Need some info on Capital Gains Tax long term ?

POSTED BY vij ON April 3, 2012 1:59 am COMMENTS (8)

I am looking for some information on long term capital Gains Tax..

1) If someone purchase a land (lets say) worth Rs 1 lakh and sells it for 2 lakh after 4 years. How much would be the Capital Gains Tax ?

2) if someone purchase shares worth Rs 1 lakh and sells for Rs 3 lakh after 5 years thru internet trading account, how much would be the Capital Gains Tax ? Would it be deducted at source or i need to declare it while filing the return ?

3) If someone purchase e-gold worth Rs 1 lakh thru NSEL trading account and sells it for Rs 1.5 lakh after 5 years thru the same NSEL trading account (lets say i have trading/DP account with Axis bank), how much would be the Capital Gains Tax ? Would it be deducted at source by Axis bank ?

Thanks in advance for your response

8 replies on this article “Need some info on Capital Gains Tax long term ?”

  1. Vikas Jain says:

    Thanks everybody for the responses so far.

    My understanding is, Long term capital gains tax (or even short term capital gains tax) is applicable only if my income is already in the taxable bracket or becomes under taxable bracket after the profit by selling the capital..

    If suppose, my income is 1 lakh per annum, and if the profit by selling the capital is Rs 50,000, then i don’t have to pay any long term or short term capital gain tax, right ? Please confirm

    1. Dear Vikas, If your income from salary, business, other sources, house property, in total is 1L Rs. & you do have 50K STCG from Eq. shares by booking the gains on exchanges & paying STT, your tax liability is zero as your total income is 1.5L Rs. which is well below the taxable limit of 2L Rs. for current FY 2012-2013.

      Thanks

      Ashal

  2. Darshan Mankad says:

    Vikas,

    As for case 2, just bear in mind that equities should have been sold through recognised stock exchange and one must have paid Securities Transaction Tax (STT). If one doesn’t pay STT and sells the shares offline, it would be chargeable as LTCG.

  3. Vikas Jain says:

    Thanks very much Manish for the info.

    For 3) i.e. for the sell of the e-gold,

    a) would the tax be deducted at source ?
    b) if i invest the profit of e-gold in purchase of further e-gold within 2 years, can i save this tax ?

    Thanks in advance

    1. Dear Vikas, No, there is no TDS for sell of E-Gold. No you can’t save LTCG Tax liability by repurchasing the E-Gold. 🙂

      Thanks

      Ashal

  4. Dear Vikas, just a small correction in the reply given by dear Manish, In case of real estate, the Indexation is compulsory & you can’t pay 10.3% tax with out indexation.

    I’ll wait for your query to know how this so called LTCG Tax liability from Real estate or E-Gold can be saved.

    Thanks

    Ashal

    1. BanyanFA says:

      Brilliant Ashal. This subtle difference in Long Term Taxation rate is not known to every one !

      Even I knowingly was ignoring it till date.

      @ Vikas – Your query is true, provided you are a resident individual. If you are a NRI, then irrespective of the fact that you have zero other income, you would have to pay Short Term Capital Gain Tax @ 15% arising from sale of equity / equity MF. If you have ST Capital Gain from sale of Debt products / property – then irrespective of the fact that you are NRI / Resident, you don’t need to pay tax upto the basic slab (2lac now).

      Regards
      BFA

  5. Vikas

    1. In case of real estate , when you sell anything after 3 yrs, then indexation can be applied , which means your cost price would be inflated 1 lac (depending on the CPI index issued by govt) . So lets say your cost comes at 1.4 lacs , then your selling price was 2 lacs , hence your actual profit will be 60k and you will have to pay 20% of this 60k , which is 12k , or 10% without indexation , which is 10k (2 lacs – 1 lacs) . You can save this tax if you invest the profit amount in the next real estate purchase within 2 yrs .

    2. For equities , there is no long term gains at the moment , so no tax .

    3. For e-gold, after 1 yr itself the indexation applies exactly the same way explained in case 1

    Manish

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