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<ul class="summary-list"><li>High-net-worth investors use many loopholes to reduce their taxes.</li><li>Among them are exchange funds, collars, 1031s, and hedging and borrowing against assets.</li></ul>In simple terms, there are only three places your money can go: to you and your family, to charitable organizations, and to the IRS. That's the pep talk Nayan Lapsiwala, a director of wealth management and partner at Aspiriant, gives his ultra-high-net-worth clients.The second part of his pep talk is to avoid letting tax avoidance undermine your financial future. It could be a bad idea to keep a stock solely to skip out on realizing capital gains."What if that stock falls 50% or more?" Lapsiwala said. "You are trying to save money on taxes, but your entire financial future can get wiped out with the market."This is why <a target="_blank" class="" href="https://www.businessinsider.com/tax-strategies-irs-rules-that-can-improve-your-financial-situation-2024-5">tax loopholes</a> and <a target="_blank" class="" href="https://www.businessinsider.com/how-to-defer-real-estate-capital-gains-tax-1031-exchange-2024-3">deferral strategies exist</a>, and why the wealthy seek out top advisors to help them navigate the complicated and intricate tax code. The right advice can buy time, reduce tax burdens, or even avoid them altogether without breaking any laws.<h2 id="e7689c3d-b101-4cb5-aaa5-8e6baca28255">8 loopholes</h2>Most investors know and have access to an <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/what-is-an-etf#:~:text=An%20exchange%2Dtraded%20fund%20(ETF,liquid%20as%20some%20mutual%20funds.">exchange-traded fund</a> (ETF). But what about an exchange fund?For investors who have reaped high gains from a stock and want to shave some off to reduce concentration risk, Lapsiwala says choosing to pool their assets in an exchange or swap fund with other investors is the way to go. A manager then oversees this fund. Consider it a 'you share your stocks, and I'll share mine'-type scenario. It gives participating investors diversification without triggering a tax event. The catch is that the shares must be held in the fund for seven years to reap the benefits and defer the tax."The manager's responsibility is to reduce capital gain taxes for everyone because now as you have a pool of assets, there might be some stocks that will go down in value, some might go up," Lapsiwala said. "So, a tax-loss-harvesting type of trading will take place and then you are reducing your capital gains taxes."Another way to lock in profits on securities is by creating collars, which means buying a <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/option-chain#:~:text=An%20option%20is%20a%20contract,its%20own%20type%20of%20security.">put option and selling a call option</a> against the underlying asset. It hedges the share price because the put creates a floor, allowing the buyer to keep the stock but offload it if it falls below the agreed-upon price, which is the strike. But buying that put will cost a premium. Therefore, calls are sold to offset the cost, giving another buyer the right to purchase the stock if it rises. The downside is that it caps any upside potential above the strike."There are executives we work with, for whatever restriction, they cannot sell, or they have huge capital gains and they don't want to take a big tax hit," Lapsiwala said. This strategy helps them plan the timing of when they want to realize the gains."For those who need liquidity, once the stock is hedged, they can borrow up to 50% against its value on margin, Lapsiwala noted. This strategy could have a double tax benefit: One, the investor isn't realizing a capital gain. Two, if the borrowed amount is used for another investment and there is investment income, the cost of borrowing is treated as investment interest. It can be used to reduce the overall taxable income.Some investors will borrow against their stocks without hedging. This is common for short-term liquidity needs, like bridge financing to buy a property while waiting to sell another, Lapsiwala noted. The risk here is if the stock drops in value in the interim, you get a <a target="_blank" class="" href="https://www.businessinsider.com/personal-finance/investing/margin-call#:~:text=A%20margin%20call%20occurs%20when%20the%20value%20of%20the%20equity,off%20some%20of%20the%20investments.">margin call</a> and must come up with the capital to cover it.As for investors who have philanthropic goals, charitable giving is tax deductible. Still, instead of giving cash that's already taxed, some of Lapsiwala's wealthy clients give their appreciated securities to a 501(c) charitable organization. This grants them a tax deduction while skipping out on capital gains tax.Another way of giving to charity is by donating appreciated assets to a donor-advised fund (DAF). In turn, the investor get a tax deduction in the year it was gifted, but they don't have to give the full amount to the charitable organization in that calendar year."This is a strategy when you have high taxable income, and you want to reduce your taxes but aren't sure that you want to give charitable grants of a high amount in a year," Lapsiwala said. "So what we typically do is, let's say clients are giving $100,000 a year, we will say, 'let's fund that by a million dollars' and they can get that million dollar deduction now, but over the next 10 years, give $100,000 annually from that account."Clients who want to give to charity while continuing to benefit from gains on their principal can opt for a charitable remainder trust (CRT). It allows them to transfer cash, property, or assets to an irrevocable trust that pays an income in the form of an annuity or a percent of the trust's assets for a term or until their death, upon which it goes to the selected charities.John Pantekidis, managing partner at TwinFocus, says CRTs are a win-win for the charity and donor. The latter gets a tax deduction up front and an annuity while helping a charity.Pantekidis, whose average client is worth close to $200 million, says this setup is suggested for clients with highly appreciated assets who want an income from it but are also charitably inclined.But perhaps the tax avoidance strategy that has been an absolute home run for high-net-worth clients, according to Pantekidis, is investing in qualified opportunity zones. These are economically distressed areas that require long-term investments in real estate and businesses.If you have a million dollars of capital gains and if you invest it in a qualified opportunity zone, you get to defer that through 2026, Pantekidis noted. Any appreciation on that investment escapes tax permanently; that's an avoidance, he said. Furthermore, an investor can depreciate the property for further tax deductions without depreciation recapture."So not only do you avoid tax on the gain, to the extent you get depreciation you can avoid tax on the initial gain. It's become an absolute home run for ultra-high-net-worth clients who have capital gains. Even some of our hedge fund managers who get compensation through carried interests of capital gains can defer those capital gains and even avoid them."However, the investment must be held for five to seven years to defer a portion of those gains and at least 10 years for the new gains to be fully tax-free.Finally, those with an appreciated property who can identify a similar property to swap it with can use 1031 Exchanges. It allows the client to defer the capital gains. If they die with the property, they can get a step-up in basis which permanently removes any tax originally deferred by the exchange, Pantekidis said.

8 of the savviest loopholes wealthy investors use to reduce or avoid capital gains tax

New to the stock market? Here are terms you should know

The <keyword id="20449324" type="General" weightage="20" keywordseo="Finance-Bill" source="keywords">Finance Bill</keyword> 2024 was passed by <keyword id="19895394" type="General" weightage="20" keywordseo="Lok-Sabha" source="keywords" meta.keywordsubtype="org" meta.entityname="Lok Sabha" meta.hostid="261" meta.entityid="Lok Sabha">Lok Sabha</keyword> on Wednesday evening, with a few amendments moved by the government. Replying to the debate, Finance Minister Nirmala Sitharman said the approach of the government has been to bring greater simplification of <keyword id="19987671" type="General" weightage="20" keywordseo="tax" source="keywords">tax</keyword> laws and procedures and enable growth and employment in the country. She responded to points made by members. The Finance Minister clarified that in real estate, the roll over provisions have not been withdrawn and are applicable. She said if the capital gain in a property transaction is invested in buying another one or two properties up to a maximum value of Rs 10 crore, no capital gain tax is required to be paid on such profits. <keyword id="20619608" type="General" weightage="20" keywordseo="capital-gains" source="keywords">Capital gains</keyword> can also still be invested in bonds which are notified under Section 54 of the Income Tax Act up to a maximum of Rs 50 lakh annually and save on taxes. To give relief on budget proposals, Sitharaman also moved an amendment in the Finance Bill on the changes in the capital gains tax on <keyword id="20412285" type="General" weightage="20" keywordseo="property-transactions" source="keywords">property transactions</keyword>. The amendment implies that taxpayers can avail either a lower tax of 12.5% without indexation or a rate of 20% with indexation, if the property is acquired prior to July 23, 2024, the day union budget was presented in the Lok Sabha. Sitharaman clarified that taxpayers can compute taxes under both provisions and choose to pay tax under the scheme where lower tax is applied. Effectively, July 23, 2024, is now set as the cut-off date for the calculation of the capital gains versus the earlier cut-off of 2001. Sitharaman said she has proposed these amendments as some members have raised hypothetical calculation to prove that under new provisions taxpayers will have to pay higher taxes. The new tax proposals on capital gains tax was brought in to bring in parity among different asset classes like equities, mutual funds and real estate. In the Finance Bill introduced on July 23, the Finance Minister had proposed a flat long term capital gains tax of 12.5% with no <keyword id="943856" type="General" weightage="100" keywordseo="indexation-benefit" source="Orion">indexation benefit</keyword>s, prior to it property transactions used to be taxed at 20% with indexation benefit. The minister also clarified that the grandfathering proposal will be allowed only for individual and Hindu Undivided Family (HUF) taxpayers and not for companies and Non Resident Individuals. They have to pay flat 12.5% LTCG tax without indexation. The proposed amendment will apply not only on real estate transactions, but also on unlisted equity transactions, which are done before July 23, 2024. All such transactions will be taxed at 10% long term capital gains instead of FY24-25 budget provision of 12.5% tax. With the opposition members demanding removal of <keyword id="19951327" type="General" weightage="20" keywordseo="GST" source="keywords">GST</keyword> on health insurance, Sitharaman said tax was there on medical insurance even before GST was introduced. "There was already a Service Tax on medical insurance, before the GST was introduced. This is not a new tax, it was already there in all the states. Those protesting here, did they discuss regarding the removal of this tax in their states? Did they write to the Finance Ministers of their respective states about it and asked them to raise it in the GST Council where states have 2/3rd part? No, but they are protesting here. This is their double standards, this is their drama," she said. "Wrongful protests have happened recently, and comments have been passed on the basis of a news report which suggested that the 'Centre has pocketed Rs. 24,529 crores of health insurance premiums alone'. This is incorrect and highly misleading. The GST rate of 18% on health insurance comprises of 9% CGST and 9% SGST. Thus, of the total collections of Rs 24,529 crores from health insurance in the last 3 years, Half of it, Rs. 12,264 crores, went straight to the states as SGST. It doesn't even come to the Centre," she added. The minister said that apart from this, roughly 41%of the Centre's share of GST collection on health insurance is devolved back to the states again, as part of Tax Devolution as per the Finance Commission's formula. Sitharaman said the new income tax regime is simpler and offers lower income tax rates for individuals. "It gives flexibility to the taxpayer to see where he wants to put his money in the absence of exemptions which is available in the old income tax regime. The old regime has not been dissolved and is still an alternative to the new tax regime. It still offers benefits of various deductions such as interest on home loan, etc. Individuals without business income can choose between regimes once and can revert back too. Hence, a choice has been provided to assesse," she said. For the previous Assessment Year 2023-24 till December 31, 2023, about 3.8% of taxpayers opted for the new tax regime, which equates to 30.93 lakh individuals, from a total of 7.98 crore ITRs filed in the categories of ITR-1 to ITR-4, she said. "However, for the Assessment Year 2024-25 until July 31, 2024, there was a dramatic increase in adoption of the new regime, with approximately 72.8% of taxpayers choosing the new tax regime. This represents about 5.25 crore individuals, out of a total of 7.22 crore ITRs filed in the same category." Sitharaman said this shows a substantial shift in taxpayer preference towards the new tax regime, over the span of just one year. "Taxpayers opting for the new regime does not mean savings and investments are not happening in the economy by the middle-class. Due to growth in fintech, better awareness, and ease of investment due to UPI, e-KYC, progressive regulations, investments in mutual funds have increased tremendously. On an average, 17.88 lakh new folios have been added every month in the last 5 years since June 2019. The number of unique mutual fund investors has grown from under 1 crore in 2014 to about 4 crore today," she added. The Finance (No.2) Bill, 2024 was passed after amendments moved by opposition were negatived. Sitharaman said the vision of Prime Minister Narendra Modi has been to establish a simple, efficient and fair technology-driven taxation regime in the country. "So, simplification and ease of compliance for the taxpayer has been the primary objective. In the last 10 years, and this year, in the third term of PM Modi, the approach to taxation has been to simplify it, reduce the burden on taxpayer and make sure it is transparent and equitable," she said. "This year also, our approach has been that we bring in greater simplification of tax laws and procedures, and that we enable growth and employment in this country," she added. Sitharaman presented the Union Budget in Parliament on July 23. This is the first full budget of the NDA government led by PM Modi. The BJP-led alliance won a third successive term earlier this year. The Lok Sabha took up discussion on the Finance Bill after the Appropriation Bill for the central government's expenditure for 2024-25 was passed by the House on Monday. The Finance Bill will now be discussed by Rajya Sabha. The passage of bill will complete the budget process.

Lok Sabha passes Finance Bill, provision on LTCG tax on property transactions amended

The <keyword id="19949639" type="General" weightage="20" keywordseo="rupee" source="keywords">rupee</keyword> recovered from its all-time low level and appreciated 9 paise to 83.69 against the US dollar in early trade on Friday, amid a positive trend in domestic equities. <keyword id="20024982" type="General" weightage="20" keywordseo="forex-traders" source="keywords">Forex traders</keyword> said foreign fund outflows from Indian equities following the government's decision to hike the tax rate on <keyword id="20619608" type="General" weightage="20" keywordseo="capital-gains" source="keywords">capital gains</keyword> weighed on the local currency and restricted the move upwards. At the interbank foreign exchange market, the local unit opened at 83.72 against the American currency, then rose to 83.69 against the American currency, registering a rise of 9 paise from its previous close. On Thursday, the rupee dropped by 7 paise to close at an all-time low of 83.78 against the US dollar. "The rupee remains under significant pressure, hovering near all-time low levels. This strain is due to the government's recent decision to hike the tax rate on capital gains, sparking major outflows of Foreign Institutional Investments (FIIs). "However, the <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (RBI) has been actively capping the downside, preventing further depreciation by maintaining the rupee at around 83.75," CR Forex Advisors MD Amit Pabari said. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was at 104.30, lower by 0.05 per cent. Brent crude futures, the global oil benchmark, rose 0.18 per cent to <keyword id="19944038" type="General" weightage="20" keywordseo="USD" source="keywords">USD</keyword> 82.52 per barrel. In the domestic <keyword id="19911354" type="General" weightage="20" keywordseo="equity-market" source="keywords">equity market</keyword>, the 30-share BSE Sensex was trading 291.71 points, or 0.36 per cent higher at 80,331.51 points. The broader NSE Nifty was up 114 points, or 0.47 per cent, to 24,520.10 points. <keyword id="19932515" type="General" weightage="100" keywordseo="Foreign-Institutional-Investors" source="keywords" meta.keywordsubtype="org" meta.entityname="Foreign Institutional Investors" meta.hostid="261" meta.entityid="Foreign Institutional Investors">Foreign Institutional Investors</keyword> (FIIs) were net sellers in the capital markets on Thursday as they offloaded shares worth Rs 2,605.49 crore, according to exchange data.

Rupee recovers from all-time low, rises 9 paise to 83.69/USD in early trade

The government's decision to remove <keyword id="22142879" type="General" weightage="20" keywordseo="indexation-benefit" source="keywords">indexation benefit</keyword> on sale of old property will result in huge <keyword id="22544904" type="General" weightage="20" keywordseo="inflow-of-black-money" source="keywords">inflow of black money</keyword> in <keyword id="19895040" type="General" weightage="100" keywordseo="real-estate" source="keywords">real estate</keyword> and investments in the sector will go down, AAP Rajya Sabha member <keyword id="19934326" type="General" weightage="20" keywordseo="Raghav-Chadha" source="keywords">Raghav Chadha</keyword> said on Thursday. Asking the government to roll back the proposal, Chadha, while taking part in the discussion on the <keyword id="19908389" type="General" weightage="20" keywordseo="Union-Budget" source="keywords">Union Budget</keyword> 2024-25, said people will never be able to buy their "dream homes". "Restore indexation on <keyword id="20584761" type="General" weightage="20" keywordseo="long-term-capital-gains" source="keywords">long-term capital gains</keyword>. Throughout the world, to woo investors to invest they are incentivised. In this country, by removing indexation we are disincentivising the investor class," he said, adding that removing indexation is not imposing <keyword id="19987671" type="General" weightage="20" keywordseo="tax" source="keywords">tax</keyword> but it is equivalent to "penalising investors". He said as a result of the step proposed by <keyword id="19956758" type="General" weightage="20" keywordseo="Finance-Minister" source="keywords">Finance Minister</keyword> Nirmala Sitharaman in the Budget 2024-25, individuals selling old properties will incur higher tax outgo. "If you do not bring back indexation three things will happen in this country. First, <keyword id="19895437" type="General" weightage="20" keywordseo="investment" source="keywords">investment</keyword> in real estate will go down and people will never be able to buy their 'dream homes'," Chadha asserted. He further said there will be undervaluation of property deals, people will buy properties at 'circle rates' and will never disclose the real value of the property. "Third, there will be a huge inflow of <keyword id="20592248" type="General" weightage="20" keywordseo="black-money" source="keywords">black money</keyword> if you don't roll back this decision to withdraw indexation," he said. In the Union Budget 2024-25, the government proposed reducing the long-term capital gains tax on immovable properties to 12.5 per cent from 20 per cent, but removed the indexation benefits to adjust for inflation. As per the Memorandum to the Union Budget, with rationalisation of rate to 12.5 per cent, indexation available under Section 48 of the Income Tax Act has been proposed to be removed for calculation of any long-term capital gains, which is presently available for property, gold and other unlisted assets. Chadha also highlighted the high tax burden faced by common people and asked for a comprehensive review of both direct and indirect taxes. "We impose taxes like the Europeans do, to get services like sub-Saharan countries," he added. Taking part in the discussion, Debashish Samantaray of the BJD said the central government has given a raw deal to all eastern states like Odisha, Jharkhand, West Bengal in the Budget. He charged that in spite of Odisha giving 20 seats to the BJP, there was hardly anything for the state in the Union Budget. He noted that "regional aspiration should be addressed", and asked the central government to treat all states as equal. RJD's Sanjay Yadav attacked the government stating the Budget had nothing for the poor and marginalised and only catered to the rich and powerful. He noted that his party has been demanding special category status for Bihar for a very long time. Yadav said instead of dividing people on the basis of religion and caste, the government should work towards generating employment in the country. Medha Vishram Kulkarni of BJP and Rajani Ashokrao Patil of INC also participated in the debate. C V Shanmugham of AIADMK said allocation in the Budget does not significantly address the pressing needs of Tamil Nadu's infrastructure, health care, Social justice and education. The government has mentioned 76 projects in Tamil Nadu, but most of them are pre-existing ones getting a facelift. Moreover, in the Budget, no help in flood mitigation was provided, despite the state being prone to cyclones. There is no mention of a linkage of Kaveri and Godawari in the Budget, he said. Samirul Islam of AITC said this Budget is anti-people, anti-poor and anti-Bengal. It only satisfies Bihar and Andhra Pradesh's allies and is to save the government. "The Budget has deprived Bengal," he said. It has also ignored the people, especially the unorganised sector. 83 per cent of India's workforce is employed by unorganised sectors and failed to announce a comprehensive scheme for them and migrant workers, he said. M Mohamed Abdulla of the DMK said the Budget has provoked a constructive debate and disappointment in Tamil Nadu, a state known for its economic contributions. Tamil Nadu expected support and recognition in the budgetary allocations, but received nothing. The government is supposed to represent the people of the country as a whole. However, it is very unfortunate and unfair to see unequal distribution to the state governments, especially for the non-BJP ruled states like Tamil Nadu which provides the highest tax for the government, he said.

Removal of indexation benefit will lead to huge inflow of black money in real estate: Raghav Chadha

<keyword id="6355302" type="General" weightage="100" keywordseo="rupee" source="Orion">Rupee</keyword> opened on a muted note and fell to an all-time low of 83.72 against the US dollar on Thursday, dragged down by the strength of the American currency in the overseas market and significant foreign fund outflows. Forex traders said the fall in the domestic unit came on the heels of a significant downturn in the Indian equity markets, sparked by the government's decision to hike the <keyword id="22422932" type="General" weightage="20" keywordseo="tax-rate" source="keywords">tax rate</keyword> on <keyword id="20619608" type="General" weightage="20" keywordseo="capital-gains" source="keywords">capital gains</keyword>. At the interbank foreign exchange market, the local unit was trading in a narrow range. It opened at an all-time low of 83.72 against the American currency, registering a fall of 1 paisa from its previous close. On Wednesday, the rupee depreciated 2 paise to hit its all-time closing low of 83.71 against the US dollar. The government's decision to hike the tax rate on capital gains dampened market sentiment, exerting immense pressure on the rupee and the equity market. "Post-budget day, the benchmark Indian equity indices, BSE Sensex and Nifty 50, dipped by approximately 0.3 per cent and 0.2 per cent, respectively, as foreign institutional investors withdrew a staggering USD 350 million from Indian stocks. "Adding to the turmoil, persistent high demand for dollars, driven by defence and oil payments, compounded the currency's woes," CR Forex Advisors MD Amit Pabari said. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was at 104.21, lower by 0.17 per cent. Brent crude futures, the global oil benchmark, fell 0.75 per cent to USD 81.10 per barrel. In the domestic equity market, the 30-share BSE Sensex was trading 425.14 points, or 0.53 per cent lower at 79,723.74 points. The broader NSE Nifty was down 120.65 points, or 0.49 per cent, to 24,292.85 points. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Wednesday as they offloaded shares worth Rs 5,130.90 crore, according to exchange data.

Rupee slips to all-time low of 83.72 against US dollar; Fall sparked by tax rate hike on capital gains, per traders

<ul class="summary-list"><li>The biggest money managers on Wall Street are shedding billions in stocks for this one tax strategy.</li><li>Tax-loss harvesting allows investors to offset capital gains taxes by selling securities at a loss.</li></ul>It's officially stock-selling season, according to Bank of America.Institutional investors usually increase their selling activity towards the end of the year, and this year was no exception. Bank of America's clients alone sold $1.3 billion in US equities last week. The bank reported that institutional selling activity was 80% higher this October than the historical average.What's the reason behind these elevated levels of security selling? The answer is <a target="_blank" class="" href="https://www.businessinsider.com/tax-savings-strategy-offset-gains-income-loss-harvesting-morgan-stanley-2024-10">tax-loss harvesting</a>.Tax-loss harvesting has long been a strategy of Wall Street and the wealthy to reduce their tax bills. They do this by selling underperforming investments for a loss to offset capital gains taxes on other investments sold at a profit. As a result, taxes are only paid on the net profit.You can replicate this strategy in your own portfolio, too. Below are some tips and tricks on how to use it to reduce your taxes, according to Jere Doyle, estate planning strategist at BNY Wealth.<h2 id="68a94438-775f-431a-954e-0e5b2d8dcb75">How tax-loss harvesting works</h2>Investors might look to rebalance some portfolio positions as the end of the year approaches. For example, after this year's incredible runup in tech stocks, some investors might be looking to sell their positions to realize their gains and diversify their holdings.That's where tax-loss harvesting comes in. If you're selling Nvidia stock with a $10,000 gain, you can pair that with a sale of another asset with a $10,000 loss to avoid paying capital gains taxes.You can also front-load your losses, according to Doyle. If you sell one asset at a $10,000 gain and another at a $15,000 loss, you can use up to $3,000 of the loss to offset other ordinary income — and carry forward the remaining $2,000 to subsequent years.Tax-loss harvesting can be especially advantageous in today's environment, according to Doyle.The market has been experiencing heightened volatility from factors such as mega-cap earnings and the election.This environment creates big winners and losers, giving investors plenty of opportunity to recognize losses. Investors shouldn't be scared of pullbacks in a volatile market. Instead, take advantage of price dips in the market to sell losing securities and lower your tax bill.<h2 id="c83964ce-4da2-4126-a044-a3769347944b">Tax-loss harvesting tips and tricks</h2>There are a few things to consider before using a tax-loss harvesting strategy.First, investors should be aware of the wash-sale rule. The wash-sale rule states that if you sell a security at a loss and buy the same or "substantially identical" security in a 30-day timeframe before or after the sale, you cannot use the loss for income tax purposes.Sometimes, people forget about this rule. "They made the mistake of repurchasing those same assets within that 61-day period, and they lose the deductibility of loss," Doyle said.If you want to sell a security at a loss but still want exposure to a specific area of the market, you can use the proceeds of the sale to purchase a similar, but not substantially identical, asset. However, the IRS hasn't provided a clear definition of what constitutes a substantially identical asset, so investors should approach this with caution. Or, you could double down on the asset more than 30 days before selling at a loss.Another piece of advice Doyle: try to match your gains and losses.It might be tempting to record a larger loss than gain to carry it over in subsequent years, but it might not be worth taking the loss if you don't plan to use it for tax-harvesting purposes in the near future."Given the time value of money, those long-term capital gain losses lose their value over a period of time," Doyle said. A $2,000 loss today will be worth less carried over many years in the future — in that case, it would be more advantageous to just record the loss in the future. In other words, don't incur excessive losses today just to be able to use them in the future.Lastly, Doyle recommends thinking through this strategy carefully to make sure it's a good fit for your current portfolio."From an investment point of view, it may not make sense. Maybe the securities you have at a loss are going to bounce back later on. Maybe the securities you're selling at a gain have future appreciation left," Doyle said.Investors should keep in mind that tax-loss harvesting isn't a one-size-fits-all strategy — but if you do have gains and the losses to offset them, the end of the tax year might be a good time to think about implementing this plan.

Bank of America's clients are selling stocks 80% more than normal to use this strategy that allows you to avoid capital gains taxes on big returns

The <keyword id="19903456" type="General" weightage="20" keywordseo="Income-Tax-department" source="keywords">Income Tax department</keyword> on Wednesday said 'substantial <keyword id="20138064" type="General" weightage="100" keywordseo="tax-savings" source="keywords">tax savings</keyword>' are expected for a vast majority of taxpayers due to reduction in the <keyword id="22526761" type="General" weightage="20" keywordseo="long-term-capital-gains" source="keywords">long term capital gains</keyword> <keyword id="45031" type="General" weightage="20" keywordseo="tax" source="Orion">tax</keyword> (LTCG) rate in the <keyword id="19895040" type="General" weightage="20" keywordseo="real-estate" source="keywords">real estate</keyword> sector. The Budget has reduced tax rates on capital gains earned from sale of house properties held for long term, but has removed the <keyword id="22142879" type="General" weightage="20" keywordseo="indexation-benefit" source="keywords">indexation benefit</keyword> available to taxpayers. The LTCG has been reduced from 20 per cent with indexation benefit to 12.5 per cent without indexation for the real estate sector. The indexation benefit allowed taxpayers to compute gains arising out of sale of <keyword id="801267" type="General" weightage="20" keywordseo="capital-assets" source="Orion">capital assets</keyword> after adjusting inflation. In a post on X, the income tax department said the nominal real estate returns are generally in the region of 12-16 per cent per annum, much higher than inflation. "The indexation for inflation is in the region of 4-5 per cent, depending on the period of holding. Therefore, substantial tax savings are expected to a vast majority of such taxpayers," it said. Giving a comparison of benefits based on the holding period of the real estate property, the I-T department said the new <keyword id="22422932" type="General" weightage="20" keywordseo="tax-rate" source="keywords">tax rate</keyword> without indexation is beneficial in most cases. For property held for five years, the new regime is beneficial when property has appreciated 1.7 times or more, while for a property held for 10 years, it is beneficial when the value has increased 2.4 times or more. For a property purchased in 2009-10, if value has increased to 4.9 times or more, it is beneficial, it said. "From the above examples, it is clear that only where returns are low (less than about 9-11 per cent per annum) that the earlier tax rate is beneficial, but such low returns in real estate are unrealistic and rare," the I-T department said. As per the changes brought in the 2024-25 Budget, the government has retained the indexation benefit for taxpayers on properties bought or inherited before 2001. The changes in the tax rate have been made effective from July 23, 2024.

Majority of taxpayers to have substantial tax savings due to reduction of long term capital gains on real estate: IT Dept

July is here, and while we are still 5 months away from the end of 2024, the deadline to file your <keyword id="19897621" type="General" weightage="20" keywordseo="ITR" source="keywords">ITR</keyword> is July 31st, which is looming large. While it is best to not "file away" filing your income tax returns for later, are you aware of the right ITR form that applies to you? Out of the 7 ITR forms available, how do you know which one is the right fit for you, and where to start? For starters, the first 4 ITR forms (ITR-1,2,3,4) are necessary for an individual to know about, while filing taxes. Lets decode all these forms in detail with Tanya, a 22 year old IT professional who earns Rs 10,000 per month. Her mother has a monthly rental income of Rs 12,000 per month. Will the two of them be required to file ITR? Well, the answer is no. You see, Tanya's <keyword id="21120362" type="General" weightage="20" keywordseo="annual-income" source="keywords">annual income</keyword> comes to about Rs 1,20,000, while her mother's total rental income comes to about Rs 2,40,000. If you opt for the old tax regime, you don't need to file an ITR if you annual income is below Rs 2.5 lakh. In the new regime, this limit stands at Rs 3 lakh. Similarly, if your grandparents are aged between 61-79, they need not file an ITR if their annual income (via rent, pensions) falls below Rs 3 lakh. And if they are aged above 80, this threshold if of Rs 5 lakh for the year. <h2>ITR-1: Sahaj </h2>Lets continue with Tanya's life. She works super hard, and over the years, earns a few well deserved raises. Now, her monthly income is Rs 50,000. In this case, she will have to file ITR-1, which is also known as Sahaj. This form applies to you if your total annual income for the year does not exceed Rs 50,00,000. The best part? This form is generally pre-filled, and all you've got to do is verify the information through your <keyword id="22247325" type="General" weightage="20" keywordseo="Form-16" source="keywords">Form-16</keyword> and Annual Information Statement (AIS). <h2>ITR-2 </h2>Over time, Tanya decides to start investing in mutual funds. While she holds most of her investments for the long-term, she is compelled to sell some units of her investment in equity mutual funds, due to a medical emergency at home. She had purchased some equity mutual fund units worth Rs 2,00,000 on April 1, 2023. Due to the emergency, she had to sell about Rs 80,000 worth of units in December of the same year. On redemption, she received Rs 1,10,000. Since she had held these securities for less than 12 months, Tanya would have to pay a short-term <keyword id="20301441" type="General" weightage="20" keywordseo="capital-gains-tax" source="keywords">capital gains tax</keyword> of 15%, Had Tanya held on to these securities for more than 12 months and then sold them at a gain, she'd have to pay long-term capital gains tax, which is applicable at 10% for equity mutual funds. And to account for such capital gains, be it from sale of shares, mutual funds, property or the like, Tanya needs to file ITR-2. <h2>ITR-3</h2>Tanya's brother, Vishal, is a freelancer who got hooked to trading in futures and options during the pandemic. Initially, he made solid profits, but during FY24, he ran into losses worth Rs 5 lakh. In this case, he will have to file ITR-3 to report his losses. This form is to be used by those who earn income under the head of profits (or even losses) of business or profession, other than regular salary. In case Tanya's mother starts receiving rental income from more than one house properties, she will also have to file ITR-3. Or, in case you are a CA, or a doctor and have your own practice (are self employed), this form is for you. <h2>ITR-4: Sugam </h2>This form is exclusively for those who opt to be taxed under the presumptive taxation scheme. You can opt for this scheme if you are a small business/firm and your annual turnover is less than Rs 3 crore, or you are self employed with an annual revenue of less than Rs 75 lakh. Under this, you don't pay taxes on your actual income, rather, you pay taxes on a presumed income. As per law, under this scheme, your net income will be considered as 6% of your total revenue, and you'll have to pay taxes on that. Here, you're really not calculating your income for taxation, and hence, it is not even mandatory to maintain records. In case you file the wrong ITR, you can always file a revised return by December 31, 2024. In case you miss filing your ITR on time, you’ll have to pay Rs 5,000 as a penalty. Moreover, you’ll be charged interest on your outstanding tax liability, if there is any. So, get down to work, right away!

Wondering which ITR form is right for you? Know all about it here

July's here, and as we inch closer to the budget, which is set to be presented around the latter half of July, there is much talk about how it will affect our pockets. Reports suggest the government is considering raising the <keyword id="20429578" type="General" weightage="20" keywordseo="standard-deduction" source="keywords">standard deduction</keyword> threshold from existing Rs 50,000 to Rs 1,00,000, amidst other things. The most common wish for a salaried employee is to reduce the income tax rates across all slabs, but at the moment, this seems unlikely. That aside, we decode the common man's wish list and what they look forward to in terms of <keyword id="22225988" type="General" weightage="20" keywordseo="income-taxes" source="keywords">income taxes</keyword> as the Finance Minister <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> drafts the budget. <h2>Wish 1: Raise the standard deduction to Rs 1 lakh</h2>A standard deduction is a fixed amount that you can deduct from your taxable income right away, to reduce your overall tax liability. You do not need to furnish any proofs for this amount. Currently, this stands at Rs 50,000, under both old and new tax regimes. Raising this threshold to Rs 1,00,000 will mean more disposable income in your hands. And as per the policy experts, this is the most likely change that we can expect under the new budget. <h2>Wish 2: Increase the <keyword id="20228341" type="General" weightage="20" keywordseo="basic-exemption-limit" source="keywords">basic exemption limit</keyword> in new tax regime</h2>As per EY's pre-budget expectation report, an increase in the basic exemption limit from the present Rs 3,00,000 to Rs 5,00,000 would immensely benefit the common man. Earlier, this limit was set at Rs 2,50,000. Note that unless you specifically opt for the old regime, the new tax regime is considered as your default choice starting 2023. If your annual income is equal to, or falls below this basic exemption limit, you do not have to pay any income tax. <h2>Wish 3: Increase tax-free limit of LTCG gains </h2>At present, if you sell any equity mutual fund unit or share after more than 12 months of holding it, you'll have to pay a 10% long-term capital gains (LTCG) tax. However, within one financial year, long-term capital gains below Rs 1,00,000 are tax-exempt. As EY's report notes, raising this extant tax-free limit to Rs 2 lakh would be beneficial, especially in boosting long-term investing sentiment in the country. But will this come true? Only Nirmala Sitharaman knows! <h2>Wish 4: Consider some tier-2 cities as metros for HRA exemption </h2>Residents of Gurugram, Noida, Bengaluru, listen up! HRA, or House rent allowance is a crucial component of our salary, and hence, our tax planning as well. You can get HRA exemption on the lowest amount amidst these 3: 1. Actual HRA received 2. 50% of salary for metro cities (Delhi, Mumbai, Kolkata, Chennai) 3. 40% of salary for non-metro cities 4. Rent paid- 10% of salary But its no secret that residents of nearby cities like Noida, Gurugram, Faridabad, or rapidly developing urban hubs like Pune, Ahmedabad, Ghaziabad, Hyderabad, Bengaluru, Thane bear the brunt of sky-high residential rents that takes a huge toll on their monthly income. Yet, they cannot claim 50% of their salary for HRA exemption. Since these cities has been classified as a non-metro, residents can claim a maximum of 40% of their salary as exemption. In case rent exceeds Rs 1,00,000 annually, you are also required to furnish the PAN details of landlord, along with a formal rental agreement. Consider this. You live in Delhi, and have an annual income of Rs 10,00,000. For HRA purposes, you can claim exemption of up to Rs 5,00,000, since Delhi is considered a metro. But, if you live in Ghaziabad, or Noida, the limit available to you sharply falls down to Rs 4,00,000. This budget, as reports note, considering these cities as metros for tax purposes would provide some relief to the common man's pocket. Per a recent report by ANAROCK research, the top 7 cities in the country (Mumbai metropolitan region, Hyderabad, Bengaluru, Pune, Delhi NCR, Chennai and Kolkata) saw an average price rise between 13-39% on a yearly basis. In fact, it was Hyderabad recorded the highest yearly price rise in residential property last quarter, jumping by as much as 39%. <h2>Wish 5 : Enhance exemption limits under the old regime</h2>The list is endless, but so are our wishes! Experts are also suggesting an enhancement in the existing limit for deduction towards interest on housing loan for self-occupied house. From its present limit of Rs 2 lakh, it should be taken to Rs 3 lakh. Also, the Rs 2-lakh cap on set off of house property loss against other heads in the same year should be done away with. For senior citizens, there should also be greater clarity on how funds received from <keyword id="19919089" type="General" weightage="20" keywordseo="nps" source="keywords">NPS</keyword> (National Pension System) via the systematic lumpsum withdrawal plan should be taxed. Well, we can only hope some, if not all of these wishes come true when finance minister presents the union budget in the parliament this month.

Budget 2024: Increase standard deduction, exemptions and more, an aam aadmi's wishlist

<ul class="summary-list"><li>Mark Cuban warned that taxing unrealized capital gains would "kill the stock market."</li><li>President Joe Biden proposed taxing unrealized gains for people worth over $100 million.</li></ul>Any proposal to tax unrealized capital gains would "kill the stock market," billionaire investor Mark Cuban said in <a target="_blank" class="" href="https://x.com/SquawkCNBC/status/1831668326407303527">a CNBC interview</a> on Thursday.As part of his <a target="_blank" class="" href="https://www.businessinsider.com/biden-budget-proposal-child-tax-credit-social-security-taxing-rich-2024-3">wide-ranging tax proposals,</a> President Joe Biden has suggested taxing unrealized capital gains for people with a net worth of more than $100 million.While Vice President Kamala Harris has not officially endorsed or shot down Biden's unrealized gains tax proposal, according to Cuban, it's dead on arrival."If you tax unrealized gains, you're going to kill the stock market, and it's going to be the ultimate employment plan for private equity because companies are not going to go public because you can get whipsawed," Cuban said.Cuban's "whipsaw" comment alluded to the main question investors have surrounding proposed taxes on unrealized capital gains: What happens if those unrealized capital gains eventually turn into unrealized capital losses in a volatile stock market?But according to Cuban, who says he has been talking with the Harris campaign often in recent weeks, Harris is highly unlikely to endorse such a plan."They realize that's the issue… Even though [Harris] is not directly conflicting the Biden tax plan, to her, her value proposition is we need to tax everybody fairly, starting from the Biden plan as a starting point, but that's not necessarily her ending point," Cuban said.Harris has already rejected some aspects of Biden's tax proposals, offering her own vision of what she would propose as President.Whereas Biden proposed to move the long-term capital gains tax rate to 39.6% for households with taxable income of more than $1 million, Harris believes that is too high and has proposed raising it to 28% instead."The point I'm really trying to convey is, she's open minded, she's not an ideologue, she wants to do what's best for business," Cuban said.Cuban defended the democratic Presidential nominee despite criticism that Harris has yet to unveil a slew of detailed economic policy proposals with the November election fast approaching."Like any good CEO trying to turn around a battleship, there's only so much you can do every single day," Cuban said. "Like any good CEO, you've got to do it when you get it right."

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