Capital Gains Tax Filing
This plan is for you if you have incurred a profit or a loss from the sale of property, equity shares, mutual fund units, units of business trusts, bonds in addition to salary/business income and need to file the tax returns after taking the same into consideration with any other income as applicable
This plan is not for intra-day or derivative traders.
It usually takes 1 to 2 working days.
- Income Tax Filing for Capital Gains from Sale of Stocks, Equity, Mutual Funds, Property & any other assets.
- Income from Gain from Lotteries, Gaming & Other activities.
- Salaried Individuals
- Freelancers
- Financial Traders
- Business owners
- Salaried Employees with ESOP/RSU in domestic/multinational companies
- Purchase of plan
- Share your Documents
- Session with TAXAJ Expert
- Sharing of Computation for Approval
- Filing of Tax Return
- All Form 16 Part A & B from your Companies
- Form 26AS Tax Credit Statement
- PAN & Aadhar Card
- Income Tax Login Credentials
- Bank statement if interest received is above Rs. 10,000/-
- Salary Slip of any month during the Financial Year
- Bank Account Number, IFSC Code
- Any Other Income or Investment Proofs that hasn't been declared or mentioned in Form 16.
- Details of Capital gains such as Statement of Equity, Stocks or Mutual Funds.
- For Property Transactions Sale & Purchase Deed, clearing mentioning Date & Value of Purchase & Sale along with Co-Owner.
Capital Gains Basics explained here in this video!
How to save Tax on Capital Gains Transaction
Q. What is Capital Gain tax in India?
Simply put, any profit or gain arising from the sale of a ‘capital asset’ is called capital gain. This gain or profit is called ‘income’, and hence you will have to pay tax for that amount in that particular year in which the transfer of the capital asset takes place. This tax is called capital gains tax, which can be short-term or long-term. Capital gains do not apply to an inherited property as there is no transaction but only a transfer of ownership from one family member to another. The Income Tax Act has specifically exempted all the assets received as gifts by way of an inheritance from elders or as a will. However, if the kin or ward who inherited the asset or property decides to sell it, it will be a monetary transaction; thus, capital gains tax will apply.
Q. What are the Type of Capital Assets?
1. STCG ( Short-term capital asset) is an asset held for 3 years or less. The criteria of 3 years have been reduced to 2 years for immovable properties such as land, building and house property from FY 2017-18. For example, selling a house property after holding it for 2 years, the profit occurred will be long-term capital gain provided that property is sold after 31st March 2017.
2. LTCG (Long-term capital asset) An asset held for more than 36 months is a long-term capital asset. The reduced period of the previous 24 months does not apply to movable property such as debt-oriented mutual funds, jewellery, etc. They will be termed as a long-term capital asset if held for more than 3 years as earlier. Some assets are short-term capital assets when held for a year or less. This rule applies when the date of transfer is after 10th July 2014 (irrespective of the date of purchase).
The assets are:
a. Equity or preference shares in a listed company.
b. Private & Govt Securities (like debentures, bonds, govt securities etc.) of a listed company.
c. Units of Unit Trust of India.
d. Units of an equity-oriented mutual fund, whether quoted or not.
e. Zero-coupon bonds, whether quoted or not
When the above-listed assets are held for more than 12 months, they are considered long-term capital assets. If an asset is acquired by gift or will or succession or inheritance, the period the previous owner held the asset also matters to determine if it’s a short term or a long-term capital asset. In the case of rights shares or bonus shares, the holding period is counted from the date of allotment respectively.
| Distance | Population |
|---|---|
| 2 kms from local limit of municipality or cantonment board | If the population of the municipality/cantonment board is more than 10,000 but not more than 1 lakh |
| 6 kms from local limit of municipality or cantonment board | If the population of the municipality/cantonment board is more than 1 lakh but not more than 10 lakh |
| 8 kms from local limit of municipality or cantonment board | If the population of the municipality/cantonment board is more than 10 lakh |
Tax on Short Term & Long Term Capital Gains?
| Tax Type | Condition | Tax applicable |
| Long-term capital gains tax | Except on sale of equity shares/ units of equity oriented fund | 20% |
| Long-term capital gains tax | On sale of Equity shares/ units of equity oriented fund | 10% over and above Rs 1 lakh |
| Short-term capital gains tax | When securities transaction tax is not applicable | The short-term capital gain is added to your income tax return and the taxpayer is taxed according to his income tax slab. |
| Short-term capital gains tax | When securities transaction tax is applicable | 15%. |
Tax on Equity & Debt Mutual Funds
Tax on Equity & Debt Mutual Funds
Gains made from selling debt funds and equity funds are treated differently. Any fund that invests heavily in equities (more than 65% of their total portfolio) is called an equity fund.
Funds | Effective 11 July 2014 | On or before 10 July 2014 | ||
| Short-Term Gains | Long-Term Gains | Short-Term Gains | Long-Term Gains | |
| Debt Funds | At tax slab rates of the individual | At 20% with indexation | At tax slab rates of the individual | 10% without indexation or 20% with indexation whichever is lower |
| Equity Funds | 15% | 10% over and above Rs 1 lakh without indexation. | 15% | Nil |
Change in Tax Rules for Debt Mutual Funds
Debt mutual funds held for more than 3 years is long-term capital assets. That's why people remain invested for at least three years to get the benefit of long-term capital gains tax. If redeemed within three years, the capital gains will be added to your income and will be treated as per your income tax slab rate.
Calculating Capital gains
Calculating Capital gains
Capital gains are calculated differently for assets held for a longer period and for those held over a shorter period.
Terms you need to know:
Total value consideration The consideration received or received by the seller against capital assets. Capital gains are chargeable to tax in the transfer year, even if consideration has not been received.
Cost of acquisition: The value at which the seller acquired the capital asset.
Cost of improvement: Capital nature expense incurred in making any additions or alterations to the building or capital asset by the seller. It is to be noted that any modifications made before April 1, 2001, are never considered.
Note: In some instances where the capital asset becomes the taxpayer's property other than the taxpayer's purchase, the cost of acquisition and improvement incurred by the previous owner would also be included.
Q. How to Calculate Short-Term Capital Gains?
Q. How to Calculate Short-Term Capital Gains?
Step 1: Start with the total value of consideration
Step 2: Deduct the following:
👉 Expenditure incurred wholly and exclusively in connection with such transfer.
👉 Cost of acquisition
👉 Cost of improvement
Step 3: This amount is a short-term capital gain.
Short term capital gain
= Full value consideration
Less expenses incurred exclusively for such transfer
Less cost of acquisition
Less cost of the improvement.
Indexed Cost of Acquisition/Improvement
Indexed Cost of Acquisition/Improvement
Indexed Cost of acquisition is calculated as Cost of acquisition / Cost inflation index (CII) for the year the seller first held the asset, or 2001-02, whichever is later X cost inflation index for the year in which the asset is transferred. Cost of acquisition and improvement is indexed by applying CII (cost inflation index). It is done to adjust for inflation over the years of holding of the asset. This CII increases one’s cost base and lowers the capital gains. Refer to this page for the complete list of CII.
What is the right time to invest in Capital Gains Account Scheme?
Finding a seller, arranging funds and getting the paperwork done for a new property is one hell of a task to complete & it's also a time-consuming process. Considering all these points, the Income Tax Department agrees with these limitations. Suppose capital gains have not been invested till the ITR filing date (e.g. 31st of July generally) of the financial year in which the property is sold. In that case, you can deposit the capital gains as per the Capital Gains Account Scheme, 1988, in any PSU bank. This way, the deposit can be claimed as an exemption from capital gains taxation. However, if the money is not invested, the deposit shall be treated as short-term capital gains for the year in which the specified period lapses.
Saving Tax on Sale of Agricultural Land
Section 54B: Exemption on Capital Gains From Transfer of Land Used for Agricultural Purpose
When you sell the land used for agricultural purposes, you make short-term or long-term capital gains from the transfer – by an individual or the individual’s parents or Hindu Undivided Family (HUF) – for 2 years before the sale. The exemption is available under Section 54B. The exempted amount can be invested in a new asset or capital gain, whichever is lower. You must reinvest into a new agricultural land within 2 years from the sale of land. The new agricultural land as purchased with the capital gain, to claim exemption, should not be sold within 3 years from its purchase. Suppose you can not buy agricultural land before the ITR filing date. The capital gain amount must be deposited in a PSU bank or IDBI Bank according to Capital Gains Account Scheme guidelines, 1988. The exemption shall be claimed for the amount which is deposited. Suppose the amount deposited as per Capital Gains Account Scheme was not used to purchase agricultural land. In that case, it should be treated as capital gains of the year in which 2 years from the date of land sale expires if you wish to know more about investment choices with good capital gains potential.
Q. How to Calculate Long-Term Capital Gains?
Q. How to Calculate Long-Term Capital Gains?
Step 1: Start with the total consideration value.
👉 Indexed Cost of improvement
Exemption on Capital Gains
Example: Aashima bought a house in July 2004 for Rs 50 lakh, and the total value received in FY 2016-17 is Rs 1.8 crore. As the Property is held for more than 3 years, it's a long-term capital asset. The cost price is now adjusted for inflation, and the indexed cost of acquisition will be taken. By using this indexed cost of acquisition formula, the adjusted cost of the house is Rs 1.17 crore. The net capital gain is Rs.63,00,000/- Long-term capital gains will be tax treated at 20% rate. For a net capital gain of Rs 63 Lakhs, the total tax outgo will be Rs 12,97,800. This Total tax is a significant amount of money to be paid out in taxes & can be lowered by taking multiple benefits of exemptions provided by IT Department on capital gains when profit gained is reinvested into buying another asset.
Section 54: Exemption on Sale of House Property on Purchase of Another House Property
Section 54F: Exemption on Capital Gain on Sale of any asset other than a House Property
Exemption under Section 54F is considerable when capital gains are from the sale of a long-term asset other than a house property. To claim this exemption, you must invest the entire sale consideration and not only capital gain to buy a new residential house property. New property Purchases should happen either a year before the sale or within 2 years after the sale of the said property. You can use the Gains from the sale of the property to invest in constructing a property. However, the new investment property construction must be completed within three years from the sale date. Budget 2014-15 mentioned that only 1 house property could be purchased or constructed from the consideration of sale to claim this exemption. This 54F exemption can be withdrawn if this new property is sold off within 3 years of its purchase date. If the entire amount from sale proceeds are invested towards the new house, the whole capital gain will be exempt from taxes, provided that you meet the above-said conditions. However, invest a portion of the sale proceeds. The capital gains exemption will be the proportion of the invested amount to the sale price = capital gains x cost of new house /net consideration.
Section 54EC: Exemption on Sale of House Property on Reinvesting in specific Bonds.
The exemption is available under Section 54EC when capital gains from the first property sale are reinvested into specific bonds.
👉 If you do not want to reinvest your profit from the sale of your first property into another property, you can invest them in bonds for up to Rs. 50 lakhs issued by the N.H.A.I. Rural Electrification Corporation.
👉 The money invested can be redeemed only after 3 years, as you can not sell the bond before the tenure of 3 years from the date of sale. With effect from the F.Y. 2018-2019, the period of 3 years has been increased to 5 years;
👉 The homeowner has six months to invest the profit in these bonds. But to claim this exemption, you will have to invest before the tax filing deadline.
Exemptions on Long Term Capital Gains Tax
Individuals are exempted from paying tax if annual income does not reach a predetermined limit(defined each year in the financial budget). The Tax exemption limit rises almost every year, so for FY 2019-2020 following are the guidelines:
- Individuals with annual income below Rs. 5,00,000 and above 80 years of age will be exempted if their:
- Residential Indians between 60 to 80 years will be exempted from long-term capital gains tax in 2021 if they earn Rs. 3,00,000 per annum.
- For individuals 60 years or younger, the exempted limit is Rs. 2,50,000 every year.
- Hindu Undivided Families can enjoy tax exemption if the annual income of their family is under Rs. 2,50,000.
- For non-residential Indians, the exempted limit is flat Rs. 2,50,000/- irrespective of the age of the individual.
Individuals cannot earn any tax deduction under Section 80C to 80U from long-term capital gains tax in India.
| Tax Type | Condition | Tax applicable |
| Long-term capital gains tax | Except on sale of equity shares/ units of equity oriented fund | 20% |
| Long-term capital gains tax | On sale of Equity shares/ units of equity oriented fund | 10% over and above Rs 1 lakh |
| Short-term capital gains tax | When securities transaction tax is not applicable | The short-term capital gain is added to your income tax return and the taxpayer is taxed according to his income tax slab. |
| Short-term capital gains tax | When securities transaction tax is applicable | 15%. |
Tax Rate Chart for Income on Sale of Assets
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| Asset | Duration of the Asset | Tax Rate | ||
| Short-Term | Long-Term | Short-Term | Long-Term | |
| Immovable Property, e.g. House property | Less than 2 years | More than 2 years | Income tax slab rate | 20.8% with indexation |
| Movable Property, e.g. Gold/Jewellery | Less than 3 years | More than 3 years | Income tax slab rate | 20.8% with indexation |
| Listed Shares* | Less than 1 year | More than 1 year | 15.60% | Exempt |
| Equity-Oriented Mutual Funds | Less than 1 year | More than 1 year | 15.60% | Exempt |
| Debt-Oriented Mutual Funds | Less than 3 years | More than 3 years | Income tax slab rate | 20.8% with indexation |
Q. Can I set off my short term capital loss against any other head of income?
Firstly, you can set off capital losses against capital gains only. Accordingly, short term capital losses can be set off against any income under capital gains, be it short term or long term. However, long term capital losses can be set off only against long term capital gains.
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