Saving Tax on Long Term Capital Gains

Understanding Long-Term Capital Gains

Before planning to sell a property it is important to plan your capital gains. Short Term Capital Gains (STCG) and Long Term Capital Gains (LTGC) are two important terms that you need to know before computing the net tax liability.

When you sale/transfer assets like property, jewels etc. within three years of its own and one year of ownership in case of shares or mutual funds, it attracts an STCG if sold at profit.

When you sale/transfer assets like property, jewels, etc. over three years of its own and one year of ownership in case of shares or mutual funds, it attracts an LTCG if sold at profit.

Certain exemptions are laid out under Section 54 and Section 54F by Income Tax Act to help taxpayers save tax on capital gains.

  • In long-term Capital Gain, the sale of a House Property is exempted under Section 54.
  • In long-term Capital Gain, the sale of any asset(s) other than House Property is exempted under Section 54F.

Long Term Capital Gains

There are certain common requirements that should be fulfilled for both the Sections:

  • To claim the exemption, a new residential house property must be purchased or constructed.
  • The new residential property must be bought or constructed either one year before the deal or two years after the offer of the property/asset.
  • The new residential property must be bought or constructed either one year before the deal or two years after the offer of the property/asset.
  • If you are unable to invest the specified amount in the manner stated above before the date of income tax return filing or one year after the sale’s date, you must deposit the specified amount in a public sector bank (or other banks as per the Capital Gains Account Scheme, 1988).
  • Only one house property can be constructed or purchased.
  • It is mandatory that the new residential property must be located in India. Any properties purchased or constructed outside of India is not available for exemption.
  • The property must only be bought on the name of the seller and not on anybody else’s name.

For any help on ITR Filing feel free to consult the tax experts at Taxraahi. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business Return, and Bulk Return.

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By | 2018-08-08T08:45:45+00:00 June 10th, 2016|Categories: Capital Gains|Tags: , , , , |1 Comment

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  1. […] CAPITAL GAINS are the profits earned on sale of capital assets. The profit earned is taxable in the hands of seller. Under section 45(1), if a capital asset is transferred by an assesse, then any profit or gain on such transfer is taxable as capital gain after the exemptions under sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA and 54GB. […]

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