out to viewers for their support and engagement, emphasizing community interaction.

Intraday trading in the cash segment is treated as speculative business, attracting higher tax rates.

Losses from intraday trading can be carried forward for four assessment years.

ATC (Allowance for Tax Credit) deduction is available for intraday gains, similar to other investments or expenses.

Term life insurance as a recommended investment for tax savings and financial protection.

Futures and options gains are taxed as normal business income, not as speculative business income.

Losses from F&O can be set off against various income streams, except for salary income.

Deductions available for F&O income include business expenses, such as rent, utilities, and depreciation.

STT, brokerage, and transaction charges are deductible expenses for F&O income.

Interest paid on loans for F&O trading is deductible against gains, though not recommended.

Losses from F&O can be carried forward for eight assessment years.

Taxation of listed equity shares differentiates between short-term and long-term capital gains, with different rates and exemptions.

Profit harvesting technique to minimize tax by selling and immediately buying back shares to realize gains in stages.

Loss harvesting strategy to reduce tax by selling shares at a loss and immediately repurchasing them to maintain the position.

Taxation of dividends, including the tax rate for NRIs and the TDS deduction by companies for dividends exceeding a certain threshold.

Transcripts

[Music]

okay

[Music]

hey folks see ya rachina randare here

and i welcome you all to a very

interesting video about how to smartly

save taxes on stock market gains if you

remember i had done one more video on

taxation recently somewhere around 26

jan in which i had said teen guru lagan

dinner parega and in that i have talked

about what is the meaning of taxes what

are the different types of taxes we

talked about even constitution of india

in that video so if you want to watch

that video you can check out the i

button but not right now after the video

is over what are we focus uh what is

going to be our focus in this video is

going to be about

taxation on five different types of

gains which different types of gains it

could be a short-term capital gain it

could be a long-term capital gain it

could be again because of dividend it

could be gain because of intra day

transaction inequity it could be about

gain in f and o segment that is the

future as an option segment

what happened

you want intraday taxation first

change the sequence

f and o

so with this as a basic stuff you know

what is going to be covered in the video

but if you were to understand all these

five taxation aspects very clearly you

need to know about five more things

taxation depends on what number one it

depends on the time period

number two it depends on are there any

deductions available or not okay this

will decide what will be the final final

rate of tax which will be applicable on

the game number four it's not got

anything to do with the tax session but

super super important what

don't forget to hit that like button and

share this video with a lot of friends

so that all get educated and they get

more and more awareness on the subject

of taxation on stock market gains and

last but not the least this time i would

like to really really really thank

these people and of course everyone is

special but i'm trying my level best to

you know

give a small shout out from my end to at

least two two people in each and every

video now onwards because otherwise i

don't have the pleasure to interact with

you personally but then i thought i can

at least give a shout out to two people

in every single video this time the

first shout out goes to mr sagar and

sagar has just congratulated me for the

you know whatever women's day

celebration and me featuring in the

front page of almost all the newspapers

so thank you sagar for uh this amazing

comment and

how can i forget mr ratnav natarajan and

he has been super kind he comments on

each and every video of mine and he

always says this that i'm sharing your

video with all of my friends so thanks a

lot to all the viewers and this time

special shout out to these two guys

now let's try and understand the

taxation of all the khatron ke khiladi

means those people who love doing

intraday trading we are talking about

intraday trading in the cash segment or

the equity segment we are not talking

about intraday in fndo segment right now

we are going to cover that okay so what

happens in cash segment in the intraday

let's understand the meaning first you

buy today and you sell today itself

or you sell today and then you buy today

what is the difference

buying first selling later or selling

first and buying letter what is the

second concept second concept is nothing

but concept of short selling if you want

you can check out this video later but

if you want to learn such amazing

concepts like short selling or

75 plus concepts in a very simplified

manner and in a very systematic manner

then don't forget to check out my basics

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dot com right so one one point that we

have understood till now is intraday

means what buying and selling on the

same day number one number two if it's

an intraday transaction it will be

treated as a speculative business now we

are not here to understand why it is

treated as speculative business why not

non-speculative business we are going to

see a intermediate and ca final taxation

we are not here for any professional

course taxation right so we just need to

understand okay it is treated as

speculative business what is the

implication of that implication is that

taxation will be as per whatever tax lab

rate you are in means what assume i'm

into the 30 percent tax late in in the

30 tax lab rate okay

if i have any intraday profits how much

tax will have to be on that 30 percent

if he is in 10 percent gain so i'll

cutting 10 percent

okay he will have to pay how much tax 10

percent tax on his speculative gain on

intraday simple right

now he is laughing because yesterday

only had told me that he has a lot of

losses in intraday okay moment oh huh so

he has lot of losses in intraday trading

now he said what to do can he carry

forward this loss yes for how many years

for four assessment years okay so

if assume in this year he has lost okay

and assume zero again nothing nothing

next year he has again can he set off

next year gains with previous year

losses yes but for how many how many

assessment years he can carry that

forward only up to four assessment years

i hope this is also clear what about atc

that one like fifty thousand car

reduction is that also available if you

have some intraday gains answer is again

yes

well in the media previous section i

talked about atc so if i were to get a

deduction under section 80 say there

could be two possible options

possibility number one through

investment in i mean something like ppf

or a tax saver fd or equity oriented

mutual fund whatever possibility number

one through investment rule possibility

number two through expense route means

what you spend on something and you get

a deduction but i believe that under atc

one of the best things that you can do

is spend on insurance

in insurance if you ask me i believe

that term life insurance is one of the

best ones to choose from why because

number one it's a very inexpensive

solution and number two you'll also get

the benefit of saving taxes so if i were

to talk about

uh you know getting an insurance right

now 31st march is very near and in that

hurry people might choose a wrong

insurance for themselves and regret

later

but don't worry ditto which is an

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in fact recently i took my additional

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now let's go ahead and come to a very

interesting point about how futures and

options gains are taxed number one most

important point that you should note is

that it's treated as a normal business

income means what do we mean by normal

business income like as you have you run

a hotel that's a normal business income

i run a business that's a normal

business income right similarly if

you're gaining anything from fndo that

will also be treated as what normal

business income in short it's not rated

as a speculative business income number

one number two what about the tax rates

how much tax rate is applicable for

futures and options gains same logic

it's treated as normal tax rates means

what if i'm into the 30 tax lab the

gains that i get from futures and

options will be taxed at 30 percent for

him

10 correct so i think this is also very

well understood but now comes the very

interesting point about set off

if i have

a separate business like assume i have a

hotel business okay but in effendo if i

have

so much loss okay so i'll give you

different different scenarios i have so

much loss in effendor

i have

another business a hotel business in

which i have gained okay assume i had an

extra house which i sold and on which

i've gotten a capital gain this year i

have also earned some money on interest

let us say interest on fds okay i also

have a rental income and of course i

have some salary income okay so i have

one loss and i have five different

income streams incomes or gains right

now

big question can i start off this huge

loss

against all these incomes yes or no

let's go one by one okay

first of all i have this income from

hotel business

can i set off some part of that loss

here yes

okay

done so whatever gain i had got from

that hotel

everything is gone okay

but still a lot of losses remaining

can i set off that loss against the

income that i had got by selling my

house yes

all right

so now whatever gain i had got by

selling that house

that is also gone oh

still loss is remaining you can imagine

what maddening loss i have made i would

have made an effect this is just an

example otherwise i'm in profits in

effendo okay third thing i'd also want

interest income can i set up that

balance loss against that whatever okay

interest

gone but still some losses remaining my

god

now what else was it

fourth one still remaining now one more

rental income that i have okay gone but

still some losses remaining

and that salary is also remaining okay

last shall we try

why

what happened

oh

it means that

the loss

on

non-speculative business normal business

a friend of business in our example

cannot be set off against income from

salaries

in the previous section we have talked

about what in the previous section we

have talked about speculation gains and

speculation loss so what was the rule

there speculation loss can be set off

only against speculation gain

not anything else i hope this point is

absolutely clear but there are many many

more interesting points like

if i'm going back to a friend or

taxation okay that is considered as my

normal business income correct then what

about my expenses on internet charges

what about my expenses on the rent of

that house of that office can i get that

also as a deduction exactly that is what

we are going to talk about in the

immediate next section of the video now

fndo income being treated as normal

business income is really really

important hi let us understand any

normal business to to run any normal

business income i am going to incur a

lot of expenses okay do i get that as a

deduction yes so for example in my

business i pay salary do i get a

deduction for that yes i pay rent for my

office do i get a reduction on that yes

now same think of your fndo income as a

friend of business income

are you maybe going to pay some rent for

the office through which you are going

to operate that can you get that as a

deduction against your referendo games

answer is yes

you will need a computer you need a

mobile phone maybe uh you can get a

depreciation on that

is that also allowable as a reduction

answer is yes why not number three you

are going to pay electricity bill

is that also a deduction answer is again

yes to sharpen your referendum skills

you have taken my friend of course is

that also an expense which is related to

your income earning activity of offender

answers again yes so don't forget again

to check out my website

ratchanalrand.com right so i hope you

have understood that because it's a

business income you can obviously take

all these as your business expenses you

can claim them as your business expenses

what will happen your ultimate

profitability will be your referendum

gains minus all these expenses and

whatever will be remaining you'll have

to pay income tax on that amount wait

before that also

whatever expenses that you have paid stt

brokerage or maybe transaction charges

all these these are also available as a

deduction simple so balance amount

you'll have to pay income tax one more

interesting thing

not at all encouraged from my side but

if you have taken a loan

to invest or to trade in effendo

horrible decision but if someone has

done that whatever interest you're

paying on that loan that is also

available as a deduction against your

gains from effendo okay so i've told you

a lot of points what are available as a

deduction against your friend again

still if some gain is remaining

can i still reduce that gain yes how by

investing again in atc

okay one like 50 000 i told you just in

the previous segment right so that is

also available now in another situation

now if you have incurred a loss in a

friend can you carry that forward yes

till how many years till eight

assessment years

i hope with this fndo tax session is

absolutely clear but before that one

last point

whether fndo is an intraday transaction

or fndo you are taking a position today

squaring it tomorrow or you are taking

the position today squaring it after one

week or after two weeks or at the end of

the month

everything whatever is the scenario

taxation will be as per normal business

income so intraday fndo and uh more than

one day eval effendo no separate tax

treatment tax treatment remains the same

now let's discuss how will your listed

equity shares again if i'm talking about

short-term capital gain or long-term

capital gain how will that be taxed okay

so have a look at this table what we

have done we have we are talking about

different parameters that we are going

to discuss we are also going to talk if

it's a short-term capital gain then how

will it be taxed and if it's a long-term

capital gain how will how it will be

taxed right before we go go on to the

taxation part first one is what is short

term what is long term correct so if i'm

talking about any listed share i bought

it today and if i sell it within one

year then it will be termed as a short

term and if i buy today and if i sell it

after one year it will be termed as what

long term so i hope the first point

period of holding is absolutely clear so

if i make a gain in a short term

transaction how much will will be my tax

rate that will be 15

but if i get a gain in a long term

capital asset i'll be taxed at the rate

of 10

okay this one is also clear right

now

i've gotten again agreed do i get any

deductions against that answer is yes

which deductions let's understand one by

one what about brokerage or other

charges which are mentioned in that

broker's note contract note do you get

that as a deduction answer is yes if you

see a deductible deductible in both

cases be it short term or weight long

term correct

what about the benefit of basic

exemption limit do i get that and if you

see yes is given in both but what is the

interpretation of that i'll give you a

simple example assume that your total

long-term capital gain on listed equity

shares is 2 lakh rupees will you have to

pay any tax on that answer is no why our

basic exemption limit is to like 50 000

correct so no need to pay any tax on

that

if that 2 lakh rupees had instead of

long-term capital gain it would have

been a short-term capital gain of 2 lakh

would you have been required to pay any

taxes no why are it is within a basic

exemption limit so no need to pay any

taxes

simple and clear yes so that was about

benefit of basic exemption limit

moving on to the next point this is an

additional exemption that i'm talking

about has got nothing to do with basic

exemption limit so again i'll give you

an example assume you're a person

wherein you are getting a salary and

your salary income is 10 lakh rupees

simple seller income is 10 lakh rupees

now in addition to that we have gotten a

long term capital gain of 80 000 rupees

okay

will you have to pay tax on that 80 000

rupees of long term capital gain answer

is

no why here for long term capital gain

you get an additional exemption of one

lakh rupees okay

means what one more example you want no

problem instead of 80 000 rupees if you

would have gained if you if you had a

long-term capital gain of one lakh

twenty thousand rupees then what will

happen tell me

from that one lakh twenty thousand

rupees one lakh gone why exemption

you'll have to pay tax only on twenty

thousand rupees at what rate ten percent

because it's long term correct long term

clear now assume

10 lakh

salary

and instead of long term capital gain

you have a short term capital gain

whatever 80 80 000 1 lakh 20 000 or any

figure will you have to pay tax on that

yes so no additional exemption is

available for a short-term capital gain

whatever you have that will be taxed at

what right 15 we have already discussed

about that right

now let's talk about set off

assume you have a short-term capital

loss it can be set up against one

short-term capital loss can be set off

against short-term capital gain or even

long-term capital gain but

if you have a short if you have a

long-term capital loss

long-term capital loss can be set off

only and only against long-term capital

gain okay

moving on how many years can i carry

forward my loss if you can see both

cases same if you have any short-term

capital loss or long-term capital loss

you can carry forward for eight

assessment years coming on to the last

two points

what is not available as a deduction

if you are talking about security

transaction tax that is not available as

a deduction and even if i'm talking

about section 80c that one lakh fifty

thousand that is not available as a

deduction for

gains from either short-term capital

gains as a short-term capital gains or a

long-term capital gains

i hope that till now whatever knowledge

you had about short-term capital gain

long-term capital gain taxation you have

broadened your perspective on gains from

both these

now next three to four minutes i want

hundred percent attention why in these

three four minutes i'm going to tell you

a magic formula by which you can gain a

lot

but by paying

zero tax how let me prove my point with

the help of an example

assume that today you are buying buying

boy you are buying shares which has hdfc

shares as an example this is not a

recommendation so today you are buying

hdfc shares worth rupees 10 lakh okay

and assume that your target

of these 10 lakh rupees invested is

rupees 12 lakhs you are wanting to have

what 20 percent gains in two years that

is your target okay so let's understand

what happens after two years because

it's our example and because you have to

win

after two years

what happens is that the value is

actually rupees 12 lakhs okay are you

happy

now that one is our chair this is the

you're happy very good so after two

years what's up what happens is that

your value of hdfc shares has gone up to

12 rupees what was your cost tell me

cost of buying was 10 lux what is your

gain is this an ltcg yes long term

capital gain is 2 lakh weight in just

the previous section of the video i told

you that you will get an exemption of 1

lakh for long term capital gain so you

are going to claim that exemption of how

much 1 lakh rupees so what will be your

balance ltcg so this was not your final

ltch i can say this was your base gain

okay what is your final long-term

capital gain that is rupees one lakh how

much tax you are going to pay on that

tax rate is what tax rate is

ten percent

so finally you will be paying ten

thousand rupees

will say

you have just told that you are going to

pay zero rupees tax and here you are

showing ten thousand rupees tax

wait wait wait wait now the concept of

profit harvesting comes into place okay

how are we going to do profit harvesting

for that let's understand so let me keep

this i'll not i'll not you know rub this

i'll give you case two

what was your target tell me target was

two lakh rupees gain agreed

so assume that after

one year so after one year your value of

the shares has now become 11 lakh what

was the cost at which you bought these

shares that was 10 lakh so

assume

that okay 11 lakh i'm happy so what do

you do you sell these shares

which were worth rupees 10 lakh so that

was your cost price okay now what is

your gain tell me gain is one lakh

what is the exemption that is available

exemption is off again one lakh so how

much tax will you pay

zero y and again is zero tax will be

zero wait

you are happy agreed but you are also

sad at the same time why you know about

my target was 12 lakh nah you're selling

entire shares at 11 lakh only is there

any solution yes there is a solution now

this is this concept of profit

harvesting pay attention

you sold shares worth rupees 11 lakhs

what you have to do

sell

oops go wait wait wait what do you have

to do

sell

and buy

immediate

this is the trick

sell and buy immediately in simple words

what are you doing you're booking profit

of 1 lakhs but you're still waiting for

that target of total 2 lakhs profit so

now what happened what happened still do

you have same number of shares in your

portfolio yes but what is your new cost

price now

new cost price is 11 lakhs

simple delay if you have not understood

rewind and play again now what happens

after another year so

after one year so ultimately this is now

scenario after two years okay so is

after one year what has happened what is

the value

value is 12 lakhs is your target met yes

what is your cost price now or 10 lakh

no all 10 lakh you sold at 11 lakh and

again bought at 11 lakh so your new

value is 11 lakh

what is your gain

gain is one lakh

what is the exempt amount

one lakh what is the tax

zero

oh ho

now what happened ultimately let us

understand ultimately

your tax here

is zero because you harvested your

profit you took the benefit of one lakh

each and every year so in the previous

case in the previous case what was your

gain pay attention what was your gain

your gain was two lakh here what is your

gain one lakh plus one left oh gain is

same case one case two tax ten thousand

tax zero zero

i hope you have understood the magic of

profit harvesting

now let's come to a super interesting

concept which is the concept of loss

harvesting and what is that let's take

an example of after a long time chandu

and his bandhu okay both both had bought

shares of abc limited and xyz limited

100 each

okay

in abc limited when they are bought

hundred shares they both are in a profit

of 50 000 but in xyz shares they are in

a loss of 30 000

simple delay okay now ideally tell me

chandu wandu both would have been

required to pay the same amount of tax

yes

wait but they are paying separate amount

of taxes how let's understand first

let's take the case of chandu oh by the

way they bought both these shares just

let us say five months ago so tell me is

it a short term or long term it's short

term okay now what is chandra doing

saying emotional i'm not going to book a

loss i'm going to pay 50 000 into 15

percent short term capital gain i'm

going to pay a tax of how much 7500

rupees why is he not ready to pay book

the loss because he feels that after one

year one and a half year i'm surely

going to book up book a profit in this

so unrealized loss remains just like

that

maybe after one and a half year he makes

a profit agreed okay but bad medicine

tell you simple how much has he paid tax

again he has paid a tax of 7500 done for

this year

now let's check what mr bandu is doing

bandu on the other hand how much was the

gain 50 000 but he says i'm going to

book the loss book the loss of how much

30 000 balance 20 000 now he's going to

pay a tax of how much 20 000 into 15

percent that is three thousand now we'll

say munda

because he is booking laws

to reduce the tax

should that be the logic behind it no

he's he's super smart

understand the logic behind it what

bundle has done he has sold 100 shares

of xyz but simultaneously he has bought

hundred shares of again same xyz

okay so what happened all in all what

happened did he book a loss yes agreed

but same image at next moment is again

what xyz shares so net net number of

shares in his portfolio of xyz remains

same

agreed

now has his tax reduced yes

now let understand what happens after

one one and a half year his target is

met

now he's into profit

okay after one and half a reason profit

can he can he book the profit at that

time yes because he still has 100 shares

in his portfolio

now because it's a long term he'll pay

only 10 percent tax and that too he'll

also get a one lakh exemption i think or

catching right so i hope you have

understood this concept where you book a

loss but immediately buy the shares and

this concept is known as the concept of

loss harvesting can you see this in any

of the portals so if you have a zero the

account then you have to go to the

console yes click there

and there and finally what can you see

loss harvesting report exactly so this

is the simplest way to understand how

much loss i can harvest to reduce my

taxes

coming on to the taxability of dividend

just three important points to be

understood number one whatever dividend

you are getting that will be taxed at

your normal tax liabilities 30 10

percent you know that and that will be

taxed under the head income from other

sources number one number two if you're

an nri then tax rate will be flat 20

okay only for nrs and third important

point is that if the dividend income

exceeds 5000 rupees then the company who

is paying dividend they will deduct tax

tds at the rate of 10 percent

well i hope you have enjoyed this

taxation master class and by now keep

your hand on your head i'm sure it might

be hot you have learned a lot in this

entire video but if you want to learn

more on how to file taxes especially

five documents that you need to file

taxes you can click here and if you want

to know more about grandfathering

concept you can click here till then

take care

and bye

[Music]

you