Should you sell a house, shares, gold, or any other valuable item and profit, you could have to pay personal gains tax. Applying to those who make money from selling personal assets, this is also known as capital gains tax. Let’s clarify what personal gains tax entails and how India implements it.
Tax on Personal Gains:
Personal gains tax is the tax paid on the profit from asset sales. The gain is the cost of purchase less your selling price. This tax relates just to the money you make from selling items you own; it is not based on your salary or company income.
Valuables That Draw Personal Income Tax:
- House or ground
- Mutual funds and shares
- Gold, decorations, or silver
- Cars or other worthwhile items (should they be sold for profit)
Categories of Personal Benefits:
Based on your asset’s length of ownership, there are two categories:
- STCG, short-term capital gains
Asset retained for a brief period—up to one to three years, depending on the type—
Taxed with a higher rate. - LTCG, Long-Term Capital Gains
Longer-term asset held—between one and three years
Taxed at a reduced rate with occasionally indexation advantage.
Individual Profits & Indian Taxes:
| Type of Asset | Temporary (STCG) | Extended term (LTCG) |
| List of shares and equity mutual funds | 15% | 10% above ₹1 lakh |
| Real estate, sometimes known as property | According to tax slab | 20% with indexation |
| Gold combined with debt mutual funds | Under tax slab 20%, with indexation | |
| Unlisted stock | 30% (STCG) | 10% (LTCG, without indexation) |
Calculating Personal Gains:
- Purchase price equal gain in tax selling price.
- Add expenses including improvement or brokerage fees.
- Use indexation if allowed for long-term benefits.
- Pay taxes using the rate indicated.
When Do You Have to Pay?
- If your annual total gain exceeds ₹1 lakh (should LTCG on shares).
- If you sold mutual funds, real estate, or other personal assets and have benefited.
- Pay as advance tax (should gain be significant) or at the time you file your return.
- Use Section 54 to minimize personal gains tax by purchasing another house, so saving tax on property gains.
- Invest in capital gain bonds using Section 54EC.
- Smart sales planning will help you to keep below exemption thresholds.
- For inflation adjustment, use indexation benefit.
Advice for Indian Taxpayers:
- Maintaining correct purchase and sale records.
- Find the proper tax rate by looking at your holding period.
- File your income tax return correctly, including capital gains information.
- See a CA if the sale calls for several assets or significant amounts.
Eventually:
Financial planning heavily relies on personal gains tax. Should you profitably sell anything, such as shares or real estate, you could have to pay taxes on that earnings. However, you can lower your tax and retain more of your income legally with good knowledge and wise use of exemptions.
