Many investors will invest in the stock market without knowing its benefit and risk involved in it, but market is always right to reward its investors whether long term or short term prospective. However investors may find painful times and joyful profits based on the market conditions and there investment strategy but we should know the benefits of investing in equity shares to understand its implications. The benefits of investing in equity shares (Listed) are:-
- Dividend is exempted from tax Under Section 10(34) of Income Tax Act.
- Long Term Gains is exempted from tax Under Section 10(38) of Income Tax Act (If shares are sold in recognized stock exchange).
- The holding period for calculating Long term Capital Gain is 12 months (other assets its 36 months).
- Short term capital gains is taxed at lower rates that is 15%
- Dividend is not constant but can vary as per profitability of company.
- High risk and return always follows.
- Easily cashable
- Capital appreciation is high compare to other assets class.
- Easy to gift and transfer by demat mode.
- Low transaction & carrying cost.
- Bonus issue by companies if good profitability. This will maximize wealth.
- Hedge against inflations.
The equity shares of listed companies are one of the best investment avenues that are present. It can give good returns when calculated for many years. There may be years when returns may be very bad like the year 2008. But new investor should invest in shares of listed companies in systematic approach without giving importance to volume / quantity but quality of shares purchased. For example if you desired to invest every month 3000/- it not big issue you can buy say 10 Dabur Ltd, 16 Lakshmi Vilas bank(LVB) etc. over period of 12 months you can accumulate over 120 Dabur & 200 LVB with benefit of bringing down cost of investment when market is falling otherwise book profit. But never feel bad of low volume / quantity but quality and invest on long term basis on SIP approach only.
I have been reading your blog posts. I appreciate the quality of contents. I am an investor in Indian stock market. I need your clarification on Income Tax angle. Is FIFO method only to be adopted. For instance I have been holding TCS for long time ( more than a year) and now I trade in TCS on short term basis. If FIFO is to adopted my tax planning goes haywires. Please advise me.
ReplyDeleteSir / Madam
ReplyDeleteIn this connection CBDT vide circular No.768 dated 24.06.1998 has clarified that "FIFO method will be applied only in respect of the dematerlised holdings because in the case of of sale of dematerialised securities, the securities held in physical form cannot be construed to have been sold as they continue to remain in the possession of the investor and are identifiable seprately".
With regard to another question though normally there can be no transfer if the ownership in an asset remains with the same person however the Income Tax Act, provides an exception when a person converts any capital asset owned by him into stock in trade of a business carried on by him it is regarded as a transfer and hence taxable. In given case also you have convrted TCS shares into stock in trade.
Thanks for your clarification.
ReplyDelete1. How BTST ( Buy today Sell Tomorrow) transaction is viewed for tax purposes. For instance, say I am already holding Infosys 200 shares for quite sometime and I buy Infosys 25 shares again today at Rs 2400 and sell tomorrow this 25 shares at a profit. Here in this transaction I am not selling any of the shares held in DMat balance but specifically select BTST option provided by my DP. Can I take exception to FIFO method in this case?
Thanks
why target is 30 of sunil agro.. why is it rising??
ReplyDeletei sent u a mail also... no reply?
ReplyDeleteHi Gunjan Sethia
ReplyDeleteLooking at Company's Balance Sheet i feel it can cross 30/-. But again movement of price is solely depends on mkt sentiment. further you pleased to know that i have send reply mail please check.
I hope you are clarified.