The tax rate on long-term capital gains varies with the nature of the asset and the date of transfer. Here's a division:
1. Equity-Oriented Mutual Funds and Listed Equity Shares
- For transfers on or after 23rd July 2024:
- First ₹1.25 lakh: Nil
- More than ₹1.25 lakh: Charged at a flat rate of 12.5%
- For transfers before 23rd July 2024:
- First ₹1 lakh: Nil tax
- More than ₹1 lakh: Charged at a flat rate of 10%
2. Other Assets (Real Estate, Land, Unlisted Shares, etc.)
- For transfers on or after 23rd July 2024:
- Except land and buildings: Taxed at 12.5% without indexation benefits
- Land and buildings: Choice of paying either:
- 12.5% without indexation benefits
- 20% with indexation benefits (if acquired before 23rd July 2024)
- For transfers before 23rd July 2024:
- Taxed at 20% with indexation benefits
1. Determine the Full Value of Consideration
This will be in cash, property value, or other proceeds from the sale.
2. Calculate the Net Value of Consideration There are transfer-related expenses, for example brokerage, lawyers fees, and advertising costs to be deducted.
3. Calculate the Cost of Acquisition Identify the original purchase price.
- For qualifying assets, apply this cost with the help of Cost Inflation Index (CII) to take into account inflation.
4. Deductions of Exemptions (if any)-
Income earned through re-investment in house property or specific bonds can be exempted under Sections 54, 54B, 54D, 54EC, and 54F.
5. Calculate Taxable LTCG
Subtract the indexed cost of acquisition and applicable exemptions from the net sale consideration.
1. Type of Asset
- Equity-Oriented Assets: Taxed at 12.5% for gains exceeding ₹1.25 lakh.
- Non-Equity Assets: Taxed at 12.5% without indexation (or 20% with indexation for land and buildings acquired before 23rd July 2024).
2. Holding Period
-Equity Assets: More than 1 year.
- Non-Equity Assets: More than 3 years.
3. Cost Inflation Index (CII)
It adjusts the purchase price of non-equity assets for inflation, reducing taxable gains.
4. Date of Acquisition and Sale
Determines eligibility for LTCG tax treatment and applicable exemptions.
LTCG tax liability can significantly influence your financial planning. Reinvesting gains in specific assets, such as residential property or certain bonds, can help maximize savings. Staying updated on tax laws ensures you’re prepared for any changes.
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