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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Taxation of Equity Products

Under the Income-tax Act as applicable to a resident individual, which of the following equity-related incomes is generally taxed as 'Income from Other Sources' rather than as capital gains?

Dividend received on equity shares held as investment is taxed under Income from Other Sources at slab rates, because it is a return on holding the shares and not a gain from transferring a capital asset. Sale profits are capital gains.

  1. ADividend received on equity shares held as investmentCorrect
  2. BProfit on sale of listed equity shares held for 18 months
  3. CProfit on sale of equity-oriented mutual fund units held for 5 months
  4. DProfit on sale of listed equity shares held for 6 months

Explanation

Dividend income from shares is not a gain from transfer of a capital asset, so it is taxed under Income from Other Sources at the slab rate. The other options all arise from transfer of capital assets and are taxed as capital gains.

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