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are tax free in the hands of the shareholder, but the company paying the dividend has to pay

dividend distribution tax at 12.5%. There is also the concept ofa deemed dividend, which is not

tax free. Further, Indian tax laws include provisions to stop dividend stripping.[5][citation

needed]

Stock certificates

Historically, investors were given stockcertificates as evidence of theirownership of shares.

In modern times, certificates are not always given and ownership may be recorded electronically

by a system such as CREST.

Share Market Basics

What are the basics of financial instruments?

A: Let us understand the two fundamental types of investments, namely bonds and stocks

with an example. Eg. Imagine you want to start your own grocery store. You will need a

capital amount to get started. You acquire the requisite funds from a friend and write

down a receipt of this loan ' I owe you Rs 1, 00,000 and will repay you the principal

loan amount plus 5% interest'. Your friend has just bought a bond (IOU) by lending

money to your company. Thus a bond is a means of investing money by lending money

to others. When you invest in bonds, the bond you buy will show the amount of money

being borrowed (face value), the interest rate (coupon rate or yield) that the borrower has

to pay, the interest payments (coupon payments), and the deadline for paying the money

back (maturity dates).

http://en.wikipedia.org/w/index.php?title=Taxhttp://en.wikipedia.org/w/index.php?title=Dividendhttp://en.wikipedia.org/w/index.php?title=Dividendhttp://en.wikipedia.org/w/index.php?title=Dividend_strippinghttp://en.wikipedia.org/w/index.php?title=Dividend_strippinghttp://en.wikipedia.org/wiki/Citation_neededhttp://en.wikipedia.org/wiki/Citation_neededhttp://en.wikipedia.org/w/index.php?title=Stock_certificatehttp://en.wikipedia.org/w/index.php?title=Stock_certificatehttp://en.wikipedia.org/w/index.php?title=Stock_certificatehttp://en.wikipedia.org/w/index.php?title=CRESThttp://en.wikipedia.org/w/index.php?title=Taxhttp://en.wikipedia.org/w/index.php?title=Dividendhttp://en.wikipedia.org/w/index.php?title=Dividend_strippinghttp://en.wikipedia.org/wiki/Citation_neededhttp://en.wikipedia.org/wiki/Citation_neededhttp://en.wikipedia.org/w/index.php?title=Stock_certificatehttp://en.wikipedia.org/w/index.php?title=CREST

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There are several Pro's and Con's to investing in bonds

Pro's

Bonds give higher interest rates compared to short-term investments.

Bonds are less risky when compared to stocks.

Con's

Selling bonds before they're due, may result in a loss, known as a discount.

If the issuer of the bond declares bankruptcy, you may lose your money. Hence you must

critically evaluate the credibility of the issuer of the bond, ensuring that he has the capability

to repay the bond amount.

Now, let us continue with the same example. To accrue more capital for your new grocery

store, you sell half your company to your brother for Rs 50,000. You put this transaction in

writing 'my new company will issue 100 shares of stock. My brother will buy 50 shares for

Rs 50,000.' Thus, your brother has just bought 50% of the shares of stock of your company.

Thus, to explain stocks:

Stocks, also known as Equities, are shares in a company. It is the certificate of ownership of

a corporation. In simple terms, when you invest in a company's stock or buy its shares, you

own part of a company. Thus, as a stockholder, you share a portion of the profit the

company may make, as well as a portion of the loss a company may take. As the company

keeps doing better, your stocks will increase in value and yield higherdividends.

Dividend: A sum of money, determined by a company's directors, paid to shareholders of a

corporation out of its earnings.

This example covers the 2 major types of investments: bonds and stocks

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Rewinding back to the Stock Market Trading history of India

A: In the earlier days, stockbrokers kept scouting for 'natural' sites to conduct their trading

activities, shifting from one set of Banyan trees to another. As the number of brokers kept

increasing and the streets kept overflowing, they simply had no choice but to relocate from

one place to another.