Income Tax on Stock Earnings and Dividends: Income Tax Return (ITR) filing deadline is approaching fast. The last date to file it is July 31. A delay in that may invite the Income Tax Department's penalty. So, many people are rushing to file it in time. People doing a job take the help of Form 16. But what about those who are also earning through the share market? Which form will they have to fill for their ITR filing? With BSE Sensex and Nifty 50 rising fast in the recent past, many of the investors have been gaining decent returns. But have you ever thought about how much of their earnings they have to pay in income tax? 

Income categorisation for income tax

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Before delving into the share market income tax part, let's know how the I-T department divides the income of an individual into five categories. 

1- Income from salary 
2- Income from house property 
3- Income from business or profession 
4- Income from capital gains 
5- Income from other sources

Income tax category for stock market earnings

There are two types of incomes from the stock market.

The first type of income is from buying and selling, and the other is from dividends.

While the income from the buying and selling of stocks is known as capital gains, the earnings from dividends or intraday trading come under the other sources category.

Types of capital gains

Within capital gains, there are two types of categories: short-term capital gains and long-term capital gains.

Short-term capital gains are applied when you sell your stocks within 12 months of buying them.

Long-term capital gains are applied when you sell stocks more than 12 months after purchasing them. 

Income tax on capital gains and other sources

On long-term capital gains, you get a tax exemption up to Rs 1 lakh, and beyond that, a flat tax of 10 per cent is levied.

E.g., if you have earned Rs 1 lakh from long-term capital gains, you don't have to pay any tax on it.

If your long-term capital gains from shares are Rs 6 lakh in a financial year, you will be taxed only on Rs 5 lakh.

At 10 per cent, your total tax on Rs 6 lakh earnings will be Rs 50,000.

As far as short-term capital gains, the income tax rate is 15 per cent, and there is no tax exemption.

So, if your short-term capital gains in a year are Rs 6 lakh, at a 15 per cent rate, your income tax on that earning will be Rs 90,000. 

Such income will come under other sources

If you earn from intraday or dividends and your income is counted as income from other sources, you will have to pay tax according to the tax slab applicable to you.

However, if your dividend is more than Rs 5,000, then 10 per cent TDS will be deducted from it by the broker or the mutual fund company.

Documents required to file ITR

If you are a salaried person who also invests in the stock market, you will need five types of documents while filing ITR. 

1- Form-16 
2- Form 26AS 
3- Annual Information Statement (AIS) 
4- Capital Gains Statement 
5- Tax Profit & Loss Statement