Capital Gains Account is like a bank account. In order to avail exemption benefit in Capital Gains, the gains must be invested. If the time limit for such investment is more than the due date of filing of Income-tax Return, then the gains needs to be invested in this account temporarily.

Where should I invest to save capital gains tax?

In such a case, you can still save the tax on your capital gains, by investing them in certain bonds. Bonds issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) have been specified for this purpose.

What’s the maximum tax rate for a capital gain?

Currently, an amount of 40% of this capital gain (not the total proceeds) is included in your annual taxable income – this makes the maximum effective capital gains tax rate for individuals 18%. How do we work this out? By taking the maximum 45% marginal tax rate for individuals and multiplying it by 40%, that’s how.

How is tax loss harvesting used in tax planning?

Tax gain-loss harvesting is another form of tax planning or management relating to investments. It is helpful because it can use a portfolio’s losses to offset overall capital gains. According to the IRS, short and long-term capital losses must first be used to offset capital gains of the same type.

How are short term and long term capital gains taxed?

According to the IRS, short and long-term capital losses must first be used to offset capital gains of the same type. In other words, long-term losses offset long-term gains before offsetting short-term gains. Short-term capital gains, or earnings from assets owned for less than one year, are taxed at ordinary income rates. 3 

Which is the best strategy for tax planning?

Tax planning strategies can include saving for retirement in an IRA or engaging in tax gain-loss harvesting. Saving via a retirement plan is a popular way to efficiently reduce taxes. Contributing money to a traditional IRA can minimize gross income up to $6,500.