How to Save Tax on LTCG, Since the reintroduction of long term capital gains (LTCG) tax on equity shares and mutual funds with equity exposure has made investors aware of their tax liability, they have sought ways to lower it as much as possible. Here are four approaches they could explore.
How to Save Tax on LTCG
NRIs may qualify for exemption from Long Term Capital Gains tax by investing the sale proceeds of a residential property into certain bonds; however, within three years after selling their previous house they must buy or construct another one.
Section 54F: How to Save Tax on LTCG
As a tax-saving strategy, Section 54F permits taxpayers to invest their non-residential capital gains, such as shares, mutual funds and gold without paying long-term capital gains tax (LTCG). All that’s necessary for investing is making it within a specified timeframe – providing investors the ability to choose an asset based on market conditions and individual needs.
Ravi Khanna may sell his equity shares to purchase property in Goa. Under Section 54F, any profit realized from this sale would be exempt from tax as long as he or she purchases or constructs the new property within three years after selling his or her original equity asset sale; furthermore, ownership must extend five years past initial equity asset sale. It should be noted however, that this tax exemption doesn’t extend to sales of fixed income instruments like bonds and debentures which remain subject to regular capital gains taxation.
How to Save Tax on LTCG
As part of this tax exemption, capital gains must be invested in residential real estate. To do this, either all net consideration from selling the original asset has to be reinvested, or at least equal or more than one proportion must be reinvested if reinvested proportion equals or surpasses one. Furthermore, at the time of sale there cannot be more than one property held by taxpayer. A detailed breakdown must also be submitted along with bank statements showing where funds came from.
An in-depth knowledge of Section 54F can assist taxpayers in reaping maximum financial benefit from this investment strategy. By developing an appropriate plan, taxpayers may save significant tax on LTCG while simultaneously growing a strong investment portfolio.
Section 54EC: How to Save Tax on LTCG
If you have long-term capital gains from selling an immovable property, one way to reduce tax could be investing it within six months in specified government bonds and instruments. Before taking advantage of this provision, however, it is crucial that you understand its nuances; to do this effectively consult a financial expert or professional CA.
Your LTCG may be used to purchase 54EC bonds, build a house, or invest it in fixed-income instruments like bank FDs and Public Provident Fund (PPF). However, should you decide to buy these bonds, keep in mind that they cannot be transferred or redeemed within three years after purchase or their exemption will be revoked.
Another advantage of investing in 54EC bonds is their high interest rates, which tend to outpace other fixed-income investments. Furthermore, any interest earned on 54EC bonds does not subject to Tax Deferral System deductions allowing you to keep all your interest payments without any deductions from their total earnings.
How to Save Tax on LTCG
Under Section 54EC, to qualify for tax exemption on long-term capital gains (LTCG), all the LTCG must be invested in eligible bonds and instruments – with a maximum investment limit of Rs 50 lakh currently. To purchase them you will need to submit an application form with supporting documents and payment through demand draft or account payee cheque at an IDBI Bank branch of collection; upon verification and approval you will receive physical or demat bonds depending on your preference. To see if you may qualify for any exemptions contact an experienced tax consultant; Housewise offers various tax-saving services designed to assist our clients achieve their investment goals with ease!
Section 54D: How to Save Tax on LTCG
Navigating finances as an NRI can be challenging. Thankfully, the Income Tax Act (ITC) offers many tax exemption benefits that help ease this burden, with one such being Section 54F of ITC which allows NRIs to avoid paying tax on long-term capital gains when investing them in residential real estate – an option which also increases economic growth by stimulating real estate developments in India.
Individuals and Hindu Undivided Families (HUFs) can take advantage of this tax benefit. The property purchased must be residential – for instance a home or plot of land – within a specified time period, either through purchasing existing properties or building new ones; construction should be complete prior to filing your return deadline date – any excess proceeds can be deposited into a Capital Gains Account Scheme instead.
How to Save Tax on LTCG
Your remaining proceeds of an LTCG can also be invested in various other investments, such as shares in qualifying start-ups. Doing this allows you to diversify your portfolio, reduce risks and maximize returns while at the same time diversifying returns – though be sure to consult a financial advisor first before making major investments!
As previously noted, you are only eligible to utilize this tax exemption once; any unused funds will become taxable as soon as the three-year period concludes. Therefore, it’s advisable that taxpayers utilize all available exemptions as soon as possible and only own one residential property at the time of sale (excluding any new properties purchased or constructed ) so as to use their exemption correctly.
I’m Pradeep Ahalawat, the founder and chief writer of this blog. (Holding the degree of M.Sc. IT with more than 15 years of expereince in IT sector) With a passion for storytelling and a keen interest in current affairs (Business), I started this platform to share my researches and perspectives on the issues that matter most to the Personal Finance.