Tax Rules


Rules, Regulations & Tax Effects - Fixed Deposits, Bonds & NCDs For Residents

  • TDS @ 10% If Interest Exceeds, Rs.5000 For NON-Bank FDs/NCDs & Rs.10000 For Bank FDs
  • Rs. 1 For Bonds of unlisted Companies.
  • No TDS for Bonds Of Listed Companies
  • Bank S/B Interest Exempted Upto Rs.10000 U/S 80TTA
  • TDS @20% if No PAN is Provided
  • You May Submit Form 15G(Non Senior citizen/HUF) or 15H(Senior Citizens) if your Total Income is Below Taxable Limit.

Rules, Regulations & Tax Effects – Mutual Funds

Tax Implications on Dividend received by Unit holders from a Mutual Fund

Individual/HUF Domestic Company NRI
Dividend    
All schemes Tax Free
Tax on distributed income (payable by the scheme) rates**
Equity Oriented Schemes Nil Nil Nil
Other than equity oriented schemes 25%+ 10% Surcharge+ 3% Cess 30%+ 10% Surcharge+ 3% Cess 25%+ 10% Surcharge+ 3% Cess
  =28.325% =33.99% =28.325%

* Securities transaction tax (STT) will be deducted on equity oriented scheme at the time of redemption/switch to the other schemes/ sale of units. Mutual Fund would also pay securities transaction tax wherever applicable on the securities sold.

** As per the Finance Act, 2014 for the purpose of determining the tax payable, the amount of distributed income be increased to such amount as would, after reduction of tax from such increased amount, be equal to the income distributed by the Mutual Fund. This provision is effective from 1 October 2014 and the impact of the same has not been reflected above.

Capital Gain Taxation

Individual/HUF$ Domestic Company@ NRI $/ #
Long Term Capital Gains##
Equity Schemes* Nil Nil Nil
Other than Equity Oriented Schemes (listed) Applicability on or before 10th July, 2014
10% without indexation or 20% with indexation whichever is lower + 10% Surcharge + 3% Cess 10% without indexation or 20% with indexation whichever is lower + 10% Surcharge + 3% Cess 10% without indexation or 20% with indexation whichever is lower + 10% Surcharge + 3% Cess
Without Indexation =11.33% =10.815% or 11.33% = 11.33%
With Indexation =22.66% = 21.63% or 22.66% = 22.66%
Other than equity oriented schemes (Unlisted) Applicability on or before 10th July, 2014
10% without indexation or 20% with indexation whichever is lower + 10% Surcharge + 3% Cess 10% without indexation or 20% with indexation whichever is lower + 10% Surcharge + 3% Cess 10% without indexation + 10% Surcharge + 3% Cess
Without Indexation = 11.33% =10.815% or 11.33% = 11.33%
With Indexation = 22.66% = 21.63% or 22.66% = Not Applicble
Other than equity oriented schemes Applicability from 11th July, 2014
Listed 20% with indexation + 10% Surcharge + 3% Cess 20% with indexation + 10% Surcharge + 3% Cess 20% with indexation + 10% Surcharge + 3% Cess
= 22.66% = 21.63% or 22.66% = 22.66%
Unlisted 20% with indexation + 10% Surcharge + 3% Cess 20% with indexation + 10% Surcharge + 3% Cess 10% without indexation + 10% Surcharge + 3% Cess
= 22.66% = 21.63% or 22.66% = 11.33%
Short Term Capital Gains###
Equity Oriented Schemes* 15%+ 10% Surcharge $ + 3% Cess 15% + Surcharge as applicable $$ + 3% Cess 15% + 10% Surcharge $ + 3% Cess
= 16.995% = 16.223% or 16.995% = 16.995%
Other than Equity Oriented Schemes 30%^ + 10% Surcharge $ + 3% Cess 30% + Surcharge as applicable $$ + 3% Cess 30%^+ 10% Surcharge $ + 3% Cess
= 33.99% =32.445% or 33.99% =33.99%

$ - Surcharge at the rate of 10% is levied in case of individual/ HUF unit holders where their income exceeds Rs 1 crore.

@ - Surcharge at the rate of 5% is levied for domestic corporate unit holders where the income exceeds Rs 1 crore but less than Rs 10 crores and at the rate of 10%, where income exceeds Rs 10 crores.

# - Short term/ long term capital gain tax will be deducted at the time of redemption of units in case of NRI investors only.

##- For units sold on or before 10th July 2014 – Period of holding more than 12 months; and For units sold from 11th July 2014 – Period of holding for units of equity oriented mutual fund schemes more than 12 months and in case of other units more than 36 months.

###- For units sold on or before 10th July 2014 – Period of holding less than or equal to 12 months; and For units sold from 11th July 2014 – Period of holding for units of equity oriented mutual fund schemes less than or equal to 12 months and in case of other units less than or equal to 36 months

Education Cess at the rate 3% will continue to apply on tax plus surcharge

Dividend Stripping: The loss due to sale of units in the schemes (where dividend is tax free) will not be available for setoff to the extent of the tax free dividend declared; if units are:(A) bought within three months prior to the record date fixed for dividend declaration; and (B) sold within nine months after the record date fixed for dividend declaration.

Bonus Stripping: The loss due to sale of original units in the schemes, where bonus units are issued, will not be available for set off; if original units are: (A) bought within three months prior to the record date fixed for allotment of bonus units; and (B) sold within nine months after the record date fixed for allotment of bonus units. However, the amount of loss so ignored shall be deemed to be the cost of purchase or acquisition of such unsold bonus units.


Broking – Tax Rules

Sr. No. Nature of securities Rate of SEBI Turnover fees
1 All sale and purchase transactions in securities other than debt securities 0.0001 per cent of the price at which the securities are purchased or sold (Rs.10 per crore)
2 All sale and purchase transactions in debt securities 0.000025 per cent of the price at which the securities are purchased or sold (Rs.2.5 per crore)

Stamp duty is levied on value of shares transferred. In India stamp duty is levied by various states and hence rate of stamp duty varies from state to state. In Maharashtra, the stamp duty rate for Cash Market (other than Government Securities) and Derivatives Market Turnover (non-delivery) is :

Type of Trade Stamp Duty Rate
Non-delivery trade 0.002%
Delivery trade 0.01%

Service Tax

Category Tax Rate Payable By
Stock brokers Services 12.36% (12%+ 0.24% education cess + 0.12 % secondary and higher education cess) Brokers and collected from their clients. However if the services are partly performed outside India and payment is received in convertible foreign exchange within 6 months, then the services will be treated as Export of Services and will be exempt from levy of Service Tax

Securities Transaction Tax (STT)

Sr. No. Taxable securities transaction Tax Rate Up to May 31, 2013 Tax Rate w.e.f. June 1, 2013 Payable by
1 Purchase of an equity share in a company, where such contract is settled by the actual delivery or transfer of such share or unit. 0.100 percent 0.100 percent Purchaser- on the value of taxable securities transaction based on the volume weighted average price.
Purchase of a unit of an equity oriented fund, where such contract is settled by the actual delivery or transfer of such share or unit. 0.100 percent NIL NA
2 Sale of a equity share in a company, where such contract is settled by the actual delivery or transfer of such share or unit 0.100 percent 0.100 percent Seller - on the value of taxable securities transaction based on the volume weighted average price.
Sale of a unit of an equity oriented fund, where such contract is settled by the actual delivery or transfer of such share or unit 0.100 percent 0.001 percent Seller - on the value of taxable securities transaction based on the volume weighted average price.
3 Sale of an equity share in a company or a unit of an equity oriented fund, where such contract is settled otherwise than by the actual delivery or transfer of such share or unit. 0.025 percent 0.025 percent Seller - on the value of taxable securities transaction based on the volume weighted average price.
4a Sale of an option in securities 0.017 percent 0.017 percent Seller - on the option premium..
4b Sale of an option in securities, where option is exercised 0.125 percent 0.125 percent Purchaser - on the settlement price.
4c Sale of a futures in securities 0.017 percent 0.010 percent Seller - on the price at which such futures is traded.

Futher as per SEBI guidelines FII's are required to settle the transactions by delivery only and therefore sr. no.3 of the above table is not applicable in case of FIIs

Taxable as Business Income

As per the provision of the Income Tax Act, 1961, income from futures & options (F&O) is treated as normal business income. Thus, profit or loss from such business (F&O) will be taxable as income under the head profits and gains of business or profession whether or not the assesse is carrying on any other business or profession.

Compliances in case of Profit & Loss

If there is a loss in F&O, here provisions of section 44AD will apply and accordingly audit of books of accounts will also be required. The provision of this section mandates disclosure of at least 8 % of net profit on the gross turnover.

So, in case the assesse does not discloses the same (less than 8 per cent or loss) , the assesse will be required to maintain books of accounts and is required to get tax audit under provisions of section 44AA and 44AB. Thus, pursuant to this change, income from business cannot be below 8 per cent of the gross turnover in any circumstances.

So, if there is a profit in F&O and you are disclosing 8% or more of total turnover as profit then only the income has to be declared as business income and accordingly ITR has to be filed. There will be no need to maintain books of accounts and of audit.

Turnover Calculation

Now, here comes the point calculation of turnover. Determination of turnover in case of F&O is one of the important factors for every individual for the income tax purpose. Turnover must be firstly calculated, in the manner explained below:

The total of positive and negative or favorable and unfavorable differences shall be taken as turnover.

Premium received on sale of options is to be included in turnover.

In respect of any reverse trades entered, the difference thereon shall also form part of the turnover.

Here, it makes no difference, whether the difference is positive or negative. All the differences, whether positive or negative are aggregated and the turnover is calculated.

Tax audit under Section 44AB

As Futures & options (F&O) is treated as normal business income, so, if the total sales, turnover or gross receipt from business for the previous year relevant to assessment year exceeds Rs. 60 lacs in FY 2010-11 & 2011-12 (Rs. 1 crore from the FY 2012-13) then its mandatory to get books of accounts audited.

Expenses

Expenses such as postage, conveyance and telephone, incurred for carrying on the business can be claimed as business expenses. You can also claim depreciation on assets used for the business or profession.