Can there be 2 tax treatments to equity holders?
Yes, there can be, depending on the equity holding period. If one redeems equity investment over a very short period on a regular basis, say a few weeks or three months, the tax department can term it business income. Any income from share sale made for earning profit is called business income. Whereas, investments made for earnings through dividends are called capital gains, where the holding period should either be one year or less but more than three months.
Is the tax liability for business income different from capital gains?
Yes. Business income is taxed at a flat rate of 30 per cent. Long-term capital gains, that is gains made from equities held for one year or more, is exempt from tax. Short-term capital gains, where the holding period is less than a year, is taxed at 15%.
