How To Save Tax On Long-Term Capital Gains
How to save tax on Long-Term Capital Gains (LTCG) in India (under current tax laws as of FY 2024–25): What Are Long-Term Capital Gains (LTCG)? LTCG refers to the profit made from the sale of assets like: Equity shares (held for more than 1 year) Property, gold, debt funds, etc. (held for more than 2–3 years, depending on asset type) LTCG on equity exceeding ₹1 lakh is taxed at 10% (without indexation).LTCG on real estate/gold/debt is taxed at 20% (with indexation) ✅ Ways to Save Tax on LTCG 1. Invest Under Section 54 (Real Estate) Applicable if you sell a residential property You must reinvest the capital gain in: Another residential house in India within 1 year before or 2 years after the sale (or within 3 years if under construction) Exemption = amount invested in new house You can now claim this only once in a lifetime if capital gain ≤ ₹2 crore 2. Section 54EC – Invest in Bonds Capital gains from property sale can be invested in 54EC bonds (e.g., REC, NHAI) Invest within 6 months of sale Max investment allowed: ₹50 lakh Lock-in period: 5 years No interest is taxable, and entire capital gain is exempt 3. Section 54F – For Assets Other Than House Sell any capital asset (like land, gold, mutual funds) Reinvest the entire sale consideration (not just the gain) in a new house Must not own more than one residential house on the date of transfer 4. Use Capital Gains Account Scheme (CGAS) If you haven’t bought the new property yet, you can deposit the capital gains in a CGAS account (in a public sector bank) Use the funds within the allowed timeframe to avoid taxes 5. Tax Harvesting for Equity LTCG Sell equity investments strategically to realize LTCG up to ₹1 lakh annually tax-free Reinvest the amount (called buy-back or switching) to reset acquisition price 6. Set Off with Capital Losses You can adjust LTCG with long-term capital losses or carry forward losses from the last 8 years 7. Choose Between Old vs. New Tax Regime LTCG on equity is taxed in both regimes, but on other assets (like debt funds or real estate), compare effective tax implications under both regimes
How To Save Tax On Long-Term Capital Gains Read Post »
