Taxability of Income on shares- Three Tier Tax 

Share market is where buying and selling of share happens. Share represents a unit of ownership of the company from where you bought it. For example, you bought 10 shares of Rs. 200 each of ABC company, then you become a shareholder of ABC. This allows you to sell ABC share anytime you want. 

By investing in shares, one can earn either through capital appreciation, i.e., on the gains made on capital, or income in the form of dividends. Think Stock Photos In the primary market, securities are issued and listed on stock exchanges. Trading in these securities happens in the secondary market.

As per the Indian Income Tax system if a person earns any income from shares market he has to pay Security Transaction Tax, Long Term capital Gain and he also has to pay Income tax as per Slab Rate.

Example: If a person earns Rupees 4 Lakh Rupees from shares market then on an estimation he will get Rupees 3.60 Lakh after various tax deductions. As he has to pay Security Transaction Tax, Long Term Capital Gain and Tax as per slab rate.

If a person Sell shares of Rupees 1 lakh then he will pay rupees 25 as Security Transaction Tax. And if shares are sold within 1 year then Short Term Capital Gain of 15% will be deducted. And 10% Long Term capital Gain if these shares are sold after 1 Year. Moreover after these he has to pay Tax as per  Income Tax slab Rate.

In 2004, Finance Minister P. Chidambaram brought Security Transaction Tax(STT) in place of Long term Capital Gain (LTCG), but LTCG still remains there. Now the Investor has to pay both tax and then after this Income tax on remaining income.

Detailed Analysis of Taxability on Share Market Income:

If a person A sold shares on which he got income of rupees 4 lakh, then Rupess 100 will deducted as STT at the time of selling the shares. If shares are sold after 1 year the LTCG of 10% will be applicable and rupees 40000 will be deducted.  If A has 3 lakh income from other sources then his total income would be rupees 7 lakh. And remaining income after tax deduction will be 6.60 Lakh. And then he will have to pay income tax as per the latest slab rates of Income Tax.