How to SAVE Capital Gains Tax??
Dear Friends and #Real estate Enthusiasts,
Welcome to another edition of #Real Estate newsletter, today we will look into saving capital gain tax. Whenever we sell property
What is Capital Gains Tax:
Capital gains result from selling a capital asset and can be short-term or long-term, based on ownership duration.
The tax on capital gains is applicable in the year of the sale and is triggered when a profit is realized from the sale of a capital asset.
Capital Assets:
Capital assets include tangible and intangible properties like land, buildings, machines, securities, patents, trademarks, and lease rights.
Exclusions from capital assets involve raw materials used in business, personal items, household items (excluding jewelry and paintings), and certain government-issued gold bonds.
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Types of Capital Assets:
Short-term capital assets (immovable assets) are held for less than 24 months (Less than 36 months for Under Construction property).
Long-term capital assets (immovable assets) are held for more than 24 months. (More than 36 months for Under Construction property).
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Taxation on Capital Gains:
Long-term capital gains tax is 20% with applicable Health and Education Cess.
Short-term capital gains tax depends on your income tax slab.
Formula for Indexation:
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Calculating Short-Term and Long-Term Capital Gains:
Short-term capital gains are calculated by subtracting expenses from the full value of consideration.
Long-term capital gains are calculated similarly, with adjustments for the indexed cost of acquisition and improvement.
Ways to Save on Capital Gains Tax:
Invest in CGAS (Capital Gains Account Scheme): Ideal for those unable to invest in a new property immediately.
Set off all Capital Losses: Offset capital gains with losses incurred earlier, subject to certain conditions.
Invest in Bonds: Invest capital gains in specified bonds within six months to avail of tax exemptions under Section 54EC.
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Exemptions on Capital Gains:
Section 54: Exemption on the sale of a house property on the purchase of another house property.
Section 54F: Exemption on the sale of any asset other than a home if the entire consideration is invested in a property.
Section 54EC: Exemption from the sale of real estate when reinvesting in specific bonds within six months.
Section 54B: Exemption of capital gains from transfers of land used for agricultural purposes.
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Conclusion:
By understanding these regulations and leveraging exemptions, individuals can optimize their tax liabilities on capital gains from property transactions. Always consult with a tax professional for personalized advice based on current tax laws.
Stay positive, stay motivated, and keep learning new things for a brighter future.
Warm regards,
#mumbai #bangalore #ahmedabad #chennai #karnataka #kerala