Latest news with #LTCG
Hans India
3 days ago
- Business
- Hans India
How to make your retirement fund last a lifetime?
As life expectancy increases and pension coverage shrinks, building a retirement corpus isn't enough — making it last a lifetime is the real challenge. Rising medical costs, inflation, and market fluctuations can quickly deplete savings unless your retirement portfolio is built to endure all life stages. That's where a pyramidal retirement framework comes in — a structured plan with three distinct layers for safety, stability, and long-term growth. Layer 1: Safety and Liquidity (50–60% of corpus) The foundation ensures uninterrupted monthly expenses and emergency access with minimal risk. Ideal investments include: Liquid and ultra-short debt mutual funds Senior Citizen Savings Scheme (SCSS) RBI Bonds SWPs with short-duration funds Overnight or arbitrage funds as emergency buffers This layer provides peace of mind and quick access to funds without market-linked volatility. Layer 2: Stability and Moderate Growth (25–30%) This middle layer aims to preserve purchasing power by beating inflation with moderate risk. Best choices: Multi-Asset Allocation mutual funds High-quality corporate bond funds Conservative PMS (Portfolio Management Services) offering regular payouts This is your reliable mid-term income source and inflation hedge. Layer 3: Long-Term Growth (10–15%) The top layer fuels your corpus for the long run and helps leave a financial legacy. Recommended options: Flexi-cap, large-cap, and mid-cap equity mutual funds Balanced Advantage Funds High-quality equity PMS for HNIs Use this layer sparingly in the early years of retirement and let it grow to fight long-term inflation and provide legacy capital. Smarter Returns Need Smarter Strategy A successful retirement plan isn't just about picking products — it's about strategy: Diversify across equity, debt, and gold Control risk by avoiding high-return traps and focusing on inflation-beating growth Optimise taxes by utilising LTCG exemptions and harvesting losses to lower liabilities Tax tip: LTCG from equity mutual funds up to ₹1.25 lakh annually is tax-free — spread withdrawals to stay under this limit. NPS: A Must-Have Retirement Tool The National Pension System (NPS) remains a powerful and underutilized tool: Withdraw up to 60% tax-free at retirement Use 40% to buy an annuity for lifetime income New SLW feature allows tax-efficient staggered withdrawals, avoiding market timing risks Pro tip: Opt for Active Choice during working years to get higher equity exposure and better long-term growth than the Auto Choice option. Mistakes to Avoid Relying only on annuities with low returns Ignoring healthcare inflation — always have health insurance and a medical emergency fund Locking funds in illiquid products like real estate or ULIPs Skipping estate planning — create a will, assign nominees, and consider a family trust Financial Freedom, for Life A large corpus doesn't guarantee comfort — but smart structuring, strategic allocation, and tax planning do. The pyramid approach ensures a steady income, liquidity in crises, and long-term capital growth. Done right, your retirement fund won't just last a lifetime — it'll also support your legacy.
Mint
23-06-2025
- Business
- Mint
Income Tax: What are ITR-2, ITR-3 and who should use them while filing their return?
Income Tax: Although taxpayers have a little less than three months before they can file their income tax return (ITR) prior to Sept 15, there are a few tax forms (ITR-2 and ITR-3) whose online utilities have yet not been enabled. The good news, however, is that income tax (I-T) department has already enabled the excel utilities for ITR-1 (Sahaj) and ITR-4 (Sugam). But if your income source demands that you file your return using ITR-2 or ITR-3 then you have no choice but to wait for a little longer. Lately, a number of taxpayers have urged the department to release their online utilities. Let us know more about these tax forms. The income tax return form number 2 (ITR-2) can be filed by individuals or Hindu Undivided Families (HUFs) who are not eligible to file ITR-1 (Sahaj). Taxpayers who do not have income from profits and gains of business or profession and also do not have income from profits and gains of business or profession in the nature of interest, salary, bonus and commission or remuneration, by whatever name called, due to, or received by them from a partnership firm. It can be filed by those who want the income of another person, such as a spouse or a minor child, to be clubbed with their income if the income to be clubbed falls in any of the above categories. ITR-2 cannot be filed by any individual or HUF, whose total income for the year includes income from profit and gains from business or profession, and also who has income in the nature of interest, salary, bonus and commission or remuneration, by whatever name called, due to, or received by him from a partnership firm. The income tax return form number 3 (ITR-3) is meant for individuals and HUFs engaged in business or profession requiring the maintenance of elaborate books of accounts. This category includes working professionals such as doctors, advocates and CAs, whose income is calculated based on actual profits. Sahaj refers to income tax return form number 1 (ITR-1). The excel utility of this form has already been enabled. This form is meant for resident individuals with a total income of up to ₹ 50 lakh. The sources of income include salary or pension, income from one house property (excluding cases where loss is brought forward), income from other sources (like interest from savings accounts, fixed deposits) and agricultural income (up to ₹ 5,000). It is noteworthy that tax payer is not eligible if someone is a company director and invested in unlisted equity shares during previous year, have income from business or profession, or resident having foreign assets or foreign income or more capital gains than permitted threshold with LTCG under section 112A more than ₹ 1.25 lakh or having carried forward/ brought forward losses. For all personal finance updates, visit here
Time of India
02-06-2025
- Business
- Time of India
Which ITR form you should use to file your income tax return depends on your income sources and taxpayer category: Here's how to pick right
Choosing the right ITR form is the first and most crucial step, as a wrong form can lead to defective returns, penalties, or refund delays. The Income Tax Department has notified the updated forms for Assessment Year 2025-26 . Here's a quick guide to help you identify the correct form based on your income type and tax situation . ITR 1 (Sahaj) For salaried individuals with simple income YOU CAN USE THIS IF You are a resident individual (not HUF or NRI/RNOR). Your total income is less than or equal to Rs.50 lakh. Your income includes: Salary or pension. One house property (no carry-forward loss). Interest or other sources (excluding lottery/racehorses). Agricultural income up to Rs.5,000. Capital gains up to Rs.1.25 lakh from shares/mutual funds (Section 112A, new from FY 2024-25). No carry-forward loss allowed. You cannot use this if: You're a director in a company. Hold ESOP/unlisted shares. Profit from virtual digital assets (crypto). Have foreign assets or income. Own more than one house. Have business or professional income. Have capital losses to carry forward. New for this year Live Events You can now declare up to Rs.1.25 lakh in LTCG from shares or equity mutual funds in ITR 1 without needing ITR 2 or ITR 3. ITR 2 For investors, NRIs, and those with capital gains or multiple properties YOU CAN USE THIS IF You are an individual or HUF. Your income includes: Salary/pension. Income from multiple house properties. Capital gains (any amount). Foreign income or assets. Agricultural income > Rs.5,000. You're an RNOR/NRI. You're a director or hold unlisted shares. You have clubbing of income (spouse's income). You cannot use this if: You have income from business or profession. New feature: The Excel utility now supports filing revised returns under Section 139(8A). ITR 3 For business owners, freelancers, and partners in firms YOU MUST USE THIS IF You are an individual or HUF with: Income from business or profession (proprietorship). You are a partner in a firm (not an LLP). Income includes capital gains (any amount or with carry-forward loss). You hold unlisted equity shares. Income/loss from futures & options. You also earn salary, rent, or other income along with business income. Use this if you cannot file ITR 1, ITR 2, or ITR 4 due to your income mix. If you're opting out of the new tax regime, Form 10-IEA confirmation is required ITR 4 (Sugam) For small businesses and professionals under presumptive tax YOU CAN USE THIS IF You are a resident individual, HUF, or partnership firm (not LLP). Your total income is less than or equal to Rs.50 lakh. You earn from: Presumptives (Section 44AD or 44AE). Presumptiven (Section 44ADA). One house property. Salary/pension. Other sources (excluding lottery/racehorses). LTCG under Section 112A: Rs.1.25 lakh (no carry-forward loss). You cannot use this if: Income is > Rs.50 lakh. You have foreign assets or income. You are an RNOR or NRI. You're a company director or hold unlisted equity. Your business turnover is > Rs.2 crore. You have capital losses to carry forward. Freelancer tip Use ITR 4 only if you're under presumptive taxation (44ADA). Otherwise, file using ITR 3. ITR 5 For LLPs, AOPs, co-operative societies, and others You can use this if you are: A partnership firm (excluding proprietorships). An LLP. Association of Persons (AOP). Body of Individuals (BOI). Estate of a deceased or insolvent person. Business trust or investment fund. Certain cooperative societies or trusts (not filing ITR 7). You cannot use this if: You are an individual, HUF, or company. You are a trust required to file ITR 7. Note If you opt out of the new tax regime, submit Form 10-IEA Don't forget... If you've received ESOPs or hold startup shares not listed on stock exchanges, you own unlisted equity even if you haven't sold it. This disqualifies you from using ITR 1 or ITR 4. Even if your salary is under Rs.50 lakh, having capital gains above Rs. 1.25 lakh or owning more than one property requires ITR 2. Using ITR 1 here can lead to a defective return notice. Only ITR 2 or ITR 3 lets you carry forward capital losses to offset future gains. If you use ITR 1/4, these losses lapse, potentially costing you thousands in future tax savings. If you've returned to India recently after living abroad, you may be an RNOR, not a regular resident. You are an RNOR if you were an NRI in nine out of the last 10 years or stayed in India for 729 days or less in the last seven years. If you're a freelancer, small business owner, or professional with modest income, you can opt for presumptive taxation to simplify filing. Under this, you declare a fixed percentage of your total receipts as income. There's no need to maintain detailed books or get audited. Use this only if your turnover is within limits (Rs.2 crore for business, Rs.50 lakh for profession). If you're salaried and traded in F&O, you must file ITR 3. F&O income is treated as business income, not capital gains, even if it's just a side activity.
Time of India
29-05-2025
- Business
- Time of India
NRIs to pay lower LTCG tax on these equity shares due to proposed forex fluctuation benefit in New Income Tax Bill 2025
The New Income Tax Bill , 2025 has a provision with which non-residents individuals (excluding FIIs) can effectively pay a lower capital gains tax than allowed under the Income Tax Act, 1961. This provision is called 'forex fluctuation benefit' and using it NRIs can pay a lower long term capital gains tax (LTCG) on sale of unlisted equity shares of an Indian company. As per calculations, if this beneficial provision in the new tax bill, 2025 is incorporated by the Indian government in the final act, then NRIs can pay as much as 72% lower long term capital gains tax when compared to before. The reason for this high percentage of savings in capital gains tax payment for NRIs is earlier under the old tax act of 1961, NRIs had to pay income tax on artificially high income due to depreciation of Indian Rupee (INR). This disadvantage is now removed and NRIs are only required to pay income tax on their actual gains in USD terms. Read below to understand what the forex fluctuation benefit about which Income Tax Bill 2025 talks is about and how NRIs stand to gain from this benefit if the government implements it in the final income tax act. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Empresas de Uberlândia reduzem custos agora [Saiba mais] Sistema TMS embarcador Saiba Mais Undo What is the forex fluctuation benefit which can result in lower LTCG tax outgo for NRIs? When NRIs invest in unlisted Indian equity shares, the USD is exchanged for INR, but when the same shares are sold, NRIs exchange INR for USD to take the gains back to their resident country. Now a situation may arise when an NRI who invested in an Indian share when 1 USD was Rs 60 and at the time of sale 1 USD became Rs 80, so this NRI gained Rs 20 due to depreciation of INR. But if the share price also rose from Rs 60 to Rs 80 during this period then from the NRI's perspective he earned zero income since he invested 1 USD for one share and got back 1 USD only after selling one share. But despite this fact, the said NRI used to pay capital gains tax, as in INR terms he earned Rs 20. This exact problem is what the forex fluctuation benefit solves under the new Income Tax Bill, 2025. Live Events If the forex fluctuation benefits feature is implemented in the final tax act, then NRIs will only pay income tax on the actual gains in United States Dollar (USD) terms and not INR terms. 'Currently, Income Tax Act, 1961 does not allow the forex fluctuation benefit to non-residents for sale of unlisted equity shares. This leads to a higher taxable gain, especially where Indian Rupee depreciates significantly during the holding period,' says Pavan Sisodia, Tax Partner, EY India. The table below shows how an NRI can potentially save as much as 72% tax when forex fluctuation benefit is given to the LTCG transaction. Particulars INR INR/ USD Converted in USD Full value of Consideration (assumed sold in 2026) [A] 8,50,000 85 10,000 Cost of Acquisition (assumed acquired in 2014) [B] 5,40,000 60 9,000 Without benefit of foreign exchange fluctuation Taxable capital gains [C = A-B] 3,10,000 Tax on capital gains (@12.5%* on C) 38,750 With the benefit of foreign exchange fluctuation Capital gains [D = A - B] 1,000 Taxable capital gains (converted in INR) 85,000 Tax on capital gains (@12.5%* on D) 10,625 Source: EY India Chartered Accountant (Dr.) Suresh Surana says this benefit- forex fluctuation ensures investors are not overtaxed. 'This method intends to ensure that the capital gains reflect the real economic gain or loss in the investor's home currency, thereby neutralising the distorting impact of currency fluctuations. As such, it prevents over-taxation that may result from rupee depreciation and aligns the tax liability more closely with the actual financial outcome realised by the non-resident,' says Surana. What did the New Income Tax Bill 2025 say about giving NRIs forex fluctuation benefit? The New Income Tax Bill, 2025 said that the forex fluctuation benefits as explained above is applicable to NRIs only for unlisted Indian equity shares like NSE, etc and not for listed equity shares like BSE, etc. Clause 72(6) of the New Income Tax Bill 2025 said: ' In the case of an assessee, who is a non-resident, capital gains arising from the transfer of a capital asset being shares in, or debentures of, an Indian company (other than equity shares referred to in section 198) shall be computed–– by converting the cost of acquisition, expenditure incurred, wholly and exclusively, in connection with such transfer and the full value of the consideration received or accruing as a result of the transfer of the capital asset into the same foreign currency as was initially utilised in the purchase of the shares or debentures; ….' The above legal provision in the new income tax bill, 2025 means forex fluctuation benefit is available only for Indian unlisted equity shares and not for listed equity shares under Section 198. Surana, says: 'The proposed change in the new Income-tax Bill, 2025, seeks to extend the benefit of foreign exchange fluctuation to non-residents (other than foreign institutional investors) in respect of LTCG arising from the transfer of unlisted shares.' Surana explains: 'In accordance with the proposed mechanism i.e. clause 72(6) of the new Income Tax Bill 2025, the cost of acquisition, sale consideration, and transfer-related expenses are first converted into the same foreign currency that was initially utilised for the acquisition of the unlisted shares or debentures. Capital gains are then computed in such foreign currency and subsequently reconverted into INR for tax purposes.' How can this provision in the new tax bill help NRIs? Here is a calculation to show how exactly NRIs are going to benefit from forex fluctuation feature: Example 1 Particulars Existing Regime (Without Forex Benefit) Proposed Regime (With Forex Benefit – Sec 72(6) Currency of Computation Indian Rupees (INR) US Dollars (USD), then reconverted to INR Amount Invested USD 1 million USD 1 million Exchange Rate at Time of Purchase Rs 70/USD Rs 70/USD Cost of Acquisition (INR equivalent) Rs 7 crore USD 1 million Sale Consideration USD 1.5 million USD 1.5 million Exchange Rate at Time of Sale Rs 90/USD Rs 90/USD Sale Value in INR Rs 13.50 crore USD 1.5 million Capital Gain (computed) Rs. 6.50 crore (Rs 13.50 crore less Rs 7.00 cr) Rs. 4.50 crore [(USD 1.5 mn less USD 1 mn) Rs. 90/USD)] Tax Rate on LTCG 12.5% 12.5% Tax Payable in INR Rs. 81.25 lakh (Rs. 6.50 crore * 12.5%) Rs. 56.25 lakh (Rs.4.50 crore * 12.5%) Effective Tax Saving Due to Forex Benefit Not applicable Rs 25 lakh Source: Chartered Accountant (Dr.) Suresh Surana CA J Jambukeswaran, Founder, CEO & Managing Director of Uniqey by JJ tax, says: "The introduction of this benefit through the new Section 42 – 'Variation in Liability' is a strategic move that strengthens India's position as an attractive investment destination for private equity, venture capital, and international strategic investors. So far, while the concessional LTCG tax rate of 12.5% did apply to non-residents, it did not account for currency fluctuations—especially the depreciation of the Indian rupee against the investor's home currency. This created a situation where tax was levied on inflated capital gains that were notional in nature and not reflective of true economic benefit." Jambukeswaran explains how this helps NRIs: Fair Valuation of Capital Gains: Non-residents investing in India using foreign currency can now adjust the acquisition cost based on exchange rate movement. So, if the rupee depreciates during the holding period, their cost in INR terms increases—leading to a lower taxable gain. This ensures tax is applied only on real, economic gains, not on notional appreciation due to currency erosion. Higher Net Returns for Long-Term Investors: Private equity and venture capital funds, which typically operate on 5–7-year investment cycles, benefit significantly. By reducing the tax outgo on paper gains inflated by forex movements, the amendment improves post-tax internal rate of return (IRR) and makes India more competitive for long-term strategic capital. Surana says this proposed change in the New Income Tax Bill, 2025 enhances India's competitiveness as an investment destination by removing a structural disincentive for long-term non-resident and NRI investors. Surana says: 'By proposing this relief under clause 197 read with 72(6) of the new Income Tax Bill, 2025 the government seeks to address a longstanding concern faced by foreign investors namely, the inflation of taxable gains due to depreciation in the Indian rupee over the holding period.' Surana adds: 'It tends to ensure tax neutrality for currency fluctuations, enabling non-resident investors to compute their capital gains in the same foreign currency used for the initial investment. This aligns the tax outcome with the investor's economic reality, as gains are taxed only to the extent of the actual increase in value measured in their base currency. It eliminates artificial gains caused solely by INR depreciation, which had the effect of increasing the tax burden even in cases where real returns were modest or flat in foreign currency terms.'
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Business Standard
19-05-2025
- Business
- Business Standard
Selling two homes? New tax ruling says you can still save on capital gains
A recent ruling by the Income Tax Appellate Tribunal (ITAT), Mumbai, has clarified that taxpayers selling two different residential properties can still claim long-term capital gains (LTCG) exemption under Section 54 of the Income Tax Act, if the sale proceeds are reinvested in a single residential property, provided all other conditions are met. Experts say this interpretation could ease tax pressures for middle-class families and joint property owners navigating complex real estate transactions. 'Judgment based on liberal interpretation' 'This judgement is based on a liberal interpretation of Section 54, thereby emphasising that denial of exemption merely on literal interpretation or pure technical grounds is not the intent of law,' said Riaz Thingna, partner, Grant Thornton Bharat. He added that the ITAT allowed the exemption even though two houses—owned separately by a husband and wife—were sold and proceeds were jointly reinvested in one new home. The ruling sets a precedent that as long as each co-owner claims LTCG exemption only on their respective share and avoids double benefit, the exemption under Section 54 cannot be denied. Multiple sales, one house still valid According to Dipesh Jain, partner, Economic Laws Practice, 'There is no restriction under Section 54 if long-term capital gains from multiple house properties are invested in one residential property, as long as the conditions of the section are fulfilled.' He further clarified that although Section 54 limits the investment to only one (or in some cases, two) residential houses, it does not restrict gains arising from the sale of multiple properties. While both experts agree that the ruling brings flexibility, they caution that risks at the initial assessment stage still exist. 'The decision offers greater clarity, but taxpayers must be cautious. If multiple properties are sold by the same person and the total gain is reinvested into a single house, exemption may be denied,' warned Thingna, citing the specific wording of the law that refers to 'a residential house'. Jain noted that litigation risks cannot be ruled out at the assessing officer level, even though higher appellate forums may offer relief. Precautions for claiming exemption Taxpayers planning to use this benefit should take the following precautions suggested by both of the experts: · Maintain clear documentation proving ownership and transaction details. · Ensure compliance with all conditions of Section 54, especially investment limits. · Avoid double claiming of exemption in case of joint ownership. · Keep judicial precedents handy to support claims if challenged by tax authorities. 'The taxpayer must show that joint owners are not taking double benefit and have claimed exemption only on their respective share,' emphasised Thingna. The ITAT's interpretation aligns with the intent of Section 54 to promote reinvestment in housing, but taxpayers must tread carefully and consult professionals to ensure compliance and avoid potential disputes.
