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“Confused between Old and New Tax Regime? This TDS comparison will help you decide.”

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How Salaried Individuals Can Reduce Capital Gains Tax: The Ultimate 2026 Guide

By CA Harish Jethani

For most salaried individuals in India, the primary focus during tax season is usually Section 80C or HRA. However, as the Indian middle class increasingly participates in the stock market and real estate, a new challenge has emerged: managing the tax bite on investment profits. If you’ve recently sold equity shares or a piece of land, you might be staring at a significant tax bill. The good news? You can reduce capital gains tax legally and effectively using strategic exemptions. This case serves as a powerful reminder that with the income tax planning India 2026 strategies, salaried employees can protect their hard-earned wealth.

Understanding the Basics: Capital Gains in 2026

Before diving into how to reduce capital gains tax, we must distinguish between the two types of gains:

1. Short-Term Capital Gains (STCG)

: Assets held for a short duration (e.g., less than 12 months for listed shares or 24 months for real estate).

2. Long-Term Capital Gains (LTCG)

: Assets held for longer durations, which usually benefit from lower tax rates and indexation (though indexation rules have seen significant shifts in recent budgets).

1. The Power of Section 54F: Selling Shares to Buy a Home

One of the most underutilized capital gains tax exemptions for salaried individuals is Section 54F. If you sell any long-term asset (like gold, plots of land, or listed shares) other than a residential house, you can claim an exemption by investing the net consideration in a residential property. Key Requirements for Section 54F: • You must purchase a house one year before or two years after the sale. • If constructing a house, it must be completed within three years. • You should not own more than one residential house (other than the new one) on the date of the transfer.

2. Reinvesting Real Estate Gains under Section 54

If your gain comes from selling a residential house rather than shares, Section 54 is your best friend. Unlike 54F, which requires you to reinvest the entire sale proceeds, Section 54 only requires you to reinvest the capital gain amount.

3. Investing in Section 54EC Bonds (Tax-Free Bonds)

Don’t want to buy a new house? You can still reduce capital gains tax by investing in specific government-notified bonds. These are popularly known as Capital Gains Bonds. • Eligible Bonds: REC (Rural Electrification Corporation), PFC (Power Finance Corporation), and NHAI (National Highways Authority of India). • Limit: You can invest up to ₹50 lakhs in a financial year. • Lock-in Period: 5 years. • Deadline: You must invest within 6 months of the asset sale. While the interest rate on these bonds is typically modest (around 5-6%), the tax saving on the principal gain often results in a much higher “effective” return for high-earning salaried individuals.

4. Tax Loss Harvesting: Turning Lemons into Lemonade

Income tax planning India 2026 isn’t just about exemptions; it’s about smart portfolio management. Tax-loss harvesting involves selling securities at a loss to offset the capital gains tax liability from winning investments.

5. The ₹1.25 Lakh Annual LTCG Exemption

As of the current 2026 regulations, LTCG on listed equity shares and equity-oriented mutual funds is exempt up to ₹1.25 lakh per financial year (increased from the previous ₹1 lakh limit in recent updates). Smart investors use “Tax-Gain Harvesting.” By selling and immediately repurchasing shares every year to “book” profits up to the exempt limit, you reset your cost base higher, significantly reducing your future tax liability.

Common Challenges for Salaried Taxpayers

Filing taxes as a salaried individual with multiple income sources can be daunting. Common hurdles include: • Calculating Indexation: Determining the inflation-adjusted cost of an asset bought decades ago. • Capital Gains Account Scheme (CGAS): If you haven’t bought a house by the ITR filing deadline, you must park the funds in a CGAS account with a nationalized bank to claim the exemption. • Tracking Multiple Portfolios: Between various broking apps, keeping a consolidated view of gains is difficult.

Frequently Asked Questions (FAQ)

Can I claim both Section 80C and Section 54F? Yes. Section 80C reduces your total taxable income (primarily salary), while Section 54F specifically reduces your taxable capital gains. They operate independently. What happens if I sell the new house within 3 years? If you sell the house for which you claimed a Section 54 or 54F exemption within three years, the exemption is revoked. The “saved” tax will become taxable in the year of the new sale. Can I save tax on Short-Term Capital Gains (STCG) by buying a house? No. Sections 54 and 54F are specifically designed forLong-Term Capital Gains. STCG is generally added to your income or taxed at a flat 20% (for equity), with fewer avenues for exemption.

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GST Refund on Exports in 2026: Complete Guide for Indian Exporters

For Indian exporters, global competitiveness is not just about product quality—it is also about pricing efficiency. Even a small tax cost embedded in export pricing can impact international contracts.

Under the GST regime, exports are treated as Zero-Rated Supplies, ensuring that taxes do not become a cost component for exporters. However, while the law promises zero-rating, the refund process remains compliance-driven.

This 2026 guide explains:

What zero-rated supply means

IGST vs LUT refund routes

Latest procedural updates

Documentation checklist

Common refund mistakes to avoid

What Are Zero-Rated Supplies Under GST?

As per Section 16 of the IGST Act, exports of goods and services are classified as Zero-Rated Supplies.

This does not merely mean a 0% tax rate. It means:

No GST should be exported along with goods/services

Exporters are eligible to claim refund of:

IGST paid on export, OR

Unutilized Input Tax Credit (ITC)

In simple terms, the entire supply chain remains tax neutral for exporters.

Two Methods to Claim GST Refund on Exports

Exporters can claim refunds through two routes. The choice depends largely on working capital availability and business structure.

1. Export with Payment of IGST (IGST Refund Route)

How It Works:

Exporter pays IGST at the time of export

Tax can be paid using ITC or cash

Refund is processed automatically through ICEGATE

Key Advantage:

This route is highly system-driven. If:

Shipping Bill

GSTR-1

GSTR-3B

are correctly filed and matched, refund is auto-credited without filing Form RFD-01.

Best Suited For:

Manufacturers exporting goods

Businesses with sufficient ITC balance

Exporters preferring automated refunds

Important Note:

Any mismatch in invoice number, port code, or tax amount can delay the refund significantly.

2. Export Without Payment of Tax (LUT Route)

Under this method, exporters file a Letter of Undertaking (LUT) annually and export without paying IGST.

How It Works:

Export under LUT without paying IGST

Claim refund of unutilized ITC by filing Form GST RFD-01

Best Suited For:

Service exporters

IT/consultancy firms

Businesses with tight cash flow

Advantage:

No upfront tax payment → Better working capital management.

Limitation:

IGST vs LUT – Quick Comparison102550100entries per pageSearch:

Criteria

IGST Route

LUT RouteUpfront Tax PaymentYesNoRefund MechanismAutomatic via ICEGATEApplication through RFD-01Processing SpeedFaster (if no mismatch)Depends on officer verificationIdeal ForGoods exportersService exporters

Showing 1 to 4 of 4 entries

What’s New in GST Refund Process (2026 Updates)

Recent procedural changes aim to reduce exporter friction:

Risk-Based Refund Processing

Up to 90% refund is provisionally processed in eligible cases, subject to verification.

Relief for Small Refund Amounts

Refund restrictions on minor IGST amounts have been relaxed for specific exporter categories.

Intermediary Service Clarifications

Recent clarifications provide relief to back-office and support service exporters, subject to fulfillment of export conditions.

(Note: Exporters should review the latest CBIC notifications/circulars before relying on updates.)

Essential Documents for GST Export Refund

Proper documentation prevents issuance of deficiency memos.

For Goods Exporters:

Export Invoice

Shipping Bill

EGM (Export General Manifest)

GSTR-1 and GSTR-3B filings

For Service Exporters:

Export Invoice

LUT copy

FIRC or BRC (Foreign currency realization proof)

Statement 3/3A (for RFD-01 filing)

Additional:

GSTR-2B reconciliation

Bank account validation on GST portal

Common Mistakes That Delay GST Refunds

Invoice mismatch between Shipping Bill and GSTR-1

Incorrect port code entry

ITC claimed not reflecting in GSTR-2B

Filing GSTR-3B before correcting GSTR-1 errors

Not receiving foreign currency within permitted time (for services)

Even minor clerical differences can trigger system validation errors.

Practical Example

Suppose an exporter files an invoice number as EXP-101 in GSTR-1 but mentions EXP101 (without dash) in the shipping bill. The system treats this as a mismatch, and the refund may get blocked until correction is made.

This highlights why data consistency across GST returns and customs filings is critical.

Conclusion

The GST refund framework is designed to keep Indian exports tax-neutral and globally competitive. However, the system is increasingly data-driven and automated.

Whether choosing the IGST route or LUT route, exporters must ensure:

Accurate return filing

Proper documentation

Timely realization of export proceeds

ITC reconciliation with GSTR-2B

With the right compliance discipline, GST refunds can become a predictable and reliable cash flow mechanism rather than a working capital bottleneck.

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Mismatches between GSTR-3B and GSTR-1 are one of the top reasons for GST notices. Regular reconciliation between GSTR-1 and GSTR-3B can help avoid notices, interest, and penalties, while ensuring your GST filings remain accurate, compliant, and stress-free. A small monthly check today can save you from costly corrections tomorrow.

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Not every document needs to stay forever. Some you keep, some you review, and some you can safely discard.

Knowing the difference can save you from future stress during tax filings, audits, or financial planning.

Swipe through to learn which documents you should save and which you can throw away. 📂

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DUE DATE FOR GSTR 1

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Union Budgets don’t just announce policy changes, they quietly reset how taxpayers, businesses, and professionals should think about compliance and planning. Post-Budget reforms influence filing behaviour, cash-flow timing, risk management, and error correction, often long after the headlines fade. Understanding these shifts early helps avoid rushed decisions, unexpected costs, and compliance gaps later in the year.

unionbudget2026 #postbudgetanalysis #incometaxindia #taxplanning #apkireturn

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ITR-U Filing Section 139(8A) Guide

Did you know you can update your tax returns for the last 4 years? Learn about the new 48-month window and additional tax slabs under Sectio

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Union Budgets don’t just announce policy changes, they quietly reset how taxpayers, businesses, and professionals should think about compliance and planning. Post-Budget reforms influence filing behaviour, cash-flow timing, risk management, and error correction, often long after the headlines fade. Understanding these shifts early helps avoid rushed decisions, unexpected costs, and compliance gaps later in the year.

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In fact, in this fast-moving Indian fintech ecosystem, the question of how small business owners maintain compliance without drowning in paperwork has become a point of dilemma. Speaking of the fiscal year 2026, among other most talked-about topics, the GST Composition Scheme 2026 is really engaging local retailers and freelancers.

The choice between Composition Levy and Regular GST scheme decides the fate of price, margin, and routine for every small trader or service person. Whose road will lead to prosperity? In this guide, we break down the Composition Levy Rules under Section 10 CGST Act to help you make an informed choice. For more details click on the link : https://apkireturn.com/gst-composition-scheme-2026-guide/

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For Indian exporters, global competitiveness is not just about product quality—it is also about pricing efficiency. Even a small tax cost embedded in export pricing can impact international contracts.

Under the GST regime, exports are treated as Zero-Rated Supplies, ensuring that taxes do not become a cost component for exporters. However, while the law promises zero-rating, the refund process remains compliance-driven.

This 2026 guide explains:

What zero-rated supply means

IGST vs LUT refund routes

Latest procedural updates

Documentation checklist

Common refund mistakes to avoid

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Private Limited Company Registration in India - Apkireturn Get Pvt. Ltd Company Registration in India in just 15 days*. End to end support and advisory. 10,000+ companies incorporated. View :-

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GST Return Filing in Jaipur | GST Return Filing services Hassle-free GST Return Filing in Jaipur with Apkireturn, we handle your filing & ensure compliance. Get expert help for GST Filing Services. View more :-

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Hassle-free GST Return Filing in Jaipur with Apkireturn, we handle your filing & ensure compliance. Get expert help for GST Filing Services.