The majority of individuals invest in the stock market or mutual funds without being aware of the tax regulations. They place more emphasis on profits. However, they should also be aware that the income from these investment opportunities is subject to taxation. Your earnings may be impacted if you invest without understanding the applicable tax regulations because returns are lower after taxes have been deducted.

If we talk about the tax on returns from investments in equity, equity mutual funds, dividends, SIP, ULIP, and ELSS, we should consider the following rules too.

• If you sell or redeem equity shares or equity mutual funds within a period of less than 1 year (holding period), the income will be treated as short-term capital gain and you will be liable to pay short-term capital gain tax at 15% (total 15.4% including 4% cess).
• If you sell after 1 year, then the income will be considered as long-term capital gain and you will have to pay long-term capital gain tax at 10% (total 10.4% including 4% cess) on income above ₹ 1,00,000 annually. Keep in mind that, there is no provision of tax on income less than one lakh annually.
• Equity funds include arbitrage funds among their subcategories. For tax reasons, a balance or hybrid fund is also regarded as an equity fund if it invests 65% of its total corpus in equity.
• The returns you receive in the form of dividends on your equity shares or if you choose a dividend plan of an equity mutual fund scheme throughout the investment term will be added to your annual income, and you will be eligible for that amount according to your tax slab. The sum is subject to tax payment.
• A 10% TDS will also be taken from you on the amount of the dividend if it exceeds ₹5,000 in a fiscal year.
• The holding term in a Systematic Investment Plan varies from the day a mutual fund is purchased to the day it is sold. However, the holding duration varies for each SIP when investing through a systematic investment plan, or SIP. Each SIP must have completed a full year.
• In ULIPs, equity funds are another option. It has a five-year lock-in period. Consequently, you have five years from the day the plan began to redeem or surrender it. You won’t have to pay taxes on the returns from stock funds if you keep investing for another five years. since ULIP is under the Exempt category. In other words, there is neither a return on the deposit nor a withdrawal tax. The maturity amount received after five years is therefore likewise tax-free.
• The benefit of the deduction under 80C in ULIP is up to a maximum of ₹1.5 Lahks (combined with other investment alternatives). However, the benefit of the deduction will not be accessible for policies issued on or after April 1, 2012, if the annual premium exceeds 10% of the sum insured in the first financial year.
• Because at least 65% of the investment in the Equity Linked Savings Scheme (ELSS) is made in equity, it is also an equity mutual fund scheme. This mutual fund scheme offers investors the same choice between two investment plans: Growth and Dividend. Between schemes, returns in the Growth Plan are not available. Not before return redemption is said. However, there is a provision for long-term capital gain tax of 10% (total 10.4% with 4% cess) on yearly profits above ₹1,00,000 beyond the required lock-in period. If you choose a dividend plan, the dividend returns you get during the investing term (both before and after the lock-in period) will be added to your yearly income, and you will be taxed on that amount in accordance with your tax slab and must make a payment.