How Capital Gains Tax Works
Capital gains tax can vary based on your income and how long you held the asset before selling. Some capital gains may be tax-exempt up to a limit.
How to Calculate Capital Gains Tax
- Rates for capital gains tax are 0%, 15%, or 20% on most assets held longer than a year. For assets held for a year or less, rates match regular tax brackets: 10% to 37%.
- You only owe capital gains tax when you sell an asset. Gains are “unrealized” before selling and become “realized” after selling.
- Capital gains tax does not apply to the sale of rural agricultural land. Investing in Capital Gains Account Scheme and Section 54F exemptions can provide tax benefits.
How to Avoid Capital Gains on Taxes
Capital gains tax applies when you sell an asset for more than you paid. The tax rate can vary based on income, filing status, and holding period. Some gains may be exempt, and losses can offset gains to reduce tax liability.