{"id":53590,"date":"2021-10-27T15:04:13","date_gmt":"2021-10-27T09:34:13","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=53590"},"modified":"2024-05-24T14:53:24","modified_gmt":"2024-05-24T09:23:24","slug":"investment-in-equity-shares-tax-planning","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/investment-in-equity-shares-tax-planning\/","title":{"rendered":"A Brief Understanding on Investment in Equity Shares & Tax planning"},"content":{"rendered":"

Earlier majority of the people used to invest in FDs, bonds etc., to make some additional income however, with time, this trend has seen a definite shift with people now increasingly making investment in equity shares and equity oriented funds. Considering the ease with which Demat account can be opened, people are investing their capital in the share market<\/a>.<\/p>\n\n\n\n

Meaning of Equity Shares<\/h2>\n\n\n\n

When a company is formed, its capital is divided into small parts, and each such part is called Share, and the total capital is called Equity Share Capital. The investors investing in such shares are called Equity Share holders. They are also considered as the owners of the company. They get the dividend based on the profits of the company.<\/p>\n\n\n\n

In case of Public Companies, if the shares are listed, then the share market price also increases. Hence the wealth of the shareholder<\/a> also increases, but if the company incurs loss, then shareholders don’t get dividend, and the market price of the share also gets affected. If the company shuts down its operations, then the maximum loss is borne by the equity share holders.<\/p>\n\n\n\n

Understanding Investment in Equity Shares<\/h2>\n\n\n\n

Investment in Unlisted Equity Shares<\/u><\/strong><\/p>\n\n\n\n

Those equity shares not listed in a stock exchange are called unlisted equity shares. When the purchase or sale of such shares is made, Securities Transaction Tax is not levied.<\/p>\n\n\n\n

Investment in Listed Equity Shares<\/u><\/strong><\/p>\n\n\n\n

Equity Shares listed in any stock exchange is called listed equity shares.  When the purchase or sale of such shares is made, Securities Transaction Tax is collected at a fixed rate.<\/p>\n\n\n\n

Investing in Equity Shares<\/u><\/strong><\/p>\n\n\n\n

If a company functioning on a small scale wishes to expand its business and which involves big scale of funding, then the company collects the capital from public as the promoters have limited capital.<\/p>\n\n\n\n

When the company offers the shares to public at a fixed price for the first time, it is called Initial Public Offer, and it is also considered as Primary Market as the shareholders can acquire the shares directly from the company itself and make investment. When the company allots shares to shareholders, then such shares gets listed in stock exchange.<\/p>\n\n\n\n

Then the shareholders would be able to purchase or sell transactions of such listed shares on the stock exchange. It may be noted that the Securities and Exchange Board of India regulates the Stock Exchange in India[1]<\/a><\/sup><\/strong>.<\/p>\n\n\n\n

Investment in Equity Shares vs. Investment in Equity Funds<\/h2>\n\n\n\n

In case you invest in shares, you should be aware of different complexities as well. Investment in stocks is a dynamic process as the business prospects undergo changes due to competition. Moreover you would need higher initial capital to create a well-diversified portfolio.<\/p>\n\n\n\n

In case of equity funds, it may be a more easy way as the fund manager takes care of your portfolio.<\/p>\n\n\n\n

Essential requirements for investing in the share market<\/h2>\n\n\n\n

Some of the essential requirements for investing in the share market are as follows:<\/em><\/p>\n\n\n\n