Now you sold your old flat and you are then told that there is a LTCG Tax (Long term capital gain tax) which you have to pay, which is 10% of the gains you made. This is heart breaking, isn’t it?
Well, there is a nice legal way to work around this instead of paying the LTCG tax. Well, as you would have guessed, it involves locking your money for a time period of 5 years. (Tax saving fixed deposits also have a time period of 5 years)
Solution is to buy 54EC capital gains bond from REC (Rural electrification Corporation) or NHAI (National Highways Authority of India). The points to keep in mind while investing about these bonds:
Always remember that these bonds are in some years not issued (For example, NHAI did not issue this bond for 2022-2023). Furthermore, very important to remember that there is a cost indexation benefit when we make a sale. So the capital gains is not entirely sale price minus the purchase price. The purchase price is indexed basis the inflation to present day. The longer the time frame between the purchase and sale of property, the higher the indexation benefits.
Finally, you can read about other tax saving tips and tricks here.
