I am of the understanding that capital gains under 1L are tax free and those gains aren’t to be added to your taxable income. However, I met a friend this evening who informed me that her CA says that capital gains are always added to the taxable income and are not really tax free regardless of them being under 1L. If this is true, my friend is not getting the 6K rebate she was hoping to get since her taxable income now crosses the 5L barrier. Had the capital gains not been added to her taxable income, she would well under this 5L barrier.
Can anybody please confirm if this is indeed true?
Some additional context: The capital gains are from her ELSS investments which were sold in the last FY and amounted to about 50k over the sale of about 1.7L
If this is indeed true, I have a follow up question from an inversion POV - if capital gains indeed exceed 1L, will one then be taxed twice? i.e. The 10% LTCG tax as well as the slab based tax on taxable income (salary - dedications + capital gains)
I do understand that. However, the question is, are these capital gains added to taxable income or not? And if yes, how does taxation work, both capital gains and slab based, if capital gains are above 1L exemption limit?
Added to taxable income. In taxable income multiple rows are created. One for ltcg, another for stcg, another for income at normal rates. Every row will have its own tax rates.
Best is to fill the itr, and see how it looks like at the end (before verification).
Your friend needs a new CA, their CA needs a new career
Well, if this turns out to be incorrect, I’ll make sure he loses many more clients than just my friend. 6k might not be a lot to many but it is to my friend, especially since it is her birthday in August.
Your friends CA has the degree for a reason, and your friend is paying the CA for a said reason.
I had invested in a SIP (equity) for 3 years and am withdrawing the investment via a 12 month SWP spread across two financial years.
This helps me ensure that the capital gains do not exceed 1L in any of the financial years.
Assuming...
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A friend recently got a SME IPO. 1.2L Rs was the investment and it is expected to open at 100% premium. So basically around 1.2L profit. (>1L limit for capital gains)
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All the UNBOOKED Gains in your Portfolio would now attract -
25% MORE LTCG (10% to 12.50% is NOT 2.5%, but 25% more), Surcharge extra as applicable.
33.33% MORE STCG (15% to 20% is NOT 5%, but 33.33% more), Surcharge extra as applicable.