{"id":9751,"date":"2022-09-07T00:34:56","date_gmt":"2022-09-06T19:04:56","guid":{"rendered":"https:\/\/aayushbhaskar.com\/?p=9751"},"modified":"2022-09-07T00:34:56","modified_gmt":"2022-09-06T19:04:56","slug":"how-to-save-tax-on-capital-gains-in-india","status":"publish","type":"post","link":"https:\/\/aayushbhaskar.com\/how-to-save-tax-on-capital-gains-in-india\/","title":{"rendered":"How to Save Tax on Capital Gains in India?","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"
Capital Gains Tax or CGT is a tax levied on assets of individuals and corporations. The assets subject to capital gain tax are Stocks, bonds, real estate, and other properties.\u00a0<\/span><\/p>\n So, if you plan on trading your property, you will be subject to capital gains tax on the profits made after deducting the indexed cost of acquisition and inflation, which can vary widely based on the holding term of a capital asset.<\/span><\/p>\n However, many options exist for reducing a property’s capital gain tax upon sale.\u00a0<\/span><\/p>\n Let’s check it out!<\/span><\/p>\n The term “capital gains” refers to the profit made by an investor when selling an asset for more than they paid for it.\u00a0<\/span><\/p>\n Capital investments include properties like houses, cars, and jewelry. The Capital Gains Tax (CGT) depends on whether the gain was made quickly or over a long period.<\/span><\/p>\n The following percentage of tax deduction is available under such circumstances:<\/span><\/p>\n Long-term CG (LTCG) taxation for debt and equity funds is distinct. Long-term profits in equity funds are not subject to taxation, whereas gains in debt funds are subject to a 20% tax indexed upwards. When calculating the value of an asset, indexation means taking inflation into account.<\/span><\/p>\n While LTCG is qualified for tax deductions, short-term profits are not. By following the guidelines outlined in the Income Tax<\/a> Act, you can legally minimize your long-term capital gains tax liability.\u00a0<\/span><\/p>\n For instance, reinvesting the home sale proceeds into a residence is one of the primary ways to avoid capital gains tax.<\/span><\/p>\n LTCG from selling a home and subsequent investment in another home is the subject of Section 54.<\/span><\/p>\n You are only eligible for a deduction toward the purchase of one home. Further, you can only claim an exemption for the first home’s price if you utilize the capital gains to finance multiple purchases.<\/span><\/p>\n When you sell your home and put the money you get from the sale toward the purchase of certain bonds, you will have long-term capital gains as defined under Section 54EC.<\/span><\/p>\n Long-term capital gains from selling an asset other than a home and the subsequent use of the funds to purchase a home are addressed in Section 54F.<\/span><\/p>\n Exemptions as per 54F<\/span><\/em><\/strong><\/p>\n LTCG can be placed in a Capital Gains Savings Account (CGS) if the account holder cannot invest the money within the allotted time. However, the funds must be utilized within a specified time frame to construct or acquire a new primary or secondary residence.<\/span><\/p>\n Sections 54 and 54F can be used in tandem with the Capital Gain Deposit Account (CGDA) Scheme, 1988.\u00a0<\/span><\/p>\n Capital gains not used when an individual files their income tax return may be deposited into a public sector bank under the CGDA Scheme. This account has a two-year (in the event of a new home purchase) or three-year (in all other cases) time limit on withdrawals (in case you are constructing a new house).<\/span><\/p>\n The funds must be used only to purchase a primary residence before the tax return filing deadline. The capital gains will be taxable if the money is not used to purchase a home within the specified time frame.<\/span><\/p>\n The annual rise in inflation and prices means that long-term capital sales typically provide substantial gains. Therefore, if you invest the money wisely, you can keep 20% of the money that would otherwise go to taxes.<\/span><\/p>\n You can, however, significantly lessen the Captial Gains tax by employing one of the following strategies:<\/span><\/p>\n It is common practice for people to sell their previous residence to finance the purchase of a new one.\u00a0<\/span><\/p>\n If you meet the following requirements of Section 54F, you can avoid paying CGT while utilizing profits from selling your old property to pay for your new property.<\/span><\/p>\n You won’t get the exemptions if you sell the new home before the three-year mark.\u00a0<\/span><\/p>\n Here, the three-year mark begins on a new home’s purchase or construction completion date. Certain requirements must be met to be eligible for the exemption provided by Section 54F. These are:<\/span><\/p>\n Currently, only one home falls under Section 54F jurisdiction. It paves the way for the sale of commercial property to fund the acquisition of a home. You can refrain from paying CGT if you invest the total amount in acquiring the replacement property.<\/span><\/p>\n It is intended for those selling a home to use the proceeds to buy another home to be prime candidates for the exemptions provided under Section 54F(i).<\/span><\/p>\n You can utilize capital gains bonds if you sell a property and don’t plan to buy another home with the money.\u00a0<\/span><\/p>\n Let’s have a look at the characteristics of capital gains bonds.\u00a0<\/span><\/p>\n This is intended for people who aren’t looking to buy a new home. They can fetch capital gains tax savings through bonds.<\/span><\/p>\nDefinition of CGT:<\/span><\/strong><\/h2>\n
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CGT on Long-Term Assets<\/span><\/strong><\/h2>\n
The Three Primary LTCG Tax Exemptions:<\/span><\/strong><\/h3>\n
Sec 54<\/span><\/h3>\n
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Sec 54 F<\/span><\/h3>\n
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Capital Gains Account Scheme (CAGS)<\/span><\/h3>\n
Tips to save money on CGT:<\/span><\/strong><\/h2>\n
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