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Have you ever heard about long term capital gain?
Selling a home is a difficult and time-consuming task in itself, and the prospect of having to pay capital gains tax can be frightening. An investment in land is considered a capital asset, and the profits earned from trading it are known as capital gains.
As a result, if you plan to sell your property, you have to pay capital gains tax on the earnings made after deducting the indexed cost of acquisition and inflation, depending on the holding period of a capital asset. However, there are numerous methods for reducing capital gains tax when selling a property.
What Is a Long Term Capital Gain?
A long term capital gain is one derived from the sale of a qualified investment held for more than 12 months at the time of sale. This contrasts with short-term profits or losses on investments that are liquidated in less than a year. Long term capital gains are often taxed more favorably than short-term profits.
The difference in value between the selling price and the acquisition price determines the long term capital gain amount. This statistic represents the investor’s net profit or loss when selling the asset. The net profit or loss experienced by an investor when selling an asset held for less than 12 months determines short-term capital gains or losses. Long term capital gains are taxed at a lower rate than short-term capital gains by the Internal Revenue Service (IRS).
When filing their yearly tax returns, taxpayers must record the number of their capital gains generated for the year since the IRS will consider these short-term capital gains profits to be taxable income. Long term capital gains are taxed at a reduced rate, which varied from 0% to 20% in 2019, depending on the taxpayer’s tax status.
Long term capital gains on equity-oriented funds
Long-term capital gains (LTCG) on the sale of listed equity shares are now taxable as of April 1, 2018. In the context of equities investment, long-term implies longer than a year from the date of acquisition. Long-term capital gains are earnings made on the selling of publicly traded equity shares.
Prior to the amendments to the Union Budget 2018, the LTCG gained on the sale of equity shares was tax-free in the hands of investors. Securities Transaction Tax had previously been applied to such equity shares (STT).
Only short-term capital gains were taxed at a 15% rate. The goal of making LTCG tax-free was to boost investor involvement in India’s stock markets. Because of the exemption, investors began to see stocks as beneficial investment instruments. However, LTCG on equity-oriented funds will be taxed after the 2018 Union Budget.
Long term capital gain (LTCG) on listed equity shares exceeding Rs 1 lakh per fiscal year is taxable at 10% without indexation.
Benefits of ULIP
Unit Linked Insurance Plans (ULIPs) are popular investment vehicles for those who want to protect their and their families futures in whatever manner they can. From offering insurance coverage to giving considerable returns as an investment vehicle, ULIP features make it the best answer to a wide variety of financial concerns.
The benefits of ULIP arise from the flexibility it provides investors. Furthermore, ULIP tax advantages increase its appeal among people wishing to save taxes and build a greater corpus for satisfying long-term and short-term objectives.
Canara HSBC Life Insurance’s Invest 4G plan provides consumers with significant flexibility via customizable plans that enable them to choose the benefits that are most suited to their needs.
Continue reading to discover more about the benefits of ULIPs:
1. Death Benefit
One major advantage of choosing a ULIP is the death benefit, which is available to dependents following the policyholder’s death. The death benefit guarantees that the policyholder’s dependents have access to financial stability and may maintain their normal lifestyle even if the policyholder is not there.
2. Meeting Financial Goals
A corpus is required for both short-term and long-term financial objectives. Policyholders may use a ULIP to significantly increase their corpus and fulfill these objectives. For example, with schooling prices growing by the day, even when the kid is very young, a ULIP may be set up to begin developing a corpus to fulfill the child’s further education ambitions. ULIP advantages might also include saving for short-term objectives such as taking a family trip to a faraway exotic area.
3. Income Tax Benefits
Income tax benefits are a factor to consider when selecting investment products, and ULIP tax advantages make it the best alternative for such investors. Sections 80C and 10(10D) of the Income Tax Act both provide tax advantages for ULIPs. ULIP tax advantages are available when people pay premiums, when earnings are withdrawn from the fund, and when the fund matures.
4. Flexibility
Investment and insurance are two financial cornerstones for anybody trying to safeguard their financial health and achieve long-term financial success. As a consequence, ULIPs are the ideal tool for such individuals.
When investing in ULIPs, a part of the premium paid is used to ensure insurance coverage, while the remainder is invested in investment products. ULIPs provide flexibility by allowing policyholders to choose how much of their investment should be used to insure themselves and how much should be used to increase their corpus.
With Invest 4G plan, which is accessible via Canara HSBC Life Insurance, investors may choose to invest their assets across eight different funds and four portfolio strategies, allowing them to maximize their savings and dramatically build their retirement corpus in a short period of time. The Invest 4G plan offers a greater amount of flexibility to the customers.
5. Long term Capital Gain Tax Benefit
It was declared in Budget 2021 that if the yearly premium of ULIP investments exceeds Rs 2.5 lakh (i.e., high-value premium insurance), the return gained would not be tax deductible.
Long-term capital gains (LTCG) taxation will apply to ULIPs, as it does to other equity-oriented investments. In addition, long term capital gain (LTCG) must be taxed at 10%. However, no taxes are applied in the event of an individual’s death.
Wrapping It Up
Investing in real estate holdings may help you create assets while also providing you with financial security and stability in the future. As a result, by taking advantage of these tax breaks, you may get the most out of your home investment.