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Income Tax returns: Invested in debt schemes? Check how much tax would be levied on your income
In long-term capital gains, one must calculate tax with and without indexation and avoid divident plans while making any debt-related investment.
While making any investment decision, one needs to understand each and every detail of the income as it's an investors right to maximise the investment if there is any option available. In India, people have started to look at debt-related investments but they don't know how much tax would be levied on their income and whether it's advisable for them to go for tax without indexation or with indexation on their capital gains. Whether one should go for dividend or not! SEBI registered investment expert Jitendra Solanki told Zee Business Online that the decision should be made on the basis on investment period.
"There are two types of taxes being levied on debt-related investments — Capital Gain Tax (CGT) and Dividend Division Tax (DDT). The CGT is divided in two parts — investment for short-term or up to three years and long-term investment for more than three year investment," he said.
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Elaborating CGT, Solanki added, "For short-term CGT, your investment income gets added into your income and tax is levied on the basis of the Income Tax slab you are falling in while for long-term debt-related investment your income would be levied 20 per cent tax with indexation benefit." Solanki further added that on DDT an investor need not pay the tax but its the company that would deduct 29.12 per cent of investor's income while distributing the dividend.
On how to maximise your income in debt-related investments Balwant Jain, tax and investment expert said, "A person has a window to decide whether they want to pay tax on their capital gain tax with or without indexation. Without indexation, one need to pay 10 per cent of his or her net gains on investment. So, an investor must calculate the tax need to be paid with or without indexation before filing his or her tax." Balwant Jain advised debt-related investors to avoid taking dividends as it costs around 29 per cent of tax while for simple lock-in without dividend plan, it would cost on the basis of the income tax slab one falls in and any slab for a public in general would lesser than 29 per cent of tax.
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