What is Understanding Tax Efficiency in Index Investing?

Index investing has gained traction in India, primarily through exchange-traded funds (ETFs) that track benchmark indices like the Nifty 50 or the Sensex. This passive approach typically results in lower transaction costs and reduced tax liabilities compared to actively managed funds.

1. Passive Index Investing

Indian investors need to consider various taxes, including capital gains tax, dividend distribution tax (DDT), and Securities Transaction Tax (STT). Understanding these taxes and their implications is crucial for optimizing after-tax returns.

2. Tax Considerations