Assessing Tax impact while choosing investments
Assessing Tax impact while choosing investment vehicles My client, a media professional, had a desire to own his own stocks and when he received an inheritance , he immediately opened an account a Portfolio Management Scheme . As luck had it , markets rallied and the PMS delivered spectacular returns . All was well till it was time to file the year’s ITR. His annual taxable income was 48 lakhs and a long term capital gains of 6 lakhs had been booked in the month of Dec 2022 . At a 10 % long term capital gain tax , with one lakh exemption , my client was happy that the extra tax liability was only Rs.50,000 . To his surprise his CA asked him to deposit 1.77 lakhs extra in taxes . How did the tax amount jump up from Rs.50,000 to 2.23 lakhs ?. The tax payable was more than four times the amount anticipated by my client. The culprit was the capital gain that took his total income above 50 lakhs , a slab that attracts a 10 % surcharge on total taxes. Look at the table below