Are ETFs subject to capital gains?

The IRS taxes dividends and interest payments from ETFs just like income from the underlying stocks or bonds, with the income being reported on your 1099 statement. With that said, equity and bond ETFs held for more than a year are taxed at the long-term capital gains rates—up to 23.8%.

How do I avoid capital gains tax on my ETF?

One common strategy is to close out positions that have losses before their one-year anniversary. You then keep positions that have gains for more than one year. This way, your gains receive long-term capital gains treatment, lowering your tax liability. Of course, this applies for stocks as well as ETFs.

How is ETF income taxed?

ETFs—exchange-traded funds—are taxed in the same way as its underlying assets would be taxed. If you hold an ETF for more than a year, then you will pay capital gains tax. If you hold it for less than one year, any profits will be treated as ordinary income.

How can I avoid capital gains tax on shares in India?

Tax harvesting: Under this method, the taxpayer can book long-term gains in equities to the extent of ₹1 lakh and reinvest the same. The value at which the equities are reinvested is the new cost of acquisition. This process can be repeated every year to take advantage of the ₹1 lakh exemption in case of LTCG.

How are capital gains taxed on an ETF?

Short-term capital gain is taxed at the same rates applied to your ordinary income. However, only net capital gains are taxed; capital gains can be offset by capital losses before applying the tax rates. Capital gains on certain ETFs may not enjoy the 15%/zero/20% tax rate , and instead may be taxed at ordinary income rates or at some other rate.

How are long term capital gains taxed in India?

STCG – As per Section 111A of the Income Tax Act, 1961, STCG is taxed at 15% plus surcharge and applicable cess. While the tax on capital gains is different for equity investments, capital gains from debt, gold, and international ETFs are taxed in the same manner. Long-term and short-term capital gains for these ETFs are defined as follows:

How are ETF dividends taxed in India?

Hence, investors who had purchased an ETF that tracks the Nifty Pharma would have benefited from this movement. When you sell units of the ETF for a profit, the gains arising are defined as capital gains and taxed as per the nature of the securities held by the ETF. 1. Tax on ETF Dividends

How are ETFs taxed in India for NRIs?

For non-resident investors (NRIs), domestic companies and Mutual Funds are required to withhold tax at the rate of 20%. If the NRI lives in a country where the provisions of the Double Tax Avoidance Agreement (DTAA) apply, then tax computation and withholding will be done as per the restricted tax rates. 2. Tax on Capital Gains Made from ETFs