Tax on Stock SIP in India – LTCG, STCG, and Dividend Rules

Confused about tax on Stock SIP in India? Learn about LTCG, STCG, and dividend tax rules with examples. Save taxes legally!

📈 How is Stock SIP Taxed in India? (3 Types of Taxes)

When you invest via Stock SIP, you may face these taxes:

Tax Type	When Applied	Rate
STCG (Short-Term Capital Gains)	Selling within 1 year	15%
LTCG (Long-Term Capital Gains)	Selling after 1 year	10% (over ₹1 lakh profit)
Dividend Tax	Received from company	10% TDS (if dividend >₹5,000/year)

(Note: LTCG applies only to equity stocks. Debt/REITs have different rules.)

💰 LTCG Tax on Stock SIP (10% Rule)

If you hold SIP shares for over 1 year, profits are Long-Term Capital Gains (LTCG).

Key Rules:

✔ Tax Rate: 10% on gains above ₹1 lakh/year (not on entire amount).
✔ No Indexation Benefit (unlike real estate).
✔ Holding Period: Counted from each SIP purchase date.

📊 Example:

• You invest ₹10,000/month in Tata Motors SIP for 2 years.
• Total invested = ₹2.4 lakhs
• Value after 2 years = ₹3 lakhs
• Profit = ₹60,000
• Tax: ₹0 (since <₹1 lakh LTCG)

(If profit was ₹1.5 lakhs, tax = 10% of ₹50,000 = ₹5,000.)

⚡ STCG Tax on Stock SIP (15% Rule)

If you sell SIP shares within 1 year, profits are Short-Term Capital Gains (STCG).

Key Rules:

✔ Flat 15% tax (regardless of income slab).
✔ Applies per SIP installment (each purchase has its own holding period).

📊 Example:

• You buy HDFC Bank shares via SIP on:
  • 5 Jan 2025 (₹1,500/share)
  • 5 Feb 2025 (₹1,600/share)
• You sell all shares on 1 Dec 2025:
  • Jan purchase: STCG (held <1 year)
  • Feb purchase: STCG (held <1 year)

(Calculate tax using brokerage statements.)

💸 Dividend Tax on Stock SIP (10% TDS Rule)

If the company pays dividends, tax applies as:

Dividend Income	Tax Rule
Up to ₹5,000/year	No TDS
Above ₹5,000/year	10% TDS (deducted by company)

Note:

• You must still report dividends in ITR (even if no TDS).
• No double tax (TDS adjusted against final liability).

📌 5 Ways to Reduce Stock SIP Taxes (Legal Tips)

1️⃣ Hold for 1+ years – Avoid 15% STCG, pay only 10% LTCG.
2️⃣ Use ₹1 lakh LTCG exemption – Plan withdrawals smartly.
3️⃣ Offset losses – If one stock SIP underperforms, sell to reduce gains.
4️⃣ Invest in tax-free dividends (e.g., REITs with no TDS).
5️⃣ Use multiple family members’ accounts – Split SIPs to utilize multiple ₹1 lakh exemptions.

(Read: Tax-Saving SIP Strategies – internal link)

📝 How to Report Stock SIP Taxes in ITR?

1. Form 26AS: Check TDS on dividends.
2. Capital Gains Schedule: Report each SIP sale (with purchase dates).
3. File ITR-2 or ITR-3 (if trading volume is high).

Pro Tip: Use brokerage tax reports (Zerodha/Groww provide P&L statements).

🎯 Final Thoughts: Is Stock SIP Tax-Efficient?

✔ Better than FD: LTCG tax (10%) < FD interest tax (income slab).
✔ Worse than ELSS: No Section 80C benefit.

Next Steps:

• Track SIPs in Excel/broker dashboard.
• Consult a CA before filing ITR.

❓ FAQs (People Also Ask)