Let’s start this blog with an easy-to-understand example. For example, you bought a house in 2020 for investment purposes. Back then, you bought that house for ₹20,00,000. Right now, the value of that property is ₹40,00,000, i.e., double its value back then. So, you plan to sell that property and make some profit. To buy that property,Â
Now, you will be taxed on whatever amount you earn as a profit on the sale of that property you bought after taking a personal loan in Mumbai. However, you should know that even if you bear a loss while selling that property, capital gains tax will still be levied.
Similarly, capital gains tax is levied on the sale and purchase of various capital assets and other investments. That’s why you might need a personal loan in Mumbai to make the loss of income from capital gains tax less impactful.
In this blog, we will give you a very elaborate know-how about ‘What is Capital Gains Tax’ and ‘How to Plan for Capital Gains Tax. So, follow along.
What is Capital Gains Tax?
capital gains tax will be levied if you earn profit from the sale of any capital asset. A capital gains tax will be applicable only if you have kept the asset for more than one year.
What are capital assets?
Land, building, and housing property, vehicles, patents, and trademarks—everything encompassing these assets is taxable under capital gains tax. When you are calculating the capital gains tax on your capital asset, you must know that there are 2 types of CGT.
| Short-Term Capital Assets | Long-Term Capital Assets |
| Any asset held for less than 36 months or even less in some cases. | Any asset held for more than a period of 36 months. |
| Held unlisted shares and immovable property for less than 24 months. | Securities like debentures, bonds, and government securities. |
| Securities like debentures, bonds, and government securities. | Quoted or Unquoted units of UTI |
| Coupon bonds, whether quoted or not, like Zero Coupon bonds. | Quoted or Unquoted Zero Coupon Bonds |
However, from 2024-2025, the time durations of short-term capital gains tax and long-term capital gains tax have changed. The 36-month holding period has been permanently removed. The holding period for any kind of listed security is 1 month only.
| Capital Gains Tax | Before Union Budget 2024 | After Union Budget 2024 |
| Short-Term Capital Gains Tax | 15% | 20% |
| Long-Term Capital Gains Tax | 10% | 12.5% |
You can refer to the High Commission in India if you are planning to calculate capital gains tax.
How to save on capital gains tax?
Don’t worry if you want to save even after making huge profits on the sale of long-term capital gains tax. Mentioned below are the tips that you can follow to save on long-term capital gains tax:
- Section 54: If you generate profit from the sale of a residential property and reinvest the profit in the purchase of another residential property, then long-term capital gains tax will not be levied.
- Section 54F: A similar principle is applicable if you reinvest the profit generated from the sale of land or buildings.
- Section 54F: According to this provision, if the profit generated from the sale of an asset is reinvested in the purchase of a residential property, then no capital gains tax will be levied.
What is the Capital Gains Account Scheme (CGAS)?
Introduced in 1988, the capital gains account scheme helps the depositor in cases when the due date to file the income tax return is further than the time limit available to re-invest the profit incurred.
In such a case, the depositor can deposit this amount in a PSU or any other bank as per CGAS. However, if you choose not to invest that money in the given duration, then the same amount will be treated as a short-term capital gain.
Conclusion
There are ways to avoid getting taxed on the sale of your capital assets. After reading this blog, you must have known at least 3-4 to avoid getting taxed on your profits from any kind of sale.
