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Taxation Domestic

LTCG / Tax Loss Harvesting​

To prevent gains from building up, experts suggest harvesting. This means booking a portion of your profits and reinvesting the proceeds. So you sell a part of your equity holdings to book long term capital gains, and then buy back the same shares or mutual fund units.

  • Harvest losses too when you still can
  • No point on selling and buying same stock, since STT and other taxes are extra
  • Tax loss harvesting, is good if you are moving loss to offset some other stock profit

This exercise can be replicated even when you are investing via SIPs in mutual funds. If you started the SIP about a year ago, start redeeming units after they complete a year and reinvest the proceeds in the same or different fund. This will reset the buying price and ensure your capital gains do not overshoot the Rs 1 lakh tax free threshold.

if you are not able to set off your entire capital loss in the same year, you can carry forward these losses for up to 8 assessment years.

Taxability​

For taxation purposes, all mutual funds with investments lower than 65% in equity instruments are considered debt funds. Short-term capital gains of less than 36 months are taxed corresponding to the investor's income tax slab.

A tax rate of 20% is levied on long-term capital gains above 36 months after indexation. Indexation refers to the adjustment of the price of debt funds after factoring in the inflation between the years when that fund was purchased and the year when you sell them. This adjustment allows for the inflation of purchase price, thereby bringing down the overall quantum of capital gains. Subsequently, your taxable income reduces proportionately.

Indexation​

Indexation is a technique to adjust income payments by means of a price index, in order to maintain the purchasing power of the public after inflation, while de-indexation is the unwinding of indexation.

Cost Inflation Index For FY 2023-24, Index Table, Meaning, Calculation

https://cleartax.in/s/indexation-helps-reduce-tax-debt-fund-gains

https://groww.in/blog/indexation-in-mutual-funds-meaningbenefits-and-more

https://www.youtube.com/watch?v=KKlsYoSaKAs

Unrealized Gains / Unrealized Loss / "paper" profits or losses​

An unrealized gain is a potential profit that exists on paper, resulting from an investment. It is an increase in the value of an asset that has yet to be sold for cash, such as a stock position that has increased in value but still remains open. A gain becomes realized once the position is sold for a profit.

Key Takeaways​

  • An unrealized gain is a theoretical profit that exists on paper, resulting from an investment that has not yet been sold for cash.
  • Unrealized gains are recorded on the financial statements differently depending on the type of security.
  • Gains do not affect taxes until the investment is sold and a realized gain is recognized.

https://www.investopedia.com/terms/u/unrealizedgain.asp

Stocks Tax​

TAX on stock market & mutual funds | STCG, LTCG, and DIVIDENDS ‪@CARachanaRanade‬​ - YouTube

Real estate taxation​

Tax on Stocks, Mutual Funds, Gold and Real Estate | STCG and LTCG | ETMONEY

Real Estate Taxation Example After Finance Bill 2024 Amendment

Taxes on house (Section 54F)​

  • In respect of capital gains arising on sale any asset other than a residential house, an individual or an HUF can claim exemption from long term capital gains if the net sale consideration in respect of such asset is invested for acquiring a residential house within a period of two years after sale of such asset.
  • Under Section 54F you should not own more than one residential house property on the date of sale of the asset except the one in respect of which you are claiming the exemption
  • Purchase of the plot by you in your wife’s name will be treated as gift to your wife. As per the provisions of Section 64 of Income Tax Act, all the income arising on property gifted to your spouse is required to be added in your hands.
  • Any gift given to a spouse is exempt from tax. However, if the spouse has no income and the gift is an income generating asset, the income from that asset may be clubbed with the income of the spouse who gifted the asset under clubbing provisions. If both husband and wife wish to claim tax benefit for their joint investments, they may have to enter into a simple agreement bifurcating proportionate ownership for housing loan repayment to reflect in their respective tax returns.

How buying a new home can save you capital gains tax on shares, mutual funds | Mint

Taxes on ETF / Equity Mutual Funds

I plan to buy house by selling shares. Can some income tax exemption be claimed? | Mint

Bought plot in wife's name who is a homemaker. On sale, how income tax is calculated | Mint

Section 54EC- Deduction on LTCG Through Capital Gain Bonds

  • Till 50 lakh of LTCG, buy NHAI bonds, get 5% interest rate with 5 year lock in and only pay taxes on interest earned on NHAI bonds and principle which was going to be taxed becomes tax free.

Section 54F of Income Tax Act: Capital Gains Can Be Invested Multiple Times To Buy A New Residential House Property

Points​

  1. Only certain investment avenues qualify for tax perks-long-term capital assets like listed & unlisted stocks, foreign shares, equity funds, and physical gold, except for house property.
  2. It's not just the winnings, it's the whole corpus. Imagine you tossed #50 lakh into stocks, and after 5 years, you're up €40 lakh. Now, here's the kicker: to snag that dream house, you have to spend the whole 90 lakh (your original investment plus the profit).
  3. Purchase should be made within 1 year before or 2 years after the date of transfer of the original asset. If you're building it from scratch, make sure those walls go up within 3 years. Wanna dodge taxes? You can, if you bought a residential property one year before the sale of the asset.
  4. No doubling up properties. When you cash out those assets, make sure you're not already lounging in more than one house
  5. That cash is earmarked for one thing and one thing only: a house. Land and commercial properties do not apply.
  6. Once you've bagged that dream house, you have to stay put for at least 3 years. No sneaking off early! If you bail before the clock runs out, be ready to cough up tax, penalty, and interest on the long-term capital gains from the sale date.
  7. A lot of people jumped on this tax-saving bandwagon, so the government had to lay down some restrictions. Here's the deal: Deduction from capital gains on investment in residential house under sections 54 and 54F are capped at Rs. 10 crore.

Property Taxes​

Property tax is calculated by the municipal authorities in proportion tothe assessed value of the property.There are mainly three ways of calculating property tax:

Capital Value System (CVS)​

The tax is levied as a percentage of the market value of the property. This market value is determined by the government and is based on the locality of the property. The market value is revised and published yearly. Mumbai follows this system.

Annual Rental Value System or Rateable Value System (RVS)​

Under this system, the tax is calculated on the yearly rental value of the property. This is not necessarily the actual rent amount being collected; rather it is the rental value decided by the municipal authority based on the size, location, condition of the premises, proximity to landmarks, amenities etc. Examples of municipalities following this system of property tax include Hyderabad and Chennai.

Unit Area Value System (UAS)​

In this system, the tax is levied on the per unit price of the built-up area of the property. This price is fixed (per square foot per month) based on the expected returns of the property as per its location, land price, and usage, and is then multiplied with its built-up area. Municipalities like Delhi, Kolkata, Bengaluru, Patna and Hyderabad follow this system for property tax calculation.

Everything to know about property tax and how it is calculated | HDFC Bank Ltd

What is Property Tax? - Types & Calculation

Nominee / Will​

Nominee vs Legal Heir: Who is the true owner of a deceased person's assets? - The 1% News

Inheritance Tax​

Let's talk about inheritance tax