Selling Stocks! How To Save Capital Gain Tax? All You Need To Know

To save or reduce capital gains tax while selling stocks, you can use several legal and strategic methods, depending on your country’s tax laws.

According to David A. E., a Certified Public Accountant at Rish & Enzastiga, here are a few smart strategies of minimizing taxes when selling stocks:

How To Save Capital Gain Tax?

Hold For The Long Term: Stocks which are held for over a year, qualify for long-term capital gains tax rates, which are lower (0%, 15% or 20% depending on income) as compared to short-term rates taxed as ordinary income.

On selling listed shares after 1 year, the first Rs 1 lakh is tax-free, taxed at 10% beyond that (without indexation).

Tax-Loss Harvesting: Sell underperforming stocks at a loss to offset gains from other sales. Investors can also deduct money in net losses against other income annually, carrying over excess losses to future years, as losses can be carried forward for up to 8 years.

Utilize Tax-Advantaged Accounts For Savings: Invest through IRAs (the Indian equivalent of IRAs are PPF accounts) or 401(k)s (the Indian equivalent for which is an EPF account) where gains can grow tax-free or tax-deferred, delaying or eliminating capital gains tax.

Gift Or Donate Stocks: Donating appreciated stocks to charity avoids capital gains tax and may provide a tax deduction. Gifting stocks to family in lower tax brackets, such as parents or adult children in no tax bracket can also reduce the tax burden. Any future gain will be taxed in their hand, potentially at a lower rate.

Timing Your Sales: If you expect a lower income year, consider selling stocks then to take advantage of lower tax brackets.

Also Read: Big Relief to Infosys As Rs 32,000 Crore Tax Demand Stands Closed: All You Need To Know