Capital Gains Tax India
Capital gains tax is the tax you pay on the profit you make from selling assets such as property, shares or mutual funds. It is divided into two parts – short-term and long-term capital gains, each of which has different rules.
If you are confused about how to calculate this tax or save on it, you are not alone. This is where expert guidance helps. The best CA firm in Kanpur like Smart Tax Saver can help you with proper planning and filing, so that you can save more and stay compliant.
1. What is Capital Gains Tax?
Capital gains tax is levied in India on the profit made by selling capital assets, shares, gold, etc.
There are two types of capital gains based on how long you’ve held the asset:
- Short-Term Capital Gains (STCG): If the asset is sold within a short period (usually less than 36 months for property and less than 12 months for listed shares), it is treated as a short-term gain and taxed at higher rates.
- Long-Term Capital Gains (LTCG): If the asset is held longer than the above time limits, the gain is treated as long-term and usually taxed at a lower rate. Indexation benefits may also apply in some cases.
2. Exemptions and Deductions under Capital Gains Tax in India
Section 54: If you sell your old house and buy or construct a new house, then long-term capital gains will not be taxed.
Section 54F: If you sell a property (which is not a house) and invest that money in buying a new house, then you also get exemption from tax.
Section 54EC: If you invest capital gains (up to ₹50 lakh) in NHAI or REC bonds within 6 months, then you will not have to pay tax.
Capital Loss Adjustment: If you have a capital loss, then you can reduce tax by adjusting it with capital gains.
It is important to apply these exemptions correctly in Capital Gains Tax India. Mistakes can lead to a tax notice. Therefore, it is beneficial to take advice from the best CA firm in Kanpur like Smart Tax Saver, for tax planning.
3. Capital gains tax in India for different asset classes
- Real estate:
If there is a profit on selling a property, then short-term or long-term capital gains tax is levied based on the holding period (the time from the date of purchase of an asset to the date of sale). Long-term also gets indexation benefit.
- Equity shares and mutual funds:
LTCG is levied if listed shares and equity mutual funds are held for more than 12 months. LTCG is exempted up to ₹1 lakh, after that 10% tax is levied.
- Gold and jewellery:
Capital gains tax is also levied on selling gold, silver, and jewellery. If the holding period is more than 36 months, then LTCG is levied, otherwise, STCG is levied.
- Unlisted shares and bonds:
The holding period and tax rules for assets are different. Wrong classification can lead to tax issues.
Capital gains tax India applies different rules to every asset type. It is always safe to take guidance from the best CA firm in Kanpur like Smart Tax Saver, for proper tax planning and filing.
4. Capital Gains Tax Filing Process
To report capital gains, you need to file ITR-2 or ITR-3, depending on your income source.
Schedule CG:
The entire calculation of capital gains has to be filled in “Schedule CG, showing short-term and long-term gains separately.
- Form 112A:
If there is LTCG from listed shares or equity mutual funds, then it is mandatory to fill Form 112A.
- Claiming Exemptions:
To claim exemptions under Section 54, 54F, 54EC, etc., proper documents and proofs have to be attached.
- Advance Tax Payment:
If the gains are high, then advance tax has to be paid on time, and interest may be levied.
The rules for filing capital gains tax in India are quite elaborate. Even a small mistake can lead to a notice or penalty. So to be safe, it is a smart decision to file with the best CA firm in Kanpur like Smart Tax Saver.
5. Common mistakes to avoid Capital Gains Tax India
- Wrong asset classification:
Shares, property, gold – all have different holding periods. Wrong classification can lead to incorrect tax calculations.
- Ignoring indexation:
LTCG enjoys the benefit of indexation, especially in real estate and gold. Not using it means paying more tax.
- Not reporting LTCG above ₹1 lakh:
Equity LTCG above ₹1 lakh is taxable. Many people do not file it.
- Not getting exemptions:
Not claiming exemptions like section 54, 54F, 54EC correctly and on time can cause a big loss.
- Not paying advance tax:
If the capital gains are high and you have not paid advance tax, both interest and penalty are levied.
To avoid such mistakes, it is important to understand the rules of Capital Gains Tax India properly. The best solution? File with the best CA firm in Kanpur, like Smart Tax Saver, with expert guidance and without any stress.
6. How the CA Firm in Kanpur Can Help
- Correct tax calculation:
Every property has different rules. Best CA firm in Kanpur like Smart Tax Saver calculates your capital gains accurately.
- Correct exemption planning:
How to get the maximum benefit of deductions like section 54, 54F, 54EC – only an expert CA can tell you.
- Error-free filing:
Schedule CG, Form 112A, and ITR-2 – all have to be filed in the correct format. CA does not let mistakes happen.
- Protection from scrutiny:
Filing with correct documentation and reporting reduces the risk of income tax department scrutiny.
- Capital loss set-off advice:
If you have a capital loss, then tax can be reduced significantly by smart utilization of it – which only an expert CA handles efficiently.
In short, if you want to save and comply with Capital Gains Tax India, then consult the best CA firm in Kanpur – be safe and smart.