Dividend pay-outs on equity: Some of the companies declare dividends to its shareholders at regular intervals from the profits earned, nonetheless as and when this sum gets credited into the demat account, an individual investor attracts taxation only in respect of the trade transaction i.e. shares bought and sold and no taxation liability arises in case of dividends.
Short term capital gains: The gains come into picture when securities held for below one year are sold at a profit and these gains which also take into account the cost of acquisition of the asset plus any improvement charges made attract 15% taxation.
Short term capital loss: A demat account holder is also allowed the privilege to offset any short term capital losses against short term gains on any of the assets. Also, the loss is allowed to be adjusted with any of the taxi implications on short term capital gains.
Long-term capital gains: Now as per the latest Union Budget 2018, now securities held for over a year will attract long term capital gains tax and the taxation rate of 10% applies for gains over Rs. 1 lakh in a financial year taking into account the grandfathering clause. Long term capital loss: The demat account here also comes with an advantage as long term capital losses can be offset against any long term capital gains. This enables investor to save considerable tax.
Carry forward of losses: Also, in case of consecutive losses of short term nature, the investor is allowed to carry forward these losses for the next eight years but the point to be noted here is that the losses can be extended in respect of only the asset from which they arose. This provision indeed is helpful in saving taxes.