![]() This adjusted cost is called the indexed acquisition cost. Indexation Indexation is a technique to adjust the purchase price of an investment to reflect the effect of inflation over the holding period. Also Read: How to check ITR refund status online This can be particularly beneficial when the losses are substantial. On the other hand, carry forward allows you to carry forward your losses to future years and offset them against future gains. ![]() For example, if you made a profit of Rs50,000 from selling shares but incurred a loss of Rs20,000 from selling property, you can offset the loss against the gain, reducing your taxable income to Rs30,000. Set off allows you to offset losses against gains in the same year, reducing your taxable income. Set Off and Carry ForwardTwo concepts that help taxpayers minimise their tax liability are set off and carry forward. Also Read: Section 80C: Income tax deduction and limits under section 80C, 80CCD in 2023 So, for example, if you bought a property for Rs50 lakh and sold it for Rs80 lakh, your LTCG would be Rs30 lakh. Also, deduct any expenditures related to the transfer of the asset.Next, deduct the cost of acquisition (what you paid when you bought the asset) and the cost of improvement (any expenses incurred to improve the asset).This is the amount that the asset is sold for. The first step is to calculate the full value of consideration.How to Calculate LTCG Calculating LTCG can be a complex process as it involves several steps. Gold, real estate and land, flats, debt funds, various assets The tax rate for other assets, such as property or gold, is 20 percent with indexation. For instance, the LTCG on the sale of listed equity shares and equity-oriented mutual funds, where STT (Securities Transaction Tax) is paid, and the asset is held for more than a year, is taxed at ten percent if the gain exceeds Rs1 lakh. Various Assets, Holding Period and Tax RateThe tax rate for LTCG varies based on the type of asset and the period it is held. The tax applies only to the gains, not the total amount received from the asset's sale. However, for listed equities and mutual funds, the asset needs to be held for more than one year.For instance, for immovable property, the asset must be held for more than two years to be considered long-term.The definition of a 'long-term' asset varies based on the type of asset. What is Long Term Capital Gains Tax or LTCG Tax?LTCG tax is a tax that investors need to pay on the profit generated from the sale of a capital asset held for a specific period. Also Read: Income tax slabs in India 2023-24: Old vs new tax regime, deductions and more When these assets are sold, the profits are subject to LTCG tax. These assets are expected to generate value for the business over a long period. However, such an item is not meant to be sold during the regular operation of the business. When it comes to businesses, a capital asset is defined as an item with a useful life extending beyond one year. They can also be unique items like art pieces or collectables. What are Capital Assets?Capital assets include stocks in companies, homes, cars, investment properties, and bonds. Understanding LTCG is essential as it can significantly impact the returns on your investments, altering your entire financial plan. One such tax that investors need to be aware of is the Long-Term Capital Gains tax or LTCG. However, the tax implication of the investments we pick is often overlooked. Investing is a critical, indispensable part of financial planning.
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