Are you curious to know how to save on long-term capital gain tax? This blog is for you, you will get to know about GST and income tax. Long-term capital gains are tax-deductible under the Income Tax Act. If you follow specific guidelines, you can save money on the profits. The essential requirement for exemption is that the total sum reinvests in a residential property. Tax HelpDesk is your complete guide for such GST and income tax-related services. It is the ultimate guide for tax filing in India.
Before we get into the specifics of how to save GST and income tax on long-term capital gains, we need to understand what capital gains are and how the capital gains tax regime works. Keep reading the blog to learn more.
Saving GST and Income Tax on Long-term Capital Gains
- The Capital Gain Account Scheme
The capital gain account program allows an investor to benefit from tax breaks without purchasing a home. The Government of India allows cash to withdraw from this account solely for the purchase of houses and plots. Any funds that can withdraw for other purposes must use within three years of withdrawal. Otherwise, the overall profit amount will be charged in accordance with the appropriate long-term capital gain tax rates.
- Investing in the bonds
If one intends to avoid tax, he might also use Section 54EC to save on long-term capital gains tax by shifting the complete amount to NHAI and RECL bonds. The list of such bonds is available on the Income Tax Department of India’s official website.
- Investments in Residential Property
One could potentially buy new residential property to avoid paying taxes on long-term capital gains. These exemptions are related to Sections 54 and 54F. Individuals or Hindu Undivided Families will be exempt from paying long-term capital gains tax under Section 54 if they sell a built-up residence and use the capital gain to buy or develop a new residential property.
The new or fresh property must purchase either one year before or two years after the present or existing property is sold. If the seller wishes to build a new home, it must finish within three years after the sale of the previous one.
Exemptions on Long-term Capital Gain Tax
Many people wish to be exempt from such taxes because their share of profits is lowered as a result of this taxation. However, if an individual’s annual income is less than the predetermined amount, they will be exempt from paying any taxes, including this one. The tax exemption limit for the fiscal year 2020-2021 is as follows:
- If a resident of India is 80 years of age or older and earns less than Rs. 5,00,000 per year, they will be exempt from this tax.
- A resident of India between the ages of 60 and 80 will be exempt from long-term capital gains tax provided they earn a maximum of Rs. 3,00,000 per year.
- Individuals under the age of 60 are exempt from long-term capital gain tax up to Rs. 2,50,000 per year.
- Hindu Undivided Families in India can benefit from this tax exemption if their annual income is less than Rs. 2,50,000.
- Non-resident Indians (NRIs) have a flat Rs. 2,50,000 exemption ceiling for long-term capital gain tax, regardless of age.
Individuals in India are not eligible for tax breaks under Sections 80C to 80U on long-term capital gains tax.
The entire profit will be considered taxable income and subject to a flat 20% tax under long-term capital gain. Because there is no minimum exemption limit on the total amount, it is liable to high taxes.
Short Term Capital Gains (STCG)
A short-term capital asset is one that is kept for less than 36 months. From FY 2017-18, the 36-month requirement for immovable items such as land, buildings, and houses has been decreased to 24 months.
Long Term Capital Gains Tax
Long-term capital gains (LTCG) taxation differs between debt and equity funds. While equities funds are tax-free on long-term gains, debt funds are taxed at a rate of 20% with indexation. Indexation is the process of calculating the cost of an item while accounting for inflationary price increases. Long-term capital assets are capital assets that have been kept for more than 36 months. From April 1st, 2017, any immovable property, whether it is land, building, or house property, that has been kept for more than 24 months will be classified as long term capital assets, attracting long term capital gains tax if sold after being held for 24 months or more.
Individuals who possess capital assets such as real estate, stocks, and bonds are also required to pay a long-term capital gain tax. Individuals, on the other hand, can save money on this tax if they are aware of the tax-saving or exemption options. Visit Tax HelpDesk’s website for simple tax filing in India for all types of taxes. They have solutions to all of your GST and income tax issues.