Tax Savings

Tips to save your LTCG tax in 2022-23


Capital gains are the profit you make when you sell an asset at a price higher than what you bought it for. For this purpose, capital refers to property, jewellery, shares, bonds, securities and vehicles. The profit you earn falls in the income category, and you would have to pay tax on them as per the Income Tax Act 1961.

Capital gains are of two types; short-term capital gains (STCG) and long-term capital gains (LTCG); you have to pay tax on STCG and LTCG as per the applicable rates. Want to find ways how to save LTCG tax in 2022-23? Read on.

Understanding Capital Gains

Here is a brief overview of capital gains based on the holding period and asset type. 

Short Term Capital Gains (STCG)

When you hold an asset for 36 months or less, it is a short-term capital asset. From 2017-18 onwards, the holding period for an immovable property like land, house, and building has been reduced to 24 months to be classified as STCG.

Long Term Capital Gains (LTCG)

When you hold an asset for more than 36 months, it is a long-term capital asset. From 2017-18 onwards, immovable property held for more than 24 months falls under the category of long-term capital asset and will attract LTCG tax if sold after 24 months.  

Some assets qualify as long-term capital assets if you hold them for more than 12 months; these are:

  • Preference and equity shares of a company listed on recognized stock exchanges in India
  • Securities like bonds, debentures, and government securities listed on a recognized stock exchange in India
  • Units of UTI
  • Units of equity funds
  • Zero coupon bonds

Before 2018, long-term capital gains on the sale of equity shares were tax-free in the hands of the investor. Post the Union Budget 2018, the LTCG tax-free limit for equity shares is one lakh in a financial year. If your capital gain is more than Rs one lakh in 2022-23, you would have to pay tax on it. The LTCG tax rate is 10% without the benefit of indexation. 

Tips to save LTCG tax in 2020-23

Here are a few ways to save long-term capital gains tax in 2020-23.

1. Tax harvesting

Tax harvesting is a strategy you can use throughout the year in a planned manner to save tax on your capital gains. You can avail of this exemption on the total long-term gains you make from stocks and equity-oriented funds. 

To use tax-loss harvesting for saving tax:

  • Sell the stock whose price has been falling consistently. You sell the equity if it has lost a significant part of its value and you do not see any chance of revival. You offset the loss incurred against the capital gains in your portfolio over the period.
  • You can book long-term gains in equities up to Rs 1 lakh and reinvest them. The price at which you reinvest is the new acquisition cost. You can repeat this process each year and save LTCG tax of Rs 10000 yearly. 

2. Section 54

Provisions under section 54 can help you save LTCG tax. If you sell a house and buy another one, you can get relief as per Section 54. To benefit from this section, you have to fulfil the following conditions:

  • The benefit is available only to individuals and HUFs.
  • You should buy another residential property within two years after the sale or one year before the sale of the existing property. 
  • If you want to construct a home, you should finish it within three years from the date of transfer. 

3. Section 54F

You can get an exemption on capital gains on the sale of assets other than a house under this section. You do not have to pay LTCG tax if you

  • Use the entire sale proceeds to buy a house property subject to conditions same as Section 54.
  • The new house is in India.
  • At the time of transfer, you should own only one residential home apart from the new one.
  • You cannot purchase or construct a residential house (other than the new one) within two years of that date.

3. Section 54EC 

As per Section 54EC, profits from the sale of a long-term capital asset, both immovable property and shares and stocks, are exempt from LTCG tax if invested in “long-term specified assets”. The conditions to avail of this exemption are:

  • You should invest the gains within six months of the sale.
  • The investment should be in government-notified bonds from the Rural Electrification Corporation (REC), National Highways Authority of India (NHAI)
  • You cannot invest more than Rs 50 lakhs in these bonds.
  • The lock-in period for the investment in bonds is 5 years.

4. Section 54B  

This section provides an exemption in case of capital gains from the transfer of agricultural land. You can save LTCG tax if:

  • You use the proceeds to buy another agricultural land within two years of the transfer.
  • You should not sell the land purchased for this purpose for at least three years from its purchase.

5. Capital Gain Account Scheme 

You can enjoy tax exemption through the capital gain account scheme without buying a residential property. Under this scheme, you can avail of the benefit if:

  • You deposit the capital gains or the net consideration in the bank on or before the due date of filing returns.
  • You can withdraw funds only to purchase a house or land and utilize the money within three years of withdrawal, or you will have to pay tax at the applicable LTCG tax rate. 

Things to remember

  • You can use more than one section to claim a deduction. If you want, you can claim an exemption under both Section 54 and Section 54EC by combining the investment in new property and specific bonds.
  • Similarly, you can claim simultaneous benefits under Sections 54 and 54F if all conditions are fulfilled.
  • The LTCG tax-free limit is 1 lakh; the sale of assets above a lakh attracts capital gains tax.


The amount of tax you pay depends on the value of the asset you sell and the LTCG tax rate. The above tips can help you reduce capital gains tax effectively. A penny saved is a penny earned, so utilize the above provisions to save tax.