How Long-Term Capital Gains Are Taxed in India

For every business, an initial capital is necessary to kickstart the operations. But this initial deposit is not just an expense towards the company; it’s an investment. Down the road, this investment will lead to some profit or loss, also known as capital gain or capital loss, respectively. When this investment yields a loss or profit on an asset that the company has owned for more than 12 months, it comes under the category of long-term capital gain or loss. 

Long-term capital gain is a wide umbrella term, and many assets qualify for the label. For instance, tangible assets like property and machinery, mutual funds, and, primarily, equity shares are known as LTCG. Now, the taxation of these long-term investments is complex. Especially when it comes to shares.

Usually, there is a 20% tax rate applicable to long-term capital gains plus the surcharge and cess. But in some special cases, only 10% and surcharge and cess are levied. The business only needs to pay a 10% LTCG tax in the following conditions.

• When the gains from the sale of listed securities exceed Rs. 1,00,000
• When the gains result from transferring any security on a recognised Indian stock exchange.
• When the profit comes from transferring any Unit Trust of India (UTI) or mutual fund, whether listed or not.

Like any rule, LTCG taxation also has some exemptions. Individuals are exempt from the tax liability if they have an annual income less than the predetermined limit. To go into more detail, it’s applicable to the following:

1. Residents who are 80 years or older with a yearly income of less than Rs. 5,00,000
2. Residents between 60 and 80 years  of age with less than Rs. 3,00,000 of annual income
3. HUF, non-residents, and Individuals younger than 60 years of age with a yearly income less than Rs. 2,50,000

Since the entire profit is taxable and is charged at 20% (or 10% depending on the asset), and there is no minimum exemption limit if one overboard the predetermined amount, businesses tend to invest the profit further into real estate, bonds, and capital gains account schemes. 

Foreign investors need to know the minute details of the long-term capital gains tax system in India to reduce their losses, stay up to the norm, and operate efficiently. With a rigid regulatory framework in India and Dubai, it is highly advisable to seek professional expertise. With consultancies like Corporate Leaps, international companies can easily find a footing in the industry and get a head start in the competition. From accounting to filling out the necessary paperwork, Corporate Leaps varied services ease your entry into the strict legal landscape of the Indian market.