When you sell an equity fund, you have to pay equity tax to the government. This process often involves some criteria, upon which tax is levied upon an individual.
According to the new tax regime, your tax depends on your holding period and annual income put together. So, to understand your tax deductions you have to find out the status of the both to manifest an error-free transaction.
In this article we will provide various insights upon which you will determine if you are eligible for certain tax deductions from your account. Let’s start.
In any case, you are not liable to pay any tax below 1-lakh rupees gains for a holding period over one year. But, in that scenario your total annual income can be considered.
First of all, in the new tax regime, the tax policy is limited for equity gains less than 3 lakhs. So, if you have no regular income, you can benefit from a zero tax policy.
On the contrary, to that, if your regular income is less than 3 lakhs, your equity below 3 lakhs would be taxable under the new tax regime. Therefore, on that almost 6 lakhs amount in total, you will have to pay 10% on the residue amount you make as profit.
If an individual’s annual income is above 3 lakhs or below 7 lakh, in this case also, the new tax regime benefits taxpayers. As the new tax regime gives relaxations to individual’s earning upto 7 lakh, consequently they will not be under the tax treatment, but as said before, a small amount of 10% will be levied as per your mutual funds gains.
Next, the individuals whose annual income surpasses the 7-lakh limit, 10% tax will be levied on the total gains.
Lastly, if an individual falls under the category where his income does not exceed 7 lakhs limit but his total gains adding mutual funds does, then the mutual funds gains above 1 lakh will be charged and levied.
If you’re following the old tax regime, where the gains limit is different, you may get some valuable benefits in that. For the old tax regime, there was no tax upto 5 lakhs amount. Therefore, in this case you have to calculate likewise, the tax amount in the new tax regime. Hence, you will find which regime you will ultimately choose to gains good returns.