Save Tax on Capital Gain Tax in India

Capital gains tax is levied on profits that are derived from the sale of property, shares, gold and mutual funds. However, there are several rules given in the Income Tax Act that can help you save tax on capital gains Tax in India. If these rules are used properly, you can reduce your tax. Here are the 5 best ways to save on capital gain tax under the latest rules in 2025.

1. Invest in residential property – Section 54

If you sell a residential property and realize Long-Term Capital Gain (LTCG) from it, you can save your tax by purchasing this amount in another residential property.

Terms:

• The asset sold must be a long-term asset, and must be sold after more than 2 years
• You have to buy a new residential property within 2 years or build a new house within 3 years.
• The new residential property must be in India.
• If you reinvest the entire capital gains amount such as buying shares or units, there will be no tax.

2. Invest in Capital Gains Tax Bonds – Section 54EC

Investing in 54EC bonds. You can save tax on capital gain Tax in India, these bonds are issued by NHAI (National Highway Authority of India) and REC (Rural Electrification Corporation).

Terms:

• It is taxed only on long-term capital gains arising from sale of land or building.
• Investment should be made within 6 months.
• Maximum investment limit should be up to ₹50 lakh
• The lock-in period of these bonds is at least 5 years.

3. Reinvest in other residential property – Section 54F

If you sell any asset like gold, shares, mutual funds or property and get long-term capital gains from it, you can reinvest it in a residential house to save tax under Section 54F.

Terms:

• At the time of selling a residential property, you should own only one residential property.
• The amount of residential property sold (not just capital gains) has to be invested in the purchase of a new house.
• The new asset should be purchased within 2 years or constructed within 3 years.
• If the entire amount is reinvested, there will be no tax.
• If only a small amount is reinvested, the discount in percentage will be.

4. Adjust capital loss against capital gain Tax

If you have incurred capital loss in any previous year, you can set it off against your capital gain tax and reduce the tax liability.

How to do?

• Short-term capital loss can be adjusted against short-term or long-term capital gains .
• Long-term capital losses can only be disallowed against long-term capital gains .
• Unutilized capital loss can be carried forward for up to 8 years.

Tip:

If you have incurred capital loss, be sure to declare it in your income tax return, so that in future can take advantage of it.

5. Use Capital Gains Account Scheme (CGAS)

If you do not want to invest in property immediately, but plan to do so later, you can deposit your capital gains Tax in a Capital Gains Account Scheme (CGAS).

terms:

• This deposit should be made before the last date of filing income tax return.
• The amount deposited in this account must be used to purchase or construct a property within the stipulated time frame.
• If this amount is not utilized within 3 years, it will become taxable.

2025 latest updates

• Change in tax rules on gold – There will be 10% tax on sale of gold from July 2024 and indexation benefit will not be available on long-term capital gain.
• Mutual Fund Taxation – Debt mutual funds will now be treated as short-term capital gain, And they will be taxed as per the slab rate.
• Real estate tax benefits limited – Tax exemption on property investment has been modified so that the tax exemption is not misused.

conclusion

It is possible to save tax on capital gain in India if you plan your investments properly. By using Section 54, 54EC, 54F, capital loss adjustment and CGAS, you can reduce your tax significantly. Get maximum benefits by understanding these provisions and investing at the right time.

Salaried Employees tax-saving strategies, read our guide on 4 Best Tax-Saving Techniques for Salaried Employees in India