LTCG Tax: How to save tax on long-term capital gains? Check what experts say

In the case of a property, profits earned by selling it within 24 months attract Short-term capital gains (STCG).

Investment is one of the key strategies for building wealth. It's also a method for saving taxes for many individuals. However, when you make some profit or gains by the sale of 'capital assets', then your income from the source becomes taxable. Capital assets include land, house, jewellery and equity stocks. Long-term capital gains, which are taxed at 10 per cent, are basically the capital gains of over Rs 1 lakh earned by selling equities, which include shares and mutual funds.

However, there are certain ways by which taxpayers can reduce their LTCG liability under various provisions of the income tax act.

"One way to save taxes in LTCG is by tax harvesting, through which equities to an extent of Rs 1 lakh can be booked and reinvested every year, the value of which will be the new cost of acquisition. This will help investors utilize the Rs 1 lakh margin of tax exemption on LTCGs and help them save Rs 10,000 per year. Another way can be by setting off and carrying forward losses or by setting off gains with losses. With no restrictions on the set off of capital losses of one asset like equity against a different category of an asset like land, if one has a long-term capital loss by selling land, she/he can set off the same with LTCG from equity investments," said Rachit Chawla, CEO, Finway FSC.

Vinit Pagaria, Head, Data and Research, StockEdge, said that Capital gains on listed equities (where STT is paid on transactions) are taxed at a lower rate and so is LTCG on listed Equity. "The provisions of section 54EC can also be used to save on LTCG by investing the proceeds into long-term specified assets," said Pagaria.

In the case of a property, profits earned by selling it within 24 months attract Short-term capital gains (STCG) and selling it after 24 months attracts the LTCG tax, which is charged at 20%. However, one can avoid the LTCG tax by investing the amount to buy another property or by investing it to construct another house, said the experts.