[inner_roadster]

We can carry out the Tax Harvesting approach by utilizing the Systematic Withdrawal Plan (SWP). This strategy will now become more relevant in reducing the taxation load of LTCG to some extent. One way to avoid the LTCG is through a tax harvesting strategy.

Generally, long-term investors do not take advantage of the Rs. 1.25 lakh exemption each year. So we need to use the LTCG exemption limit every year to reduce taxation. Every year, we must withdraw our equity-based mutual funds in a systematic way so that the long-term capital gain remains within the limit of Rs. 1.25 lakh maximum for the fiscal year. The capital redeemed must be immediately reinvested.

By using this disciplined strategy, we can reduce the tax on long-term capital gains every year. When using this strategy for redemption and reinvestment, one need to be extremely cautious and stay away from the trap of market timing.

[rx100]

Originally Posted by sumeethaldankar

Is there any scope for exemption if an investor incurs a short term/long term loss while selling of his shares etc ? I have a loss making investment which is always on downward spiral. If the government conveniently takes away a chunk if you are doing well I think they should also provide some relief when one is not doing so great.

You can always offset your realized losses against gains, and that would be your net capital gain. Similarly if there is only losses in an year, you can carry forward same to future tax years and offset with future gains.

[thanixravindran]

Originally Posted by Naetik30

This is very true. I invested in SGBs and they are maturing on August 4, 2024. This is absolute fraud on the SGB investors who trusted a Govt of India initiative.

Hi - I also have SGB. What is the problem in SGB? Aren't they still tax free and now subject to LTCG?

[Noctis]

Originally Posted by thanixravindran

Hi - I also have SGB. What is the problem in SGB? Aren't they still tax free and now subject to LTCG?

The duty on gold has been reduced by 9%, which means SGB redemption value will also decrease accordingly.

[ValarMorghulis]

Originally Posted by thanixravindran

Hi - I also have SGB. What is the problem in SGB? Aren't they still tax free and now subject to LTCG?

They are still tax free and not subjected to LTCG.

Issue is customs duty on gold has been reduced, bringing the total duty from 15% to 6% in this budget. Due to this tax relief, there was a drop in gold prices on the Multi Commodity Exchange (MCX) and also in the SGB prices.

[JediKnight]

Originally Posted by vaibhav_a_a

This clarifies one of the points re debt investments made prior to April 2023.

This a massive negative for debt fund owners. I have a couple old debt funds purchased before April 2023 where taxation after indexation is zero. But after this I will have to pay 12.5%. Now after this tax the inflation adjusted returns will be negative. Had I known I would have exited them

[hothatchaway]

Originally Posted by inner_roadster

We can carry out the Tax Harvesting approach by utilizing the Systematic Withdrawal Plan (SWP). This strategy will now become more relevant in reducing the taxation load of LTCG to some extent. One way to avoid the LTCG is through a tax harvesting strategy.

Generally, long-term investors do not take advantage of the Rs. 1.25 lakh exemption each year. So we need to use the LTCG exemption limit every year to reduce taxation. Every year, we must withdraw our equity-based mutual funds in a systematic way so that the long-term capital gain remains within the limit of Rs. 1.25 lakh maximum for the fiscal year. The capital redeemed must be immediately reinvested.

By using this disciplined strategy, we can reduce the tax on long-term capital gains every year. When using this strategy for redemption and reinvestment, one need to be extremely cautious and stay away from the trap of market timing.

Sir, this is such an awesome insight, it's right there under our very noses and yet I don't know how many of us see it.

If I have understood this correctly, I have w units of a fund bought at y price and today the price is z. Let's say (z-y) x w = 1.2l cap gain (assume it amounts exactly to that) I redeem all w units which are at a nav of z, book profits and reinvest the entire amount right away. Let the nav gradually appreciate from z. My overall portfolio value remains unchanged but instead of taking the entire CG hit at an indeterminate point in the future, I have used the annual limit to offset my taxes partially.

I am not sure when the money from the redemption hits our account, and then of course it takes upto 2 business days for the purchase request to be executed, so there will be a small gap of upto 3 days for the redemption to be reinvested, the nav movement should be minimal though. And of course if one has cash lying around then you can do both on the same day.

Thanks so much for sharing this insight.

[inner_roadster]

Originally Posted by hothatchaway

Thanks so much for sharing this insight.

You've understood my concept exactly. Similar tax harvesting can be done for direct equity as well. In the event that some of your portfolio holdings are accruing losses. You can sell that equity, repurchase it, and book the loss for the fiscal year. These losses can be adjusted with STCG or LTCG, depending on the period of your equity holding.

[vaibhav_a_a]

Originally Posted by JediKnight

This a massive negative for debt fund owners. I have a couple old debt funds purchased before April 2023 where taxation after indexation is zero. But after this I will have to pay 12.5%. Now after this tax the inflation adjusted returns will be negative. Had I known I would have exited them

We are in the same boat, dear sir - the leaking one.

p.s. All of you who are screaming hoarse about the govt ''cheating'' you by the change in redemption pricing in SGB, here's a line from the RBI website (published Feb 4, 2019).

" Are there any risks in investing in SGBs?
There may be a risk of capital loss if the market price of gold declines. However, the investor does not lose in terms of the units of gold which he has paid for."

source: https://www.rbi.org.in/commonperson/...s%20paid%20for.

Note that there is no further explanation of the factors influencing market price but any reasonable investor should assume that exchange rate, and duty structure are among a few. I think the mistake that many investors have made (basis last few series' redemption prices and returns thereby) is to assume that this is some kind of sure-shot money-making scheme. It's not. It's like any other scheme.

Further, if you look at the GoI approach to retailing gold or linked instruments, a few, but not exhaustive list of steps that I recall that indicate that GoI is exiting any bullion / backed instrument to the general public and instead encouraging private players.

The SPMCIL auctioned (off Mumbai mint) bulk of their minted gold [large sizes] in stock by close of fiscal 2022. Then they stopped retailing physical gold coin via their website and sales counter here in Delhi sometime in 2023. Then came the agreement with UAE for private players to import gold (at lower duty). In Feb 24 our hon'ble FM indicated to SPMCIL to be ''future ready'' https://economictimes.indiatimes.com...2.cms?from=mdr. Then this budget clearly benefited jewellers by way of lower duty. Now, there has been no issuance of SGB nor any series indicated in this fiscal.

Disclaimer- I have a large number of SGBs and lost quite a bit earlier this week but am sitting tight.

[OrangeCar]

Originally Posted by thanixravindran

True. Though over simplified, below picture from Twitter sums up the mood today

The thing that is missing in this GST portion is cess. Cess on many goods, like Cars is huge.

As far as I remember, when GST was introduced (in 2018?), Cess was put in addition over the rates of GST saying we will need this extra money to compensate for any revenue loss that states may incur. This cess will be on for 5 years. Around Covid time, when this 5 years period was going to lapse, all parties came together to extend Cess beyond 5 years, citing revenue loss due to Covid. However, now Cess is extended but no end date defined. We are all doomed to continue to pay cess forever.

If I am wrong on the above, i.e., 5 year initial plan of cess and now extended without a defined end date, I will be happy to be corrected.

I also had another question to taxation experts here. What if you sold MFs with a gain under 1 year holding period, in month of June. Will that too be taxed at 20% when filing returns next year? Or will that be 15%. I hope it is not retrospective. Because no way investors knew short term gain taxes were going to be raised.

[ZenMaster]

I too hold some SGBs. While I'm sad to see the value fall, My redemption horizon is far away and there is nothing I can do about that.

But thinking another way, considering that global Gold prices will keep rising, is now actually a good time to buy SGBs from the Secondary market?

Also, if I buy like that and hold them till maturity, will they still be tax free?

At this rate, I wouldn't be surprised if one fine day, they will Tax SGB gains as well and even PPF.

[volkman10]

Budget 2024: Tax clearance certificate must for residents leaving India.

As per Section 230 of the Income-tax (I-T) Act, any individual residing in India must obtain a certificate from tax authorities before departure.

Starting October 1, they will need a clearance certificate confirming compliance with the Black Money Act, 2015.

Link:

[Linuskm]

Originally Posted by JediKnight

This a massive negative for debt fund owners. I have a couple old debt funds purchased before April 2023 where taxation after indexation is zero. But after this I will have to pay 12.5%. Now after this tax the inflation adjusted returns will be negative. Had I known I would have exited them

As I know debt funds are taxed as per your income tax slab which means it can be as high as 30%, but now if you hold them for 2 yes you only pay 12.5%

[SmartCat]

Originally Posted by lemedico

Watch from 11:00. The sgb dilemma is described very well. He even goes on to suggest a large scale PIL filing for the same

Originally Posted by Naetik30

This is absolute fraud on the SGB investors who trusted a Govt of India initiative.

Gold ETF/mutual fund value fell too:



And so did the value of physical Gold:



So it is not a fraud on SGB investors specifically. The drop in value comes under 'market risk'.

[vaibhav_a_a]

Originally Posted by ZenMaster

I too hold some SGBs. While I'm sad to see the value fall, My redemption horizon is far away and there is nothing I can do about that.

But thinking another way, considering that global Gold prices will keep rising, is now actually a good time to buy SGBs from the Secondary market?

Also, if I buy like that and hold them till maturity, will they still be tax free?

At this rate, I wouldn't be surprised if one fine day, they will Tax SGB gains as well and even PPF.

Cant comment on whether this is a good time to buy from secondary or not but at full term, maturity redemption proceeds are tax free irrespective of time you've held them for.