| Does an investor have to pay tax on buying and selling of shares? |
Yes, you are liable to pay tax on these transactions: on the difference between the price at which you sell and the price at which you acquired it. You can also claim deduction for expenses incurred to acquire these securities along with cost of buying these securities. If you are in the business of buying and selling securities, the profit and loss from these transactions will be taxed to you as a part of business income.
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| What is the nature of income under which transaction in securities are taxed? |
Profit and loss from purchase and sale of securities will be taxed under the head of income from "Capital gains", provided such securities are held as investments by you. This is true only in case of a resident individual and not a person who is in the business of buying and selling securities.
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| What is a short term asset/long term asset? |
Capital asset is divided as long term and short term with reference to the period of holding of the asset by you. The period of holding is computed from the date of acquisition to the date immediately preceding its sale. If the shares, units of specified mutual fund u/s 10(23D) or any other listed security are held by you for less than 12 months then such shares/units or listed security would be treated as short term assets. In all other cases, when the holding duration is more than 12 months, they are termed as long term capital assets.
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| At what rate will the income from short term/long term capital gains be taxed? |
Short term capital gains will be included along with other heads of income and taxed at the applicable slab of tax rate relevant for the assessment year. For the top band, tax at the rate of 30% (plus applicable surcharge) will be charged.
Long term capital gain will be subject to tax rate of 10% (plus applicable surcharge) if indexation benefit is not taken and at a tax rate of 20% (plus applicable surcharge) if indexation benefit is taken.
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