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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 11, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more
Varsha Question by Varsha on Apr 21, 2024Hindi
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I had invested in Sovereign Gold Bonds in 2015-16. I received maturity payments in 2023-24. As per terms of issue, these bonds were exempt from long term capital gains tax on maturity. My question is: Am I required to declared long term capital gains on these bonds in my ITR2 for A. Y. 2024-25? If so, where? I do not find any provision in Schedule Capital Gains in ITR2 return.

Ans: No, you are not required to declare long term capital gains on the Sovereign Gold Bonds that matured in 2023-24 in your ITR2 for A.Y. 2024-25. Sovereign Gold Bonds are exempt from long-term capital gains tax on maturity as per the terms of issue
Since the capital gains are exempt, you don't need to report them anywhere in your ITR return, including the Schedule Capital Gains section.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 29, 2024

Asked by Anonymous - Nov 21, 2023Hindi
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Sir, I will be 80 years of age on 07 Feb, 2024. I have made some Long Term Capital Gains from Mutual Funds during this current financial year, 2023 - 24. I understand that senior citizens aged 80 years and above need not file any income tax returns. Please let me know whether I should pay the long term capital gains tax for this current financial year or need not.
Ans: Understanding Long Term Capital Gains Tax for Senior Citizens
Congratulations on your upcoming milestone of turning 80 on 07 February 2024. It's a significant achievement and I appreciate the wisdom that comes with it. Let's discuss the tax implications for your long-term capital gains from mutual funds in the current financial year, 2023-24.

Income Tax Rules for Senior Citizens
In India, senior citizens (aged 60 and above) and super senior citizens (aged 80 and above) enjoy certain tax benefits. These include higher exemption limits and additional deductions. For super senior citizens, the income tax exemption limit is higher compared to regular taxpayers.

Long Term Capital Gains (LTCG) Tax
Long-term capital gains (LTCG) from equity mutual funds are taxed at 10% if the gains exceed Rs 1 lakh in a financial year. This tax is applicable irrespective of your age or income bracket.

Filing Income Tax Returns
Super senior citizens, aged 80 years and above, are generally not required to file income tax returns if their income is below the exemption limit. However, this exemption does not apply to taxable long-term capital gains.

Need to Pay LTCG Tax
Even though you will be 80 years old, you need to pay long-term capital gains tax if your gains exceed Rs 1 lakh. The exemption from filing returns based on age does not exclude you from paying taxes on capital gains.

Importance of Compliance
It's important to comply with tax laws to avoid any penalties or legal issues. Paying your LTCG tax ensures that you stay within the legal framework.

Role of Actively Managed Funds
Actively managed funds have the potential to provide higher returns, which could lead to higher long-term capital gains. This makes it crucial to plan your tax liabilities accordingly.

Benefits of Regular Plans
Investing through regular plans with the guidance of a Certified Financial Planner ensures that you receive expert advice. This can help you manage your investments and tax liabilities effectively.

Avoiding Real Estate and Index Funds
Real estate investments and index funds are not recommended in this context. Actively managed funds provide better management and potential returns, which align with your financial goals.

Professional Advice
Consulting with a Certified Financial Planner can help you navigate the complexities of tax laws. They can provide personalized advice based on your financial situation.

Importance of Planning
Effective financial planning includes managing your tax liabilities. By understanding the tax implications of your investments, you can make informed decisions.

Regular Review
Regularly reviewing your investment portfolio ensures that it aligns with your financial goals and tax planning needs. A Certified Financial Planner can assist in this process.

Conclusion
Even at 80 years of age, paying long-term capital gains tax is necessary if your gains exceed Rs 1 lakh. Compliance with tax laws is crucial for financial health. Consulting with a Certified Financial Planner can help you manage your investments and tax liabilities effectively.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7101 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Oct 24, 2024

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Dear Money Gurus, I have invested in Sovereign Gold Bonds. I know if the bonds are held for full 8 years the redemption is tax free. However, I want to check if I opt to redeem the bonds after 5 years as per the Government window available, will the gains be taxable?
Ans: You mentioned considering the option to redeem the bonds after 5 years. The government provides a redemption window starting from the fifth year. This is convenient if you need liquidity before the 8-year term ends.

The question is whether the capital gains from redeeming after 5 years will be taxable.

In short, yes, the gains will be taxable if you redeem before the 8-year period.

Let me explain in detail.

Tax Implications on Redemption Before 8 Years
SGBs enjoy a unique tax benefit when held for the full tenure of 8 years. Any capital gains from redeeming the bonds after 8 years are completely tax-free. However, if you opt to redeem the bonds after 5 years using the available exit window, the capital gains will not enjoy the tax-free benefit.

If you redeem after 5 years but before 8 years, the capital gains will be taxed as long-term capital gains (LTCG).

LTCG on SGBs is taxed at 12.5% if the gains exceed Rs. 1.25 lakh in a financial year.
Short-term gains (STCG) are taxed at 20% if redeemed within three years.
By redeeming after 5 years, the government treats it as an early exit, and the LTCG taxation applies.

Interest Income: Taxable Every Year
It’s also essential to note that the interest earned on SGBs, which is currently set at 2.5% per annum, is taxable every year. This interest is added to your income and taxed as per your income tax slab.

You cannot avoid taxation on the interest income. So, even though you are considering redeeming after 5 years, your interest income has already been taxed annually.

Should You Redeem After 5 Years?
While the option to redeem after 5 years offers flexibility, it's important to weigh the tax implications. Redeeming after 5 years will attract LTCG tax, which reduces your net gains.

If your financial needs permit, holding the bonds for the full 8-year tenure will maximize the tax benefits, allowing you to redeem them tax-free.

This strategy makes SGBs more effective as a long-term investment.

Final Insights
If you redeem after 5 years, you will pay LTCG tax at 12.5% on gains exceeding Rs. 1.25 lakh.

The interest you earn each year is taxable and added to your total income.

Holding the bonds for the full 8 years will help you avoid capital gains tax, as the redemption is tax-free at that point.

Opt for early redemption only if you need liquidity or other financial circumstances require it. Otherwise, holding the bonds for the entire tenure offers better tax efficiency.

Best Regards,

K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

..Read more

Latest Questions
T S Khurana

T S Khurana   |197 Answers  |Ask -

Tax Expert - Answered on Nov 23, 2024

Asked by Anonymous - May 11, 2024Hindi
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Can you please suggest on capital gains as per Indian taxation laws arising in the below two queries : 1) property purchased with joint ownership, me and my wife’s name in 2015 at a cost of 64,80,000, housing improvements done for the cost of 1000000 and brokerages of 200000 paid and sold the same property at 10000000 in Dec 2023? 2) 87% of the proceeds got from the deal i.e 8700000, have been reinvested to pay 25% amount in purchasing another joint ownership property in Dec 2023, 3) I have invested in another under construction property in Nov 2023 by taking housing loan, which is on me and my wife’s name worth 1.4 cr, here the primary applicant is me only while wife is just made a Co applicant in the builder buyer agreement and also on the housing loan . So what are the LTCG tax liabilities arising from the above 3 scenarios for FY 2023-2024 and FY 2024-2025. I intend to sale off the property acquired in (2) by Dec 2024 and use that proceeds to close the housing loan for the property acquired in (3), will this sale of property be inviting any tax liabilities if the complete proceeds received from the sale of the property in (2) would be utilised to close the housing loan taken in Nov 2023 for the property in (3) ? Since in FY 23-24, I would be claiming the LTCG from the sale proceeds of 1) invested in the purchase of property in 2), and I intend to sale off this property in Dec 2024, will the LTCG claim be forfeited on the property sale in (1), should I hold this property at least for further 1 year so that sale of this property in 2) will not invite STCG?
Ans: (A). Let's first talk about F/Y 2023-24 :
You jointly sold a Property during the year for Rs.76.80 lakhs (64.80+10.00+2.00), & sold the same for Rs.100.00 lakhs.
You have jointly also purchased Property No.3 (I suppose it is Residential only), for Rs.140.00 lakhs.
You should avail exemption u/s-54 & file your ITR accordingly. Please disclose all details about sale & purchase in your ITR.
02. Now coming to the F/Y 2024-25 :
You intend to Sell Property No.2, which was acquired in 2023-24. Any Gain on Sale of it would be Short Term capital Gains & taxed accordingly.
Alternatively, you may hold this sale of property no.2 (for 2 years from its purchase) & avoid STCG
You are free to utilize the sale proceeds in a way you like, including paying off your housing Loan.
Please note to avail exemption u/s 54 only from investment in property no.3 & not 2.
Most welcome for any further clarifications. Thanks.

...Read more

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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