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Long Term Capital Gains Tax on Shares

Long Term Capital Gains Tax on Shares

Any profit booked from the selling of a capital asset such as shares is known as capital gains. Capital gains on investment generally occur when the selling price of a share is higher than the purchase price. The gain realized from selling shares counts as “income” and is therefore subject to capital gains tax. I am talking about the article Long Term Capital Gains Tax on Shares.

For instance, the Rs 50,000 is regarded as your capital gain on which tax is due if you purchased shares for Rs 1 lakh and sold them for Rs 1.5 lakh. depending on your holding tenure.

Holding tenure as a determining element for share taxation

The length of time an investor keeps a stock, or the investment horizon, impacts the type of capital gain. Long-term capital gains and short-term capital gains are both examples of capital profits.

Short-term capital gains are profits gained by selling shares held for less than a year after the acquisition, and short-term capital gains tax is applied to them. Visit our page on Short Term Capital Gains Tax in India on the Angel Broking Knowledge Centre for a thorough explanation of STCG tax in India.

Long Term Capital Gains Tax Rate

The 2018 budget reinstated India’s long-term capital gains tax (LTCG tax). The current LTCG tax rate in India is 10% and is imposed on gains exceeding Rs 1 lakh on the sale of shares held for more than a year (LTCG) without any indexation advantages. Long Term Capital Gains Tax on Shares tax rate.

For instance, imagine a person purchased shares on September 12th, 2019, for Rs. 5 lakh. The cost of the shares increased till January 2021, reaching Rs 7 lakh. In this case, the investor earned 2 lakh rupees. They would be required to pay a 10% tax on the Rs 2 lakh profit made if they sell it today (beyond the 12-month threshold).

Calculation long term capital gains tax on Shares

The investor may claim indexation advantages for profits achieved prior to January 31, 2018. The investor’s brokerage fee and the indexed purchase price of the shares are deducted from the share’s selling price to determine the investor’s long-term capital gains.

However, indexation advantages won’t be available for profits acquired after January 31, 2018, in accordance with the most recent income tax regulations. Here, long-term capital gains are computed by deducting the share’s selling price from the share’s actual purchase price, as well as any brokerage fees the investor may have paid.

Gains made after January 31, 2018

Investor realized profits of Rs. 1,50,000 on the sale of shares purchased in February 2019 for Rs. 5,50,000 and sold in January 2021 for Rs. 7,00,000. Gains from investments made with indexation advantages will be subject to a 10% tax. Gains under Rs. 1 lakh are tax-free, whereas gains beyond Rs. 1 lakh are subject to a 10% tax.

Gains of Rs. 1 lakh will thus not be included in the calculation of the long-term capital gains tax on a profit of Rs. 1,50,00,000. The remaining Rs 50,000 will be subject to a 10% tax, increasing the investor’s tax obligation to Rs 5,000.

How to Reduce Capital Gains Tax Liability?

By utilizing the provisions outlined in the Income Tax Act, investors can decrease their overall tax burden on long-term capital gains resulting from the sale of stocks in a number of different ways.

Tax harvesting:

An example will help to further illustrate this strategy. Take into account, for instance, if an investor pays Rs 300 for 1000 shares of a corporation. Three years later, the price increased to Rs 550. Think for a moment that the investor now decides to sell his shares. The sale price in this instance totals Rs 5,50,000.

After three years, the investor would be required to pay Rs 15,000 in capital gains tax. It is calculable as follows:

Gains from selling shares equal Rs. 5,50,000 – Rs. 3,00,000, or Rs.

Conclusion

Hope you liked this article Long Term Capital Gains Tax on Shares. This supports the idea that keeping investments for a longer period of time is advantageous for investors.

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