Taxation on LTCG

Taxation
1

I am having some confusion on LTCG. As per the law, profits in LTCG upto Rs. 1 Lakh are tax-free.

But if the person is also earning salary which is taxable, then tax will be applied on those profit or not.

For Ex. Salary is Rs. 8,00,000/- and the LTCG is Rs. 1,00,000/-. Then I have to pay tax on total income of Rs. 9 Lakhs, or if Rs 1 lakh is exepmted from tax then I have to pay tax only on Rs. 8 lakhs.

2

Hi @Aditya_Gupta

We have 5 different heads while computing income tax in which different heads have different rules:

Income from:

  • Salary
  • House Property
  • Business & Profession
  • Capital Gains
  • From other sources

As LTCG comes under capital gains head, your long-term gains till 1 lac will be exempted.

So, in this case, you will have to pay tax on only 8 lacs, and after a standard deduction of 50k, Deductions like 80C, HRA, and other deductions, your net taxable income should be even lower. Check with your tax consultant regarding the same or you can check out @Quicko at https://quicko.com to help you out with your taxation

3

Hey @Aditya_Gupta,

As rightly mentioned by @Meher_Smaran, LTCG up to ₹1 lakh will be exempted from taxes and you’ll be liable to pay tax on ₹8,00,000 as per the applicable slab rate.

4

@Quicko

Kindly clarify that tax on salary is as per slab and tax on capital gain is 10%.

So in case if one is earning 8 Lacs as salary and say he got 10 Lacs of capital gain from selling MFs.

What will be the total tax?

5

Tax on 8 lakhs as usual, as per slab and all deductions.

In 10 lakhs capital gains, assuming they are all LTCG, you can subtract 1 lakh. Remaining = 9 lakhs. 10% that is taxed

You can consider capital gains as a completely separate income. No need to mix it up with salary. And you only pay the 10% LTCG tax once you cross the basic income level after all deductions

6

So the total tax will be as follows assuming no deductions taken.

  1. Salary - Taxable income - 7.5L. Tax payable as per slab(new regime) : 31, 200.
  2. LTCG(assuming asset held more than 3 years) - 10-1= 9L. Tax payable at 10% on 9L = 90,000.

So ,Total tax payable = 31,200 + 90,000 = 1,21,200.

7

Yeah.

Not a CA

8

Hey @trader_dude,

Yes, your salary income will be taxed as per the applicable slab. So, if you have a salary of ₹8,00,000, after considering standard deduction, you would have to pay tax on ₹7,50,000 (assuming you are opting for the new regime).

Moreover, the LTCG will be taxed at 10%. You get a ₹1,00,000 exemption on LTCG, hence you will have to pay taxes on the gains above this limit. Say, you have LTCG of ₹10L, you’d have to pay tax on ₹9L.