Navigating the Maze: A Comprehensive Guide to Long-Term Capital Gains Tax in India
The Indian Income Tax Act, 1961, plays a crucial role in regulating how capital gains are taxed. This blog, brought to you by Registration Service, your one-stop shop for business and compliance needs in Kota, dives deep into the world of Long-Term Capital Gains (LTCG) tax in India.

Understanding Capital Gains:
When you sell an asset (property, stocks, etc.) for more than you purchased it for, the profit you earn is considered a capital gain. These gains are categorized as either short-term or long-term depending on how long you held the asset before selling.

Long-Term Capital Gains (LTCG):
As per the Income Tax Act, an asset is considered a long-term capital asset if held for a specific period before disposal. This period varies depending on the type of asset:

  • Equity Shares & Equity Oriented Mutual Funds: Held for more than 12 months.
  • Debt Oriented Mutual Funds: Held for more than 36 months.
  • Immovable Property (Land & Building): Held for more than 24 months.
  • Unlisted Shares: Held for more than 24 months.

Taxation of LTCG:
The taxation of LTCG has undergone changes in recent years. Here’s a breakdown of the current LTCG tax regime in India:

Securities Transactions Tax (STT) Applicable Assets:

  • Equity Shares & Equity Oriented Mutual Funds: If you’ve paid STT while acquiring and selling these assets, LTCG exceeding ₹1,00,000 in a financial year is taxed at a concessional rate of 10% (plus applicable surcharge and cess). Any LTCG below ₹1,00,000 is exempt from tax under Section 112A.

Non-STT Applicable Assets:

  • Debt-Oriented Mutual Funds (after 36 months): LTCG is taxed at a rate of 20% (plus surcharge and cess) with indexation benefits.
  • Immovable Property (after 24 months): LTCG can be exempt from tax under various sections like Section 54 (investment in new residential property), Section 54EC (investment in specified bonds), etc. If exemption is not claimed, it’s taxed at 20% (plus surcharge and cess) with indexation benefits.
  • Unlisted Shares (after 24 months): Taxed at 20% (plus surcharge and cess) with indexation benefits.

Indexation Benefit:
Indexation allows you to adjust the purchase price of the asset for inflation, reducing the taxable LTCG. This helps account for the rupee’s decreasing value over time.

Exemptions and Deductions:
The Income Tax Act offers various exemptions and deductions to reduce your LTCG tax liability. Some common ones include:

  • Section 54: LTCG from the sale of residential property can be exempted from tax if the proceeds are reinvested in a new residential property within a specified timeframe..
  • Section 54EC: Exemption for LTCG on sale of any capital asset if invested in specific bonds.
  • Section 54F: Exemption for LTCG on sale of residential property if invested in a new one within a specific timeframe (capped at ₹10 crore).

Important Points to Remember:

  • Always consult a qualified tax advisor for personalized guidance on LTCG tax applicable to your specific situation.
  • Maintain proper records of purchase and sale transactions for all your assets.
  • Understand the different sections of the Income Tax Act that offer exemptions and deductions to minimize your tax burden.

Registration Service: Your Partner in Tax Compliance
Registration Service, with our team of experienced Chartered Accountants (CAs) in Kota, can assist you with:

  • Calculating your LTCG tax liability
  • Understanding the most beneficial tax exemptions
  • Preparing tax returns efficiently
  • Navigating the complexities of LTCG tax regulations

By partnering with Registration Service, you can ensure you’re compliant with LTCG tax regulations and minimize your tax burden. Let us handle the complexities while you focus on growing your wealth!

Disclaimer: This blog is for informational purposes only and should not be considered as tax advice. Please consult a qualified tax professional for personalized guidance on your specific situation.

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