5 legal ways to avoid LTCG tax in India
5 legal ways to avoid LTCG tax in India

1) 1 Lakh Exemption

In LTCG tax, you are eligible for an exemption of up to 1 lakh in a financial year. If your gains from selling shares or mutual funds exceed this amount, consider spreading the withdrawals over two financial years to stay below the exemption limit.

2) Tax-Friendly Securities

To escape LTCG tax, consider investing in tax-saving instruments like ELSS (Equity Linked Saving Scheme) or tax-saving fixed deposits, which have a lock-in period of 3 years.

3) Set Off Capital Losses

Investors can offset their long-term and short-term capital losses against long-term capital gains. This reduces the tax liability, and you only pay tax on the net gain.

4) Indexation Benefit

Take advantage of indexation when calculating LTCG tax. Although the benefit of indexation is expected to end from April 1, 2023, if you purchased mutual funds before March 31, 2023, you can still benefit from it.

5) Grandfathering Clause

The grandfathering clause provides relief for long-term capital gains accrued before January 31, 2018. Gains made before this date are exempt from taxation under this clause.

Note: It’s important to follow these strategies in compliance with tax regulations to effectively minimize your LTCG tax obligations.

Also read: 3 Mutual Funds which Give Stability of Debt Fund and Growth of Equity