Capital Gains Taxation (LTCG and STCG)

• Indexation Benefit: This benefit, which adjusts the purchase cost for inflation using the Cost Inflation Index (CII), was previously available for many long-term assets. As of July 23, 2024, it has been largely removed, with a uniform 12.5% LTCG rate now applicable without indexation for most assets. An exception may exist for certain real estate transactions where the taxpayer has a one-time option to choose between the old (20% with indexation) and new regime.
• Securities Transaction Tax (STT): STT is levied on the purchase and sale of listed equity shares and units of equity-oriented mutual funds on a recognized stock exchange.

Other Investment Income

• Dividends: Dividends received from companies or mutual funds are added to your total income and taxed according to your applicable income tax slab rates
• Interest: Interest earned from fixed deposits, bonds, and savings accounts is generally fully taxable at your income tax slab rate.
• Tax-Free Investments: Certain government-backed schemes like the Public Provident Fund (PPF) offer an Exempt-Exempt-Exempt (EEE) status, where contributions, interest earned, and maturity proceeds are all tax-free. Contributions to PPF and Equity Linked Savings Schemes (ELSS) also qualify for deductions under Section 80C.

Exemptions and Tax Planning

Investors can manage their tax liabilities using several exemptions and strategies:

• Section 54/54F: You can claim exemption from LTCG on the sale of a residential house (Section 54) or any other long-term asset (Section 54F) by reinvesting the gains/sale proceeds into buying or constructing a new residential property within specified time limits.
• Section 54EC: Capital gains from the sale of land or building can be invested in specified bonds (e.g., NHAI, REC) within six months to claim an exemption of up to 50 lakh.

New Tax Regime (Default) for Individuals & HUF

For resident individuals under the new tax regime, annual income up to 12 lakh is effectively tax-free due to an increased rebate under Section 87A. Salaried individuals benefit from a standard deduction of ₹75,000, raising their effective tax-free limit to ₹12.75 lakh.

• Section 54/54F: You can claim exemption from LTCG on the sale of a residential house (Section 54) or any other long-term asset (Section 54F) by reinvesting the gains/sale proceeds into buying or constructing a new residential property within specified time limits.
• Section 54EC: Capital gains from the sale of land or building can be invested in specified bonds (e.g., NHAI, REC) within six months to claim an exemption of up to 50 lakh.

Old Tax Regime (Optional) for Resident Individuals

The old tax regime remains an option and offers higher basic exemption limits for senior and super senior citizens, along with the ability to claim a wide range of deductions (e.g., Section 80C, 80D, HRA).