There is a lot of discussion about tax saving in the country these days. The budget is going to be presented in the next few days. In such a situation, every income taxpayer will have an eye on the budget. But before the budget, people are looking for new ways of investment to save tax.
In such a situation, can tax be saved by investing in the stock market? Everyone wants to know the answer to this question. Let us tell you that to start with, equity investment is not your special Section 80C investment, which gives you tax exemption. But you can avail many benefits by investing in equity. Read further information below.
Investment Under RGESS
Rajiv Gandhi Equity Savings Scheme (RGESS) was launched in the year 2012. The objective behind bringing this was to motivate investors to join the small and equity market for the first time.
Under RGESS, new investors in equities with annual income up to Rs 12 lakh can avail rebate of up to 50 per cent of the amount invested in equities, subject to a maximum of Rs 50,000. At the same time, if a first-time investor allocates Rs 50,000 in equity, an exemption of Rs 25,000 can be deducted under section 80CCG from the total taxable income. This benefit can be availed over a period of three years.
ELSS Investment Scheme
For your information, let us tell you that this is not direct equity but indirect equity investment. Equity-Linked Savings Scheme i.e. ELSS are equity mutual funds, which come with a time limit of 3 years. Investments up to Rs 1.50 lakh per financial year can be claimed under Section 80C. However, it needs to be noted that Rs 1.50 lakh is a large exemption limit and includes PPF, CPF, Long Term Deposit, ULIP, ELSS, tuition fees, life insurance premiums and home loan investments.
Short-Term Capital Gains on Equity
The reason equities are tax efficient is that they get more professional treatment when it comes to short-term capital gains. Short-term capital gains are those when the equity is held for less than a year. In other cases, it varies from 2 to 3 years for assets. At the same time, the tax rate on short-term capital gains on equity is also low.
Whereas STCG on other assets is levied at the maximum rate applicable to the taxpayer, STCG on equity has to be paid at the rate of 15 per cent. In the case of Long Term Capital Gains (LTCG), it is 2 or 3 years. In this, LTCG held for more than a year on investment after 2018 is taxed at the rate of 10 per cent.