Capital Gains Tax is increased in India from Budget 2024, But their are 3 Ways to Save Capital Gains Tax with Sections 54, 54EC, and 54F.
We will explain Income Tax Sections 54, 54EC and 54F with examples. First, we should understand, What is Capital Gains Tax?
Capital Gains Tax
When you sell an asset, like property or stocks, at a higher price than the purchase price and make a Capital Gain, So this is under Capital Gains Tax. In LTCG, The Tax is 12.5%, and In STCG, The Tax is 20%. Calculate Your Capital Gain Tax.
New Capital Gains Tax Rates
According to the Indian Budget 2024, Indexation benefit has been removed by the Finance Ministry, and a flat 12.5% LTCG will apply on the sale of assets. New Capital Gain Tax Rates were also introduced by the Finance Minister of India, Which are given below:
- Long-Term Capital Gain Tax, Or LTCG, is increased to 12.5% from 10%.
- Short-Term Capital Gain Tax or STCG, is increased to 20% from 15%.
- The exempt limit in LTCG is also increased to ₹1.25 Lakh.
But There are 3 Ways to Save Capital Gains Tax In India, Which are under Section 54, Section 54EC and Section 54F. We will explain these sections in detail.
Section 54
Covers
Section 54 covers the sale of a residential property and making a profit.
Tax Saving
You can save Tax on profit if you use this money to buy another residential property 1 year before, 2 year after sale date or 3 years, if you are constructing a house.
Condition
If the amount of the new house is cheaper than capital gains, Then the remaining amount is Taxable.
Section 54EC
Covers
Section 54EC covers the sale of long-term assets like Property or stocks and making a profit.
Tax Saving
You can save capital gain tax on it by investing the amount in Government specific bonds like NHAI, REC, etc.
Conditions
- You can invest up to ₹50 Lakh.
- Invest within 6 months of the sale date.
- Hold the investment till 5 years.
Section 54F
Covers
Section 54F covers the selling of assets like Land, stocks, etc., except Residential property and making profit.
Tax Saving
You can save capital gain tax, if you use the entire sell amount with profit to purchase a residential property before 1 year or after 2 years of the sale date and 3 years if you are constructing a house.
Conditions
- Invest a entire sale amount.
- You must not own more than 1 residential property on the date of sale, except a new one.
Indexation is now back with 2 Conditions:
- 12.5% LTCG without indexation
- 20% LTCG with Indexation.
Sections 54, 54EC and 54F Examples
- If you sell a house for ₹50 lakh and make ₹15 Lakh profit and then buy another house of ₹15 lakh within a specific time, Then the Tax will be 0 under Section 54.
- If you invest these ₹15 Lakhs in NHAI, REC, etc. Bonds within 6 months, then Tax will be 0 Under Section 54EC.
- If you sell shares worth ₹40 Lakh and make ₹10 Lakh profit and buy a house worth ₹40 lakh, then 0 Tax on ₹10 Lakh profit is in Section 54F.
So these are the 3 Ways To Save Capital Gains Tax by Sections 54, 54EC and 54F.
