Thursday, February 2, 2023

HOW MUCH TAX DO YOU PAY ON YOUR EQUITY INVESTMENT?

Amongst different types of assets, be they financial or physical, equity investments have given the largest returns over the long term. This is the reason why equity assets form a big part of most investors’ portfolios. While it is a fact that equity investments are unsafe, over long periods of investing, the impacts of risk get removed.

There are many types of equity-related products are in the market, but they aren’t all similar. They differ not only in terms of features, but also purpose and exposure to risk. For example, mutual funds are an investment vehicle and do not give insurance, but unit-linked insurance plans have both investment and insurance segments. 

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Aside from this, the tax rules that refer to these products also differ. For example, capital gains tax is based on the period of holding. So for stocks and equity-oriented mutual funds, the long term is described as more than 1 year, but for Ulips this parameter doesn’t apply.

Taxes decrease the overall returns that you can get from a product. Add to that the fact that different equity assets bring different tax rules, an investor must take a thoughtful look at the suitability of an investment in terms of taxes too. 

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