The flip side of making a neat profit on selling stocks or property is the huge tax levied. However, there are ways to work around it – legally. This comprehensive piece explains at length what Long-Term Capital Gains (LTCG) is and how to compute the same. It then explains how to calculate tax on capital gains, use Cost Inflation Index (CII) to your advantage and save tax in case of both long-term and short-term gains. The article further delves on how one can save tax by investing profits in another property, bonds, shares and equity mutual funds. Armed with this knowledge, you can offset a significant amount of your tax liability.
Basics of tax and Long-Term Capital Gains
If one sells an asset such as shares, mutual fund units, property, bonds etc., the profit earned from the sale is called income from capital gains. One must pay tax on the money thus earned. The tax paid is called Capital Gains Tax. And if you make a loss on sale of assets, you have a Capital Loss.
Now, let’s see how to compute capital gains. But first, one must know about the capital gains on different types of investment products
The nature of investment product sold such as property, equity mutual fund, debt mutual funds, stocks, gold.
Duration of ownership. The tax varies depending on the type of asset. For example, if property is sold after being held for two years, it classifies as Long-Term Capital Gains (LTCG). If pe...