I have purchased some shares in the Bombay Stock Exchange. Its been 6 months and have received some dividend income from them. Does this count towards my total income? Will I have to pay income tax on this amount? Or, am I only liable to pay capital gains tax on this? How does this work?
- Dividends: There are tax free in your hands as the company already pays a Dividend Distribution Tax. You would have to declare this in your returns in Schedule EI.
- Capital Gains:
Any gains as a result of sale within one year is classified as "Short Term Capital Gain" and is taxed at a flat rate of 15%. [Enter in Schedule SPI-SI].
If the gains are after a period of One year, it is classified as "Long Term Capital Gain" and is tax free, you have to declare this in Schedule EI.
Note the above is only for shares. There are different rules for other assets like House, Jewellery, Mutual Funds, Debt Funds.
Refer to the Income Tax guide for more details.