ITR Filing: Tips To Save Capital Gain Tax On Equities

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What Is Capital Gain Tax?

Profit on equity investments with a holding period of up to one year is called short-term capital gain (STCG); investment with a holding period of over a year is called long-term capital gain (LTCG).

Capital Gain Tax

STCG and LTCG Tax

STCG on equity is taxed at a 15% rate. LTCG of up to Rs 1 lakh on equity investment is tax-free, whereas LTCG above Rs 1 lakh is taxed at 10%.

STCG & LTCG

Capital Loss

You can set off a long-term capital loss from LTCG to save the applicable tax. It allows to carry forward capital losses for the next 8 consecutive years, provided one files ITR every year.

Loss

Tax Harvesting

You can book LTCG on equities before the end of every financial year so that the capital gain doesn’t exceed the Rs 1 lakh limit, and you can purchase them again the next day as fresh buying.

Tax Harvesting

LTCG Above Rs 1 lakh

You can book LTCG on equity with an amount exceeding Rs 1 lakh to the extent you have a long-term capital loss carried forward in your books.

LTCG

Book A Fresh Long-Term Capital Loss

You may also book a fresh long-term capital loss for setting off from the LTCG that exceeds the Rs 1 lakh limit and repurchase the stocks later to reinstate your portfolio structure.

Capital Loss

Things To Consider

You can set off long-term capital losses with only LTCG, whereas you can set off short-term capital losses with both short and long-term capital gains, so plan tax harvesting accordingly.

Things To Consider