#Stock-Market  #Basic-of-SM  #Finance 

Taxation on shares

Short term capital gain (STCG)

  • Holds for less than 1 year
  • Rate of flat @15% tax on profit

Long term capital gain (LTCG)

  • Holds for more than 1 year
  • Upto 1L tax-free, But above 1L @10% in FY
  • The Union Budget 2018 proposed to levy long-term capital gains tax (LTCG) of 10 percent on gains exceeding Rs 100,000 from the sale of equity shares.

Intraday Gain

  • Speculative Business income
  • Taxation according to your tax-slab

Dvidend Tax

  • Taxation according to your tax-slab

Grandfathering provision

  • Deemed cost of acquisition is taken the price of the share as of 31st Jan 2018 or actual price whichever is higher.

Types on Return on Investing

When you invest (in SM, FDs …) you will get either

  1. Interest
  • Interest is the charge against the money lent to the borrower.
  • Interest payment is mandatory(Eg: Banks FDs)
  • Rate of Interest in known in advance(i.e fixed)
  • Interest are also Taxable
  1. Dividend
  • Dividend is the percentage of profit distributed
  • It is Return on investment in Share
  • Its company decision wheather to give divident or not
  • OLD: Tax free for Individuals subject to limits(i.e Above 10 Lalks @10% for LTCG)
  • NEW 2020: Divident is also Taxable
A dividend is given on `FACE value`
  See `Dividend Yield` not `Dividend percentage`

Company with good dividend means they have low growth opportunities
  Eg:  PFC, REC, Oil, Coal India, GAIL
  PUS companies mainly give high dividend

Analysis of Stock Market

  • Analysis can be done in two ways:
    • Fundamental Analysis(FA)
    • Technical Analysis(TA)
  • FA tells what to buy but TA tells when to buy

Fundamental Analysis(FA)

  • Analysis of business & intrinsic value
  • No Speculation
  • Low Risk

In FA we need to analysis the following parameter:

  • Company Analysis
    • Company overview
    • Business Segment
    • Performance, Growth outlook
  • Sector Analysis
    • SWAT analysis of Company and Sector
    • Competitors
    • Threats
  • Financial
    • Ratio analysis(ROCE, D/E ..)
    • Peer Comp
    • Cash flow, P&L, Balalce sheet
  • Valuation
    • P/E, P/B
    • Reason for premium or under valuation
  • Corporate Goverance
    • Management team
    • Their business journey
    • Shareholding

Technical

  • Analysis of trends & charts
  • High risk
  • High Speculation
  • Based on history repeat itself

Know Yourself(Who are you)

  • Intraday Trader
    • Closes the trade within a day
  • Short Term Investor
    • Closes the trade in 2 days - 3 months
  • Medium Term Investor
    • Closes the trade in 3 months - 1 year
  • Long Term Investor
    • Closes the trade after 1 year