How to Smartly Save Taxes on Stock Market Gains? | CA Rachana Ranade
Summary
TLDRIn 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
📈 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.
🚀 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.
💼 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.
📊 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.
🌱 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.
📉 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.
Mindmap
Keywords
💡Taxation
💡Stock Market Gains
💡Short-term Capital Gain
💡Long-term Capital Gain
💡Intraday Trading
💡Futures and Options (F&O)
💡Tax Deductions
💡Profit Harvesting
💡Loss Harvesting
💡Dividend Taxation
💡Tax Exemption
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
of stock market version 2.0 and this is
the special coupon code for you the
expiry of this coupon code is tomorrow
so if you want to learn don't forget to
check out our website
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
insurance advisory platform and it is
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fin shots they'll help you in this
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they'll help you to choose the right
insurance policy you can book a free
call with them and these guys will help
you through whatsapp or text or in fact
you can also get on a free call with
them when they'll help you to choose the
right insurance policy for you number
two they'll take you through the entire
buying process why because not all
people are very tech savvy right so
they'll help you in the entire buying of
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three if required they'll also help you
in the claim settlement process as well
in fact recently i took my additional
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with ditto and the experience that i got
was really amazing and if you want to
experience the same thing you can surely
check out the link in the description
box below
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
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